2011WASCA0159 Scaffidi

[2011] WASCA 159
JURISDICTION
: SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION
: SCAFFIDI -v- PERPETUAL TRUSTEES VICTORIA

LTD [2011] WASCA 159
CORAM
: NEWNES JA
MURPHY JA
MAZZA J
HEARD
: 15 JUNE 2011
DELIVERED
: 1 AUGUST 2011
FILE NO/S
: CACV 5 of 2011
BETWEEN
: MARIA SCAFFIDI by her next friend THE PUBLIC

TRUSTEE
Appellant
AND
PERPETUAL TRUSTEES VICTORIA LTD
First Respondent
GIUSEPPE DIEGO SCAFFIDI
Second Respondent
ON APPEAL FROM:
Jurisdiction
: SUPREME COURT OF WESTERN AUSTRALIA
Coram
: MASTER SANDERSON
Citation
: PERPETUAL TRUSTEES VICTORIA LTD -vSCAFFIDI [2010] WASC 401
File No
: CIV 1376 of 2008
Document Name: WASCA\CACV\2011WASCA0159.doc (JH)
Page 1
[2011] WASCA 159

Catchwords:
Contracts - Deed of settlement - Construction - Whether deed of settlement
validly terminated - Whether original cause of action against appellant could be
continued - Legal principles concerning releases and covenants not to sue Whether settlement deed an accord and satisfaction or accord and conditional
satisfaction - Person under disability - Effect of court approval
Legislation:
Rules of the Supreme Court 1971 (WA), O 70 r 10
Result:
Leave to appeal granted
Appeal dismissed
Category: A
Representation:
Counsel:
Appellant
First Respondent
Second Respondent
:
:
:
Mr B W Ashdown
Dr J T Schoombee
No appearance
:
:
:
Public Trustee
Downings Legal
Oldfield Legal
Solicitors:
Appellant
First Respondent
Second Respondent
Case(s) referred to in judgment(s):

Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15;
(1987) 162 CLR 549
Baxter v Obacelo Pty Ltd [2001] HCA 66; (2001) 205 CLR 635
Benfield v Australian National Railways Commission (1992) 8 WAR 285
Blue Moon Grill Pty Ltd v Yorkey's Knob Boating Club Inc [2006] QCA 253
Buseska v Sergio (1990) 102 FLR 157
Page 2
[2011] WASCA 159

Commonwealth Bank of Australia v Cluness [1997] NSWSC 222; (1997) 8 BPR
15,467
Concut Pty Ltd v Worrell [2000] HCA 64; (2000) 75 ALJR 312
Dalle-Molle v Manos [2004] SASC 102; (2004) 88 SASR 193
Dalmation Nominees Pty Ltd v Marinovich (Unreported, WASC, Library
No 980670, 20 November 1998)
Eden v Naish (1878) 7 Ch D 781
Federal Commissioner of Taxation v Orica Ltd [1998] HCA 33; (1998) 194
CLR 500
Gibbons v Wright [1954] HCA 17; (1954) 91 CLR 423
Howard F Hudson Pty Ltd v Ronayne [1972] HCA 3; (1972) 126 CLR 449
JF & BE Palmer Pty Ltd v Blowers & Lowe Pty Ltd (1987) 16 FCR 89; (1987)
75 ALR 509
Leonard v Booth [1954] HCA 64; (1954) 91 CLR 452
Mayfair Trading Co Pty Ltd v Dreyer [1958] HCA 55; (1958) 101 CLR 428
McDermott v Black [1940] HCA 4; (1940) 63 CLR 161
McTier v Haupt (1992) 1 VR 653
Nissho Iwai (Australia) Ltd v Shrian Oskar [1984] WAR 53
Osborn v McDermott (1998) 3 VR 1
Perpetual Trustees Victoria Ltd v Scaffidi [2010] WASC 401
Rhodes v Swithenbank (1889) 22 QBD 577
Roberts v Gippsland Agricultural and Earth Moving Contracting Co Pty Ltd
[1956] VLR 555
Saunders v Milsome (1866) LR 2 Eq 573
Scott v English [1947] VLR 445
Shaw v Shaw [1965] HCA 39; (1965) 113 CLR 545
Smith v Mapleback (1786) 1 TR 441
State Bank of New South Wales v Commonwealth Savings Bank of Australia
(1985) 6 FCR 524
Tallerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd [1957] HCA
10; (1957) 98 CLR 93
Thompson v Australian Capital Television Pty Ltd [1996] HCA 38; (1996) 186
CLR 574
Tricontinental Corporation Ltd v HDFI Ltd (1990) 21 NSWLR 689
Walton v Gardiner (1993) 177 CLR 378
Wood v Public Trustee (WA) (1995) 16 WAR 58
Page 3
[2011] WASCA 159

REASONS OF THE COURT
REASONS OF THE COURT:

Introduction
1
This is an application for leave to appeal from the judgment of

Master Sanderson, in which the learned master held, in effect, that a
settlement deed relating to the compromise of the action in the court
below had been validly terminated, and that the first respondent (the
plaintiff in the action below - Perpetual) was at liberty to continue its
cause of action against the appellant (the defendant in the action below Mrs Scaffidi). The master's reasons are contained in Perpetual Trustees
Victoria Ltd v Scaffidi [2010] WASC 401. It was accepted by the parties
that the learned master's judgment was interlocutory in nature, and that
leave to appeal was therefore required pursuant to s 60(1)(f) of the
Supreme Court Act 1935 (WA). The second respondent did not
participate in the appeal. He filed a notice of intention stating that he
would accept any order in the appeal other than as to costs.
For the reasons which follow, leave to appeal should be granted but
the appeal should be dismissed. Perpetual's notice of contention is also
without merit.
It is convenient to commence with a consideration of the background

to the litigation in the court below. In recounting the history of the
litigation, we will use the same shorthand expressions which the parties
used when describing the litigation and the claims involved in it, in their
settlement deed.
The litigation
4
In CIV 1376 of 2008, Perpetual sued Mrs Scaffidi to enforce a

mortgage which she allegedly granted over certain properties to secure
moneys lent by Perpetual (the Claim). Mrs Scaffidi denied the Claim.
She alleged that she did not receive the money, that her signature had
been forged, and she counterclaimed against Perpetual on the basis that, in
any event, the mortgage should be set aside on the equitable ground of
unconscionable conduct (the Counterclaim). Mrs Scaffidi also joined her
son, Mr Scaffidi, as a third party, and alleged, amongst other things, that
he, in effect, granted the mortgage on her behalf and was guilty of
misleading and deceptive conduct (the Third Party Claim).
There was a mediation in 2009, following which Perpetual,

Mrs Scaffidi and Mr Scaffidi entered into a settlement deed. Mrs Scaffidi
Page 4
[2011] WASCA 159

was under a disability at the time, and the settlement deed required court
approval under O 70 r 10 of the Rules of the Supreme Court 1971 (WA).
6
The settlement was approved on 19 January

Master Chapman, who made the following orders:
2010
1.
The proposed compromise is in the interest of the Defendant.
2.
The proposed compromise which is annexed to these orders to be

given effect in the terms incorporated in the deed.
3.
There be no order as to costs.
by
The settlement deed required Mr Scaffidi to pay $550,000 to

Perpetual within 21 days of the court approval. He did not do so within
the time stipulated, or at all.
In May 2010, case management of the action and the third party
proceedings was reactivated by the consent of the parties.
On 11 August 2010, Mrs Scaffidi, by her guardian ad litem, issued a

summons seeking a stay of the proceedings by Perpetual and certain
declarations as to the effect of the settlement deed. On 12 October 2010,
Perpetual issued notices to each of Mr Scaffidi and Mrs Scaffidi
purporting to terminate the settlement deed by reason of Mr Scaffidi's
non-payment of the sum of $550,000. Perpetual then issued its own
chamber summons seeking a declaration, amongst other things, that it had
validly terminated the settlement deed and that Perpetual was entitled to
pursue the action to trial and judgment.
The settlement deed

10
The settlement deed, entered into by Perpetual, Mrs Scaffidi by her

guardian ad litem, and Mr Scaffidi, provided relevantly as follows:
CONDITIONS PRECEDENT
This Deed is subject to and conditional upon (1) an application to the
Court being made by 22 December 2009 on behalf of Mrs Scaffidi
pursuant to Order 70 Rule 10 of the Rules of the Supreme Court of
Western Australia for approval of the settlement between Perpetual and
Mrs Scaffidi contained herein ('the Approval') and (2) the Approval being
granted by the Court within three months of such application being made.
If the Approval is not granted within such time or at all, this Deed will
cease to have effect and none of the parties will continue to be bound by
any of its terms.
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[2011] WASCA 159

RECITALS
The Parties have agreed to resolve the Dispute in the manner set
out in this Deed. Without any admission of liability on the part of
any party, the Parties have agreed that Mr Scaffidi or his nominee
will pay Perpetual the Settlement Sum in full and final settlement
of the Claim, the Counterclaim and the Third Party Claim subject
to the terms of this Deed.
...
2.1
Joint and several covenants

If a Party comprises two or more persons, the covenants and deeds
made or entered into on the part of that party bind and must be
observed and performed by those persons jointly and each of them
severally and may be enforced against any one or any two or more
of them.
...
2.2
Headings
Except in the Schedule, headings in this Deed are for convenience
and identification of clauses only and do not otherwise affect its
interpretation.
...
3
SETTLEMENT
3.1
Mr Scaffidi (or his nominee) must pay the Settlement Sum to

Perpetual within 21 days of the Approval.
3.2
Payment of the Settlement Sum will be by bank cheque made

payable to Downings Legal and delivered to the offices of
Downings Legal by Mr Scaffidi within the time stipulated in
clause 3.1.
3.3
Within 7 days of receipt of the Settlement Sum, Perpetual will at

the election of Mr Scaffidi provide either:
3.2.1
To Mr Scaffidi's solicitors, a Form of Transfer of

Mortgage to Mr Scaffidi (or his nominee) executed by
Perpetual, the original Mortgage and duplicate certificate
of title; or
3.2.2
To Mrs Scaffidi's solicitor, a form of discharge of the

Mortgage and duplicate certificate of title.
Page 6
[2011] WASCA 159

3.4
Upon payment of the Settlement Sum, the Parties will cause

consent orders to be filed at the Supreme Court of Western
Australia dismissing the Claim, the Counterclaim and the Third
Party Proceedings with no order as to costs and vacating all
previous costs orders.
3.5
In consideration of payment of the Settlement Sum within the time

stipulated in clause 3.1 of this Deed, each Party releases and
discharges the other Parties from all liability now existing or which
might, but for this Deed, arise in respect of:
(a)
the Claim;
(b)
the Counterclaim;
(c)
the Third Party Claim;
(c)[sic] the Dispute; and/or

(d)
any legal or other costs, charges, fees or expenses arising

from the Claim, the Counterclaim the Third Party Claim
and/or the Dispute.
BAR TO PROCEEDINGS
4.1
Party not to take action

A party must not at any time take or continue any action, suit or
proceeding, or make any claim or demand of any nature against any
other party or anyone else arising out of the circumstances that
gave rise to the Dispute.
4.2
Bar to proceedings
Other than in proceedings taken to enforce the provisions of this
Deed, this Deed may be pleaded as a bar to any action or
proceeding mentioned in clause 4.1
...
9
FURTHER ASSURANCES
Each party must sign this Deed and do all acts and things necessary
or desirable to implement and give full effect to the provisions and
purpose of this Deed.
The grounds of appeal

11
The grounds of appeal, as explained at the hearing by counsel for

Mrs Scaffidi, may be summarised and grouped as follows:
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[2011] WASCA 159

(a)
the effect of the approval of the settlement deed by Master

Chapman on 19 January 2010, was to make the terms of the
settlement orders of the court, and accordingly no party could
terminate it without obtaining court approval, or without obtaining
a discharge or variation of the court's order approving the
compromise (ground 2);
(b)
the settlement deed, on its proper construction, constituted an

accord and satisfaction (ground 8);
(c)
upon approval of the settlement deed, Perpetual had a right to

obtain an order for payment of the sum of $550,000, or a right to
enforce Mr Scaffidi's obligation to pay the said sum, but had no
other relevant rights (ground 5);
(d)
the settlement deed, by cl 4, on its proper construction, operated to

preclude Perpetual from suing on its original cause of action, and
only permitted Perpetual to sue Mr Scaffidi pursuant to cl 4.2 and
cl 9 of the settlement deed (grounds 1, 3 and 6);
(e)
the non-payment of the $550,000 did not entitle Perpetual

unilaterally to terminate the settlement deed, and the deed could
only be terminated by Perpetual and Mrs Scaffidi together
(ground 4);
(f)
Perpetual could not terminate the settlement deed and therefore

maintain its cause of action against Mrs Scaffidi, because to do so
would be to permit Perpetual to take advantage of its (alleged)
breaches of cls 4.1, 4.2 and 9 of the settlement deed (ground 7).
The grounds of appeal raise, in essence, two fundamental issues:
12
13
(a)
the proper construction of Master Chapman's orders; and
(b)
the proper construction of the settlement deed.
It is convenient to address the second issue first and to commence a

consideration of that issue by reference to certain aspects of the law with
respect to the compromise of actions.
Page 8
[2011] WASCA 159

Legal principles
Releases and covenants not to sue
14
Technically, at common law, a release is a discharge under seal of an

existing obligation or right of action: Commonwealth Bank of Australia
v Cluness [1997] NSWSC 222; (1997) 8 BPR 15,467, 15,474. The
common law rule was that the release of a cause of action once accrued
must be by deed under seal: McDermott v Black [1940] HCA 4; (1940)
63 CLR 161, 176; Thompson v Australian Capital Television Pty Ltd
[1996] HCA 38; (1996) 186 CLR 574, 610. Consideration is not required
for a promise in a deed: Leonard v Booth [1954] HCA 64; (1954) 91
CLR 452, 474; Howard F Hudson Pty Ltd v Ronayne [1972] HCA 3;
(1972) 126 CLR 449, 462.
15
The existence of a release by deed did not necessarily indicate the

receipt by the plaintiff of satisfaction in respect of the original wrong in
question: Thompson v Australian Capital Television Pty Ltd (611).
16
Under the common law, the release of an obligation created other

than by deed could also be brought about by an agreement for valuable
consideration if it amounted to an accord and satisfaction: McDermott v
Black (183); Thompson v Australian Capital Television Pty Ltd
(610 - 611); Federal Commissioner of Taxation v Orica Ltd [1998] HCA
33; (1998) 194 CLR 500, 544.
17
In Thompson v Australian Capital Television Pty Ltd (610),

Gummow J said:
Accord and satisfaction (the former being the agreement or consent to
accept the latter) requires acceptance of something in place of the full
remedy to which the recipient is entitled, coupled with provision of the
consideration agreed upon.
18
In the case of both release by deed and release by accord and

satisfaction, the release 'discharges and extinguishes the obligation':
Federal Commissioner of Taxation v Orica (544).
19
At law, an obligation created by deed, however, could only be

released by deed and not by accord and satisfaction. For that reason, an
accord and satisfaction was not pleaded in bar of an action upon a
specialty: McDermott v Black (187); Federal Commissioner of Taxation
v Orica (544). (As to specialty debts see Saunders v Milsome (1866)
LR 2 Eq 573, 575.)
Page 9
[2011] WASCA 159

20
On the other hand, equity would enforce an agreement for value to

release an obligation, whether the obligation was originally created by
deed or not: McDermott v Black (187); Federal Commissioner of
Taxation v Orica (544). Hence, the statements in cases that 'such
agreements operated as releases and thus as discharges': Federal
Commissioner of Taxation v Orica (544).
21
Prior to the Judicature Act, such an agreement, including an

agreement by way of covenant not to sue, was enforced by common
injunction restraining the plaintiff from pleading the facts to the contrary,
at least if the consideration under the agreement was neither illusory nor
inadequate. In the Judicature system, the agreement may be pleaded
directly in bar by way of equitable defence if the plaintiff asserts its
original right or cause of action: Thompson v Australian Capital
Television Pty Ltd (610); McDermott v Black (187).
22
Further, at common law, a covenant not to sue involving a single

promisor, although not a release under seal or an accord and satisfaction,
if it were unlimited in time and general and unconditional, could also be
pleaded in bar in order to avoid circuity of action: McDermott v Black
(186 - 187); Thompson v Australian Capital Television Pty Ltd (609),
where Gummow J said:
The reason why a covenant not to sue of this nature has been held to
provide a plea in bar was more fully explained by Williston in the
following passage (163):
'This is to avoid circuity of action; for, if the plaintiff in the original
action should recover, the defendant could recover precisely the
same damages back for breach of the covenant to forbear or not to
sue. Instead of permitting the double action, the court produces the
same effect more simply by giving judgment for the defendant in the
original action.' (164) (emphasis added)
Similarly, in Smith v Mapleback (1786) 1 TR 441, 446, Buller J
23
said:
[I]t is a maxim in law so to judge of contracts as to prevent a multiplicity
of actions; therefore this must be taken to be a surrender, in order to
prevent two actions instead of one ... And it is on that ground, that the
Courts have construed express words of covenant into a release. As
supposing the obligee of a bond covenanted that he would not sue on it,
the Courts say that shall operate as a release; for if it operated only as a
covenant, it would produce two actions.
Page 10
[2011] WASCA 159

24
Where, however, there were several joint promisors, the law did not
apply the circuity of action principle so as to treat a covenant not to sue
one as the release of the other. A covenant not to sue one joint obligor
was treated as simply a covenant not to enforce the obligation. The law
with reference to the difference between joint promisors and single
promisors, was summarised in this regard by Glanville Williams in 'Joint
Obligations', Butterworth & Co, 1949 as follows (107 - 108):
Whereas a release of one joint debtor discharges all, a covenant not to sue,
it is held, does not. The argument, for what it is worth, is that where there
is a single promisor a release will discharge him by putting an end to the
obligation; whereas a covenant not to sue does not directly put an end to
the obligation but is a contract not to enforce it. It is true that if the creditor
were able to claim on the obligation in breach of his covenant the
defendant would be able to counterclaim for damages for breach of
covenant; and as the two claims would cancel out the court short-circuits
the whole proceeding by dismissing the plaintiff's claim in the first
instance. But this is only where there is a single promisor; if there are
several joint promisors, and the creditor sues others than those whom he
covenanted not to sue, the argument based on circuity of proceedings does
not apply, and the action will succeed. The point was clearly put in
Clayton (Lacy) v Kynaston (1701):
'A perpetual and absolute covenant, for example, to an obligor, that
the obligee would never sue upon the obligation, is a release; or if it
be with condition never to sue, it will be a defeasance, though there
be no words not to sue in the obligation, but only in the condition
of it; and the reason of this is to avoid a circuity of action; because
there one should precisely recover the same damage that he has
suffered by the other's suing the bond. A is bound to B and B
covenants never to put the bond in suit against A; if afterwards B
will sue A on the bond, he may plead the covenant by way of
release. But if A and B be jointly and severally bound to C in a sum
certain, and C covenants with A not to sue him, that shall not be a
release, but a covenant only; because he covenants only not to sue
A but does not covenant not to sue B for the covenant is not a
release in its nature, but only by construction, to avoid circuity of
action; for where he covenants not to sue one, he still has a remedy,
and then it shall be construed as a covenant, and no more.'
25
The rule developed against the background that a release by deed or

accord and satisfaction granted to one joint obligor discharged the others.
As a consequence, the courts were reluctant to construe an agreement with
one joint obligor as a release rather than a covenant not to sue. See
Thompson v Australian Capital Television Pty Ltd (581 - 582,
608 - 609); JF & BE Palmer Pty Ltd v Blowers & Lowe Pty Ltd (1987)
16 FCR 89; (1987) 75 ALR 509, 511 - 512. Thus, even if a document
Page 11
[2011] WASCA 159

were expressed as a release, if it expressly reserved the plaintiff's rights

against the other parties jointly liable, it would be read as a covenant not
to sue and would not operate as a release of the others: Baxter v Obacelo
Pty Ltd [2001] HCA 66; (2001) 205 CLR 635, 650 [26].
Accord executory, accord and satisfaction, and accord and conditional
satisfaction
26
Dixon J in McDermott v Black (183 - 185), said:

The essence of accord and satisfaction is the acceptance by the plaintiff of
something in place of his cause of action. What he takes is a matter
depending on his own consent or agreement. It may be a promise or
contract or it may be the act or thing promised. But, whatever it is, until it
is provided and accepted the cause of action remains alive and unimpaired.
The accord is the agreement or consent to accept the satisfaction. Until the
satisfaction is given the accord remains executory and cannot bar the
claim. The distinction between an accord executory and an accord and
satisfaction remains as valid and as important as ever. An accord executory
neither extinguishes the old cause of action nor affords a new one.
...
The distinction depends on what exactly is agreed to be taken in place of
the existing cause of action or claim. An executory promise or series of
promises given in consideration of the abandonment of the claim may be
accepted in substitution or satisfaction of the existing liability. Or, on the
other hand, promises may be given by the party liable that he will satisfy
the claim by doing an act, making over a thing or paying an ascertained
sum of money and the other party may agree to accept, not the promise,
but the act, thing or money in satisfaction of his claim. If the agreement is
to accept the promise in satisfaction, the discharge of the liability is
immediate; if the performance, then there is no discharge unless and until
the promise is performed.
27
As Keane J observed, however, in Blue Moon Grill Pty Ltd v

Yorkey's Knob Boating Club Inc [2006] QCA 253 [20], what is
important is to focus on what the parties have agreed, rather than the
categorisation of their agreement as either an accord and satisfaction or an
accord executory. The classification of agreements itself depends on a true
appreciation of the effect of the terms agreed between the parties and the
binary classification of agreements is not always adequate.
28
An accord executory, whereby a promisor promises to abandon a

claim or cause of action in exchange for some active performance by the
promisee is a type of unilateral contract: see the discussion in
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[2011] WASCA 159

Sneddon M C and Ellingham M P, Cheshire and Fifoot's Law of Contract

(9th Aust ed [4.24]).
29
The inadequacy of the binary classification into accord executory

and accord satisfaction was referred to by Fullagar J in Scott v English
[1947] VLR 445, 453:
The essence of the matter may be said to be that a mere 'accord' is not a
contract at all. But, if we find in any particular case that there is a contract
- a promise accepted in 'satisfaction' against a promise - our problem is not
necessarily at an end. We have still, I think, in some cases to construe the
contract to see whether its effect is to discharge the original cause of action
absolutely, so that the plaintiff can never thereafter sue on it but can only
sue on the new contract, or whether it effects only a conditional discharge,
merely suspending the original cause of action, so that, if it is not
performed by the defendant according to its tenor, the plaintiff may still
maintain that original cause of action The question is likely to arise
wherever a time is fixed for performance of the defendant's promise. In the
present case, where a time is so fixed, if the compromise is a mere accord,
the plaintiff could sue on the original cause of action at any time before
acceptance of performance; he would not be bound to accept performance.
If, on the other hand, the compromise is a new contract, he cannot sue on
the original cause of action unless the time for performance has passed and
there is no performance. But, if the time for performance by the defendant
has passed and there is no performance, can he sue only on the new
contract, the original cause of action being absolutely discharged by the
new contract, or can he, at his option sue for breach of the new contract,
or, rescinding the new contract, proceed on his original cause of action?
The question, I think, is to be decided as a matter of construction of the
new contract.
30
Fullagar J's observations were approved and applied in Nissho Iwai

(Australia) Ltd v Shrian Oskar [1984] WAR 53. See also Tallerman &
Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd [1957] HCA 10;
(1957) 98 CLR 93, 114 (Dixon CJ & Fullagar J), 150 (Taylor J).
31
Fullagar J's reasoning was summarised by Phillips JA in Osborn v

McDermott (1998) 3 VR 1, 10, who said that:
[H]is Honour contemplated a case in which the accord amounted to an
immediately enforceable agreement (which suggests that there was accord
and satisfaction), but that the 'satisfaction' (the discharge of existing
obligations) was itself only conditional, suspending the original cause of
action, but not extinguishing it, unless and until performance by the
defendant according to the tenor of the agreement.
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[2011] WASCA 159

32
Phillips JA described the three categories of compromises in the

following way (10 - 11):
Thus, there are three possibilities, not two. First, there is the mere accord
executory which, on the authorities, does not constitute a contract and
which is altogether unenforceable, giving rise to no new rights and
obligations pending performance and under which, when there is
performance (but only when there is performance), the plaintiff's existing
cause of action is discharged. Secondly, at the other end of the scale is the
accord and satisfaction, under which there is an immediate and enforceable
agreement once the compromise is agreed upon, the parties agreeing that
the plaintiff takes in satisfaction of his existing claim against the defendant
the new promise by the defendant in substitution for any existing
obligation. Somewhere between the two, there is the accord and
conditional satisfaction, which exists where the compromise amounts to an
existing and enforceable agreement between the parties for performance
according to its tenor but which does not operate to discharge any existing
cause of action unless and until there has been performance.
Where there is a mere accord executory, no suit can be maintained upon
the compromise unless and until there has been performance, and then suit
is ordinarily unnecessary. Upon default in performance, the plaintiff's
existing cause of action continues unaffected. With accord and
satisfaction, either party may sue upon the compromise, but only on the
compromise and for nothing else: the original cause of action has gone.
Where there is accord and conditional satisfaction, the plaintiff is bound to
await performance and accept it if tendered, but if there be no
performance, then the plaintiff may proceed according to general
principles called into play when any agreement is repudiated: the plaintiff
may either treat the agreement (the accord) as at an end and proceed on
his original cause of action; or he may, at his option, sue on the
compromise agreement, in place of the original cause of action.
(emphasis added)
33
In Nissho Iwai v Shrian Oskar Brinsden J referred in similar terms

to the position of a plaintiff under a compromise agreement involving, in
effect, an accord and conditional satisfaction (58):
I am of the opinion that [the compromise] was no mere accord executory
but a contract intended to create new antecedent obligations, but effected
no absolute discharge of the cause of action but only if the defendant
performed his promise. The defendant in this case failed to perform his
promise and so that left the plaintiff in the position that it could sue on the
new contract or rescind the new contract and proceed on the original cause
of action.
See also Buseska v Sergio (1990) 102 FLR 157, 159.
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[2011] WASCA 159

The parties' contentions as to the essential nature of the settlement deed

34
The contest between the parties was whether the settlement deed was
an accord and satisfaction, as Mrs Scaffidi contended, or an accord and
conditional satisfaction, as found by the learned master and as contended
for by Perpetual. Neither party contended that it was an accord executory.
35
Mrs Scaffidi's submissions were, in essence, twofold. First, it was

said that cl 3.5, properly construed, effectuated an immediate release of
Perpetual's cause of action against Mrs Scaffidi once the settlement deed
was approved by Master Chapman. It was contended in that regard that
the satisfaction received by Perpetual was Mr Scaffidi's promise to pay
the Settlement Sum and that the satisfaction was not intended to be the
actual payment of the Settlement Sum. Secondly, it was said on behalf of
Mrs Scaffidi (written submissions par 94) that the master erred because
'clause 4 of the Settlement Deed is a covenant by [Perpetual] not to sue
(without a time limit or condition) save to enforce the obligations of the
Settlement Deed, which also operates to release the previous claims
against [Mrs Scaffidi]'. It is said that cl 4 operates, immediately with
effect upon court approval, to preclude Perpetual suing Mrs Scaffidi on
the Claim.
The proper construction of the settlement deed

36
Clause 3.5 in terms provides for a release 'in consideration of [sic

for]' the 'payment of the Settlement Sum' within the stipulated time. It
does not refer to Mr Scaffidi's promise to pay the settlement sum.
Clause 3.1 requires the payment to be made to Perpetual. Clause 3.5 is
not, accordingly, with respect to Perpetual, a mere release under seal. It is
also, evidently, intended to operate by way of accord and satisfaction,
with the satisfaction being the 'payment [to Perpetual] of the Settlement
Sum' within the stipulated time, and not merely a promise to pay the sum
in question.
37
With respect to Mr Scaffidi and Mrs Scaffidi, their position is

somewhat different. It is difficult, in relation to Mr Scaffidi and
Mrs Scaffidi, to characterise the payment of the settlement sum to
Perpetual itself as satisfaction in the sense of 'an acceptance [by them] of
something in place of the full remedy to which the recipient is entitled'
(adopting and adapting the words in Thompson v Australian Capital
Television Pty Ltd (610)) when neither is a recipient of the settlement
sum.
Page 15
[2011] WASCA 159

38
Nevertheless, it must be presumed that the releases by Mrs Scaffidi

and Mr Scaffidi in favour of each other and Perpetual in cl 3.5 were
intended to operate contemporaneously with Perpetual's release of
Mrs Scaffidi. Accordingly, cl 3.5 must be construed as providing that the
releases by Mrs Scaffidi and Mr Scaffidi are contingent upon
Mr Scaffidi's payment of the settlement sum to Perpetual. It is
unnecessary for present purposes to consider whether the releases
received by Mrs Scaffidi constituted a satisfaction for the rights alleged in
the Counterclaim and the Third Party Claim. For present purposes, it is
sufficient to note that all of the releases in cl 3.5 are given under seal and
are contingent upon the payment to Perpetual in accordance with cl 3.1. If
and upon taking effect, each release in cl 3.5 'discharges and extinguishes'
the underlying cause of action to which it relates: Federal Commissioner
of Taxation v Orica (544).
39
The contingent nature of the releases in cl 3.5 also finds support in

cls 3.3 and 3.4. Clause 3.5 is preceded by cl 3.4, which provides that
'Upon payment', the parties will cause the Claim, Counterclaim and Third
Party Claim to be dismissed. By cl 3.3, it is only seven days after 'receipt'
of payment by Perpetual that it is obliged either, in effect, to assign the
mortgage to Mr Scaffidi or to put Mrs Scaffidi in a position to discharge
the mortgage. In this regard, in our view, it is clear that the stipulation in
cl 3.1 combines the characteristics of both a promissory and contingent
condition, as to which see McTier v Haupt (1992) 1 VR 653, 657; Ankar
Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15;
(1987) 162 CLR 549, 555 - 556; Tricontinental Corporation Ltd v HDFI
Ltd (1990) 21 NSWLR 689, 704. Such a term may be contrasted with a
merely promissory condition in a tripartite contract where breach by the
promisor of the condition does not entitle the promisee of the obligation to
terminate as against the third party to the contract: State Bank of New
South Wales v Commonwealth Savings Bank of Australia (1985) 6 FCR
524, 550 - 552.
40
Further, the construction advanced by Mrs Scaffidi that cl 3.5

effected an immediate release upon approval by Master Chapman
produces an absurdity. On that construction, Mrs Scaffidi's property
could be indefinitely encumbered by a mortgage which was
unenforceable. That is so because Perpetual is only obliged to transfer the
mortgage or provide Mrs Scaffidi with the means to have it discharged
within '7 days of receipt of the Settlement Sum'. If Mr Scaffidi were
never to pay the sum of $550,000, even after having been successfully
sued to judgment, the mortgage would remain on the title, but be
unenforceable. To counter that acknowledged absurdity, counsel for
Page 16
[2011] WASCA 159

Mrs Scaffidi was driven to argue at the hearing of the appeal that cl 3
properly construed meant, in effect, that Perpetual was obliged under
cl 3.3 to transfer the mortgage to Mr Scaffidi at his direction, either upon
payment to Perpetual of the settlement sum of $550,000 within the
stipulated time, or, in the event of non-payment, upon Mr Scaffidi being
put into bankruptcy. Thus, it was said, Perpetual could be obliged to
transfer the mortgage to Mr Scaffidi, at his direction, even if Perpetual
never received a cent of the $550,000 which Mr Scaffidi was obliged to
pay under cl 3.1. It is apparent from this that the problem with the
absurdity of the principal construction advanced on behalf of Mrs Scaffidi
is not alleviated by recourse to this further proposed construction, which
collapses under the weight of its own inherent absurdity.
41
Clause 4.1 is, in effect, a covenant not to sue. Clause 4.2 is defined
by reference to the scope of cl 4.1 as it relates to the pleading of the deed
as a bar 'to any action or proceeding mentioned in cl 4.1'. Clause 4 must
be read in context, and the settlement deed must be construed as a whole,
so as to give, so far as possible, an harmonious construction to all of its
provisions. Clause 4 does not in terms refer to the Claim, Counterclaim
and Third Party Claim. The words 'any action, suit or proceeding, or ...
any claim or demand of any nature ... arising out of the circumstances that
gave rise to the Dispute' appear to us, in context, to be referring to other
actions and claims which might arise from the circumstances of the
Dispute, rather than the Claim, Counterclaim and Third Party Claim
which the parties have explicitly addressed in cls 3.3, 3.4 and 3.5.
42
Even if we are wrong in that view, and cl 4.1 included, on its proper
construction, a covenant not to sue on the Claim, Counterclaim and Third
Party Claim, there is no reason to suppose that the parties intended those
claims to be effectively sterilised from the commencement of the deed,
when the release and discharge of the claims (under cl 3.5) are, in effect,
conditional upon the payment of the settlement sum.
43
Clause 9 requires the parties to do all acts and things necessary or

desirable 'to implement and give full effect to the provisions and purpose'
of the deed. Clause 9 is a servant of the substantive rights and obligations
found elsewhere in the deed. It does not create new rights or obligations
inconsistent with the operative provisions of the deed which it is designed
to serve, including, relevantly, cls 3 and 4.
44
Finally, although the settlement deed does not expressly provide for
termination for the breach of non-fulfilment of conditions, clear words are
required to rebut the presumption that a contracting party does not intend
Page 17
[2011] WASCA 159

to abandon any remedies for breach of contract arising by operation of

law: Concut Pty Ltd v Worrell [2000] HCA 64; (2000) 75 ALJR 312
[23]. There is no provision in the settlement deed which precludes the
parties from relying on their general law rights arising from the
performance or non-performance of the deed.
45
For these reasons, the construction of the deed advanced by

Mrs Scaffidi should be rejected.
46
The above conclusions, in substance, are sufficient to dispose of the

grounds of appeal which depend upon the proper construction of the
settlement deed. For completeness, we will address, briefly, the points in
the appeal raised in subpars (b) to (f) set out in [11] above of these
reasons.
47
For the reasons given above, on the proper construction of cl 3.5 and
in the events which have happened, there was no accord and satisfaction
of Perpetual's cause of action against Mrs Scaffidi. Perpetual's rights were
not confined to enforcing Mr Scaffidi's obligation to pay the settlement
sum.
Clause 3.1 also operated as a contingent condition, the
non-fulfilment of which entitled Perpetual to terminate the deed.
Similarly, the settlement deed did not operate to preclude Perpetual from
suing on its original cause of action in the event of non-payment of the
settlement sum. Perpetual was entitled to terminate the deed, without
Mrs Scaffidi's consent or co-operation, because cl 3.1 operated not only as
a promissory condition, but as a contingent condition, the non-fulfilment
of which gave Perpetual the right to terminate under the general law. Its
rights under the general law were not excluded by the terms of the deed.
Further, it was not in breach of cls 4.1 and 4.2, or cl 9, in terminating and
exercising its rights under the general law.
The effect of Master Chapman's orders

48
49
The other principal issue in the appeal was whether the effect of
Master Chapman's approval of the settlement deed was to turn the terms
of the deed into orders of the court, so that a breach of the deed
constituted a breach of the court's orders.
Order 70 r 10 provides:
10.
Compromise of action by person under disability
(1)
No settlement or compromise, and no acceptance of money paid

into court, whenever entered into or made, in any cause or matter
(other than an appeal to the Court of Appeal) in which there is a
Page 18
[2011] WASCA 159

claim by or on behalf of or against a person under disability, shall

be valid unless it is approved by the Court.
(2)
An application for approval under paragraph (1) (a)
if made before the hearing of a cause or matter, shall be by

summons in chambers;
(b)
if made during the trial of an action or issue, shall be to the

trial Judge on motion,
and shall be supported by affidavit and by the opinion of an

independent counsel; but the Court or Judge may dispense with the
necessity of obtaining counsel's opinion.
(3)
In this Rule settlement includes an acceptance of an offer to

consent to judgment.
50
The court has inherent power to approve an agreement to

compromise an action brought on behalf of the person under a disability if
it is satisfied that it is for the benefit of the person to do so. Order 70 r 10
merely provides a framework to enable the court to exercise its power:
Wood v Public Trustee (WA) (1995) 16 WAR 58, 62.
51
The need for court approval of any compromise is that if the next
friend or guardian ad litem does anything in the action beyond the mere
conduct of it, it must be for the benefit of the person under the disability
and if it is not, the person under the disability will not be bound: Rhodes
v Swithenbank (1889) 22 QBD 577, 579. The purpose of the requirement
for leave is to ensure that the settlement is fair and reasonable, to provide
a means by which the other party can obtain a valid discharge, and to
ensure that the solicitors for the party under the disability are paid only
their proper costs: Benfield v Australian National Railways Commission
(1992) 8 WAR 285, 292.
52
As to the second of those considerations, an agreement made by a

person lacking mental capacity is voidable against the other party if the
other party knew of the lack of capacity: Gibbons v Wright [1954] HCA
17; (1954) 91 CLR 423, 441; Dalle-Molle v Manos [2004] SASC 102;
(2004) 88 SASR 193 [16]. Accordingly, it would 'be unsafe for a [party]
to enter into a compromise with a [party] under a disability suing by a
next friend as such a contract may well be voidable': Wood v Public
Trustee (WA) (63).
53
The effect of Master Chapman's orders was to render the settlement

deed enforceable against Mrs Scaffidi. The orders did not, by their
Page 19
[2011] WASCA 159

express terms, or by necessary implication, make the terms of the deed

into orders of the court. Master Chapman's orders are to be understood as
rendering valid and efficacious the agreement of compromise, thereby
enabling the parties to 'sue on the new contract' or, if it were terminable
under the general law, 'rescind the new contract and proceed on the
original cause of action': see Nissho Iwai v Shrian Oskar (58); Buseska
v Sergio (159).
54
If, of course, the compromise agreement were subsequently

enforced, the court might then make orders requiring performance of its
terms, either in separate proceedings or, in certain circumstances, on
motion in the original proceedings. Since the Judicature Act 'such a
compromise may be converted into an order of the court upon a motion
by any party interested and enforced like a judgment': Roberts v
Gippsland Agricultural and Earth Moving Contracting Co Pty Ltd
[1956] VLR 555, 557 citing Daniell's Chancery Practice (8th ed, vol 1,
646) (emphasis added). See also Dalmation Nominees Pty Ltd v
Marinovich (Unreported, WASC, Library No 980670, 20 November
1998) 11 - 14. Master Chapman's orders were not in the nature of an
enforcement of the settlement deed, but were made for the purpose,
relevantly, of rendering the settlement deed enforceable.
55
Some authority, by way of analogy, may be found in Shaw v Shaw

[1965] HCA 39; (1965) 113 CLR 545. In that case, the High Court
considered the effect of s 87(1)(k) of the Matrimonial Causes Act 1959
(Cth) which provided that the court could 'sanction an agreement for the
acceptance of a lump sum or periodic sums or other benefits in lieu of
rights under an order made in respect of [certain matters], or any right to
seek such an order'. Barwick CJ, with whom Kitto, Taylor and
Windeyer JJ agreed, said (549):
The Court is given power to sanction such an agreement so that it will be
binding on the parties according to its terms so far as they relate to matters
within that part of the Act. No doubt, a Court asked to sanction such an
agreement will consider closely its provisions realizing not merely that the
parties are foregoing rights to the Court's immediate intervention but that
they must thereafter rely upon the contractual rights which the agreement
gives.
56
Accordingly, the orders of Master Chapman are not to be construed

as the court ordering that the settlement deed be carried out in accordance
with its terms.
Page 20
[2011] WASCA 159

57
For the above reasons, leave to appeal should be granted, but the
appeal should be dismissed.
Notice of contention
58
59
By the notice of contention, Perpetual contends that even if

Mrs Scaffidi established any of her grounds of appeal, Mrs Scaffidi
should be denied any relief on her summons filed 11 August 2010,
including, relevantly, a stay of the Claim because, in effect:
(a)
she is seeking the equitable remedy of 'specific performance' and

she is a volunteer, or there was a total failure of consideration, and
the court should refuse 'specific performance' because 'the granting
of such relief' would result in hardship to Perpetual in being
unable to enforce its mortgage; and
(b)
Mrs Scaffidi should not obtain the benefit of 'declaratory relief or

the like' because equitable relief may be declined on the grounds
of hardship and unfairness.
As the notice of contention is to be considered on the basis that

Mrs Scaffidi has succeeded on any of her grounds of appeal, it may be
assumed that there was accord and satisfaction of Perpetual's cause of
action against Mrs Scaffidi by virtue of the promise to pay the settlement
sum, that Perpetual covenanted, by deed, to release and never to sue
Mrs Scaffidi on the Claim, and that the accord and satisfaction, the release
by seal and the unconditional covenant under seal not to sue, all came into
immediate effect upon approval of the settlement deed by Master
Chapman. Accordingly, for the purpose of the notice of contention, it is
to be assumed that there was a release or discharge of Perpetual's cause of
action against Mrs Scaffidi at law immediately upon approval of the deed
of settlement. In these circumstances (and whilst ever the deed were on
foot), any subsequent purported revival by Perpetual of its original cause
of action against Mrs Scaffidi would be 'foredoomed to fail' and would
constitute an abuse of process: Walton v Gardiner (1993) 177 CLR 378,
393. That being the position at law, any purported revival of the Claim in
the action by Perpetual could consequently be stayed as an abuse of
process without any recourse by Mrs Scaffidi to equitable relief. There
was no suggestion that, procedurally, a stay application in these
circumstances could not be brought by summons - as to which, see Eden v
Naish (1878) 7 Ch D 781, 786. Nor was there a submission to the effect
that the deed was unenforceable at law on the grounds of public policy.
Page 21
[2011] WASCA 159

60
Moreover, Mrs Scaffidi on her summons did not seek specific

performance. The notice of contention seems to assume that declaratory
relief is, or is equivalent to, an equitable remedy and that the traditional
barriers to equitable relief apply equally to declaratory relief. That
submission cannot be accepted: Mayfair Trading Co Pty Ltd v Dreyer
[1958] HCA 55; (1958) 101 CLR 428, 450 - 456; Meagher RP,
Heydon JD & Leeming MJ, Meagher, Gummow and Lehane's Equity:
Doctrines & Remedies (4th ed, 2002) [19-155].
61
For these reasons, were it necessary to determine the notice of

contention, it could not be upheld.
Page 22

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[2011] WASCA 159

: SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

: SCAFFIDI -v- PERPETUAL TRUSTEES VICTORIA

: MARIA SCAFFIDI by her next friend THE PUBLIC

: SUPREME COURT OF WESTERN AUSTRALIA

: PERPETUAL TRUSTEES VICTORIA LTD -vSCAFFIDI [2010] WASC 401

: CIV 1376 of 2008

Document Name: WASCA\CACV\2011WASCA0159.doc (JH)

[2011] WASCA 159

Case(s) referred to in judgment(s):

[2011] WASCA 159

Document Name: WASCA\CACV\2011WASCA0159.doc (JH)

[2011] WASCA 159

REASONS OF THE COURT:

This is an application for leave to appeal from the judgment of

It is convenient to commence with a consideration of the background

In CIV 1376 of 2008, Perpetual sued Mrs Scaffidi to enforce a

There was a mediation in 2009, following which Perpetual,

Document Name: WASCA\CACV\2011WASCA0159.doc (JH)

[2011] WASCA 159

The settlement was approved on 19 January

The proposed compromise is in the interest of the Defendant.

The proposed compromise which is annexed to these orders to be

There be no order as to costs.

The settlement deed required Mr Scaffidi to pay $550,000 to

On 11 August 2010, Mrs Scaffidi, by her guardian ad litem, issued a

The settlement deed

The settlement deed, entered into by Perpetual, Mrs Scaffidi by her

Document Name: WASCA\CACV\2011WASCA0159.doc (JH)

[2011] WASCA 159

Joint and several covenants

Mr Scaffidi (or his nominee) must pay the Settlement Sum to

Payment of the Settlement Sum will be by bank cheque made

Within 7 days of receipt of the Settlement Sum, Perpetual will at

To Mr Scaffidi's solicitors, a Form of Transfer of

To Mrs Scaffidi's solicitor, a form of discharge of the

Document Name: WASCA\CACV\2011WASCA0159.doc (JH)

[2011] WASCA 159

Upon payment of the Settlement Sum, the Parties will cause

In consideration of payment of the Settlement Sum within the time

the Third Party Claim;

(c)[sic] the Dispute; and/or

any legal or other costs, charges, fees or expenses arising

Party not to take action

The grounds of appeal

The grounds of appeal, as explained at the hearing by counsel for

Document Name: WASCA\CACV\2011WASCA0159.doc (JH)

[2011] WASCA 159

the effect of the approval of the settlement deed by Master

the settlement deed, on its proper construction, constituted an

upon approval of the settlement deed, Perpetual had a right to

the settlement deed, by cl 4, on its proper construction, operated to

the non-payment of the $550,000 did not entitle Perpetual

Perpetual could not terminate the settlement deed and therefore

the proper construction of Master Chapman's orders; and

the proper construction of the settlement deed.

It is convenient to address the second issue first and to commence a

Document Name: WASCA\CACV\2011WASCA0159.doc (JH)

[2011] WASCA 159

Technically, at common law, a release is a discharge under seal of an

The existence of a release by deed did not necessarily indicate the

Under the common law, the release of an obligation created other