Significance

The Victorian Supreme Court considered, in Rilgar Nominees Pty Ltd v BHA Holdings Pty Ltd [2014] VSC 632, the effect of a 'handshake' settlement agreement where a party to the dispute is not present and the mediation agreement required a signed settlement deed for settlement. It also considered the 'no real prospect of success test' and the application of the Duomatic principle.

Facts

Rilgar Nominees Pty Ltd (plaintiff) commenced proceedings against the second, third and fourth defendants (HPEdefendants) for allegedly oppressive conduct under the Corporations Act 2001 (Cth) (Oppression Proceeding). The plaintiff and the HPE defendants owned 100% of the voting shares in BHA Holdings Pty Ltd (first defendant).

The Oppression Proceeding was the subject of a mediation, not attended by the first defendant. The terms of the settlement reached during the mediation were written on a whiteboard and subject to a 'hand shake' agreement but not formally documented. The mediation agreement stated that no settlement of the dispute would take place unless a settlement agreement had been signed.

The plaintiff commenced proceedings arguing that the first defendant was bound by the informal settlement agreement and sought specific performance. The first defendant sought summary judgment on the basis that the plaintiff had 'no real prospect of success'.

Decision

Sifris J found that the plaintiff's claim had no real prospect of success. His Honour held that:

  • the 'no real prospect of success' test refers to a 'real' as opposed to 'fanciful' chance of success and is to be applied without comparison to the 'hopeless' or 'bound to fail' tests;
  • the first defendant was a necessary party to the settlement agreement, and as there were obligations on its behalf in it, the first defendant's assent and sign off was required in order for it to be binding on the first defendant;
  • the principle in In re Duomatic [1969] 2 Ch 365 has limited application and did not apply in this case. The unanimous agreement of all of the shareholders of the first defendant who were entitled to vote did not bind the first defendant or overcome the requirements in the shareholders' deed regarding notice of meetings and management of the company by its directors;
  • there was no written settlement agreement between the parties, and no evidence that the parties intended to waive this requirement. Waiver of this requirement would require clear and unequivocal conduct by the parties; and
  • the terms of the settlement agreement were not complete and went beyond matters agreed at mediation.