In a recent decision, the Supreme Court of NSW held that a deed of settlement was binding on a borrower once she had signed and unconditionally delivered it, even where one of the other parties’ counterpart of the deed had not been signed and delivered.

This is good news for lenders, which signals the Court’s reluctance to allow borrowers to ‘change their mind’ after settling a dispute with their lender.

Factual background

Mrs Pratap commenced proceedings against her mortgagee (Permanent), challenging the validity of the loan on the grounds of fraud.

Mrs Pratap also sued two mortgage intermediaries (AFIG and Firstfolio).

The ‘settlement’

Prior to hearing, Mrs Pratap and the lender parties (being Permanent, AFIG and Firstfolio) agreed to settle the matter.

On 4 June 2013, counterparts of an agreed deed of settlement were delivered between Mrs Pratap, Permanent and Firstfolio.

The relevant provisions of the deed were:

  • all parties were required to deliver original counterparts of the deed by 5 June 2014;
  • the proceedings were to be dismissed; and
  • the parties were required to observe confidentiality provisions.

On 7 June 2013, Mrs Pratap told the other parties that she had not understood that the deed prevented her from speaking to the media about the case.

Mrs Pratap requested that the other parties amend the deed to remove the confidentiality restrictions.

At the time of Mrs Pratap’s request to amend the deed, AFIG’s counterpart of the deed had not been delivered to the other parties. 

Was the settlement binding on Mrs Pratap?

Mrs Pratap sought to have the deed set aside on the basis that she failed to understand the confidentiality provisions.

Firstfolio and AFIG sought an order that the proceedings had been settled in accordance with the terms of the deed.

The question before the court was whether the deed was binding on the parties, where Mrs Pratap had requested the deed be amended before AFIG had signed and delivered the deed.

Was the deed binding?

The court held that once a party had signed, sealed and unconditionally delivered a deed, the deed was binding on that party even if another party to the deed had not executed or delivered the deed. 

Implications of the decision

This judgment is good news for lenders.

It confirms that if a party to a settlement deed ‘changes their mind’ after they have signed and delivered the deed, then the other parties to the deed are able to enforce the terms of the settlement.