Anastasios Gouras v Todor Ivanov No. SCGRG91/1898 Judgment No. 4317 Number of Pages 5 Practice and Procedure

[1993] SASC 4317

COURT IN THE FULL COURT OF THE SUPREME COURT OF SOUTH AUSTRALIA KING CJ(2), DEBELLE(1) AND MILLHOUSE(3) JJ

CWDS
Practice and procedure - action - offer to consent to judgment and acceptance thereof - solicitor's authority - solicitor misinterprets instructions - authority exceeded - limitation of authority not known to other party - whether plaintiff entitled to sign judgment. Supreme Court Rules 1987, R.40. Harvey v Phillips (1956) 95 CLR 235, applied

HRNG ADELAIDE, 12 October 1993 #DATE 10:12:1993
Counsel for appellant:     Mr S D G Apps
Solicitors for appellant:    Norman Waterhouse
Counsel for respondent:     Mr D M Quick QC with
   Mr M F Newell
Solicitors for respondent: Phillips Fox

ORDER
Appeal allowed.

JUDGE1 DEBELLE J This is appeal from a decision of a Master in which he upheld the respondent's application to set aside the respondent's offer to consent to judgment filed pursuant to R.40 and the appellant's filed acceptance of that offer. 2. The appellant instituted an action in the District Court of Adelaide claiming damages for injuries he had received in a motor vehicle accident on 21 August 1985. The respondent denied liability. On 18 September 1991 an order was made on the application of the appellant removing the action into this Court. The application was occasioned by the appellant increasing his claim for damages to the sum of $260,000, an amount which was at that time in excess of the jurisdictional limits of the District Court. 3. On 5 February 1992 the respondent's solicitor received instructions from the respondent's insurer in the following terms: "Please file an offer for $150,000.00 plus costs and disbursements leaving liability for the Court to determine." 4. The solicitor handling the matter misinterpreted the instructions and on 13 February 1992 filed an offer to consent to judgment in the sum of $150,000. The offer did not contain the qualification as to liability which had formed part of the instructions from the respondent's insurer. 5. After the appellant's solicitors had received the filed offer to consent to judgment, they took instructions from their client and by letter dated 30 March 1992 made a counter offer to settle the action in the sum of $182,000, inclusive of the costs and disbursements incurred by the appellant. On 2 April 1992 the appellant's solicitor received a telephone call from the respondent's solicitors seeking details of the appellant's disbursements. These were provided by letter dated 6 April. On 6 May 1992 the respondent's solicitors wrote to the appellant's solicitors in terms which rejected the counter offer and reaffirmed the filed offer. The letter was in these terms:
    "We are instructed by our client to reaffirm Offer to
    Consent to Judgment as filed in the Supreme Court in the sum
    of $150,000.00. Naturally, such offer is in addition
reasonable costs and disbursements to be agreed or taxed." 6. The plaintiff's solicitors took further instructions and on 11 May 1992 filed their client's acceptance of the offer. On the same day they wrote to the respondent's solicitors enclosing a copy of the filed acceptance of the offer. 7. On 26 May 1992, before the appellant's solicitors had signed judgment for the amount offered, the respondent's solicitors informed the appellant's solicitors that they had misinterpreted their instructions when filing the offer to consent to judgment. The respondent later applied on 18 June 1992 to have the filed offer and acceptance set aside. 8. The learned Master found that the offer to consent to judgment was filed without authority and that the respondent's insurer did not agree to judgment being entered in the sum of $150,000. He found that the respondent was prepared to agree damages in the sum of $150,000 but the amount of the judgment could not be ascertained until liability was either agreed or determined. There is no appeal from these findings. Further, it was common ground that, when the offer to consent to judgment was filed and when it was accepted by the appellant, neither the appellant nor his advisers were aware that the offer was not in accordance with the instructions of the respondent's insurer. 9. Where a filed offer to consent to judgment has been accepted by a filed acceptance of that offer, the Court has a discretion whether to permit the plaintiff to sign judgment for the amount offered and to enforce that judgment. That is clear from the terms of r.40.03(a), the relevant parts of which provide:
    "The plaintiff may:
     (i) sign judgment for the amount offered;
     (ii) tax his costs against the consenting defendant incurred
    up to 14 days after the service of the notice on him together
    with the costs of filing and serving his notice of acceptance
    and signing judgment;
(iii) proceed to enforce such judgment." 10. Further, it is well settled that, until the judgment or order embodying the compromise has been perfected, an authority exists in the court to refuse to give effect to or act upon the compromise and perhaps set it aside: Harvey v Phillips (1956) 95 CLR 235 at 243 and the cases there cited. The learned Master applied the principles in Harvey v Phillips (supra) and, having determined that the respondent's solicitor lacked actual authority to make the offer and that it would in all the circumstances of the case be unjust to the respondent to enter judgment against him, ordered that the filed offer to consent to judgment and the filed acceptance be set aside. 11. When invoking the discretion of the Court to set aside a compromise made in excess of counsel's authority, the applicant must satisfy the Court that in the all the circumstances it would effect grave injustice if the compromise was allowed to stand given the restriction on counsel's authority: Harvey v Phillips (supra) at 243; Halsbury's Laws of England (4th edition Re-issue) Vol. 3 (1) para 520. The applicant is seeking the intervention of the Court to undo something which, according the ordinary principles of agency and of contract, is binding on both parties. The applicant must, therefore, make full disclosure of all that has transpired so that the Court can be readily satisfied that in all the circumstances it is just and fair that the compromise should be set aside. 12. The affidavit sworn in support of this application provided but a relatively perfunctory outline of the facts. It essentially referred to the instructions received by the respondent's solicitors, the terms of the offer, the acceptance, and the discovery that the terms of the offer as filed did not accord with instructions. It did not refer to all of the documents which had passed between the respondent's solicitors and the respondent's insurer. At some stage the insurer's file was made available for inspection by the appellant's solicitor. Inspection of that file disclosed that on 1 May 1992 the respondent insurer had written a memorandum to the respondent's solicitors in response to a letter dated 9 April 1992 from the respondent's solicitors. The memorandum was in these terms:
"We refer to your letter 9th April 1992. Please maintain
    our original offer of $150,000.00 plus reasonable costs and
    disbursements to be agreed or taxed." 13. The letter of 9 April was not proved and the Court is unaware of its terms. There was no suggestion that the contents of that letter were not disclosed to the appellant's solicitor. Presumably the letter was on the insurer's file which was inspected by the appellant's solicitors. 14. Although it is clear that the memorandum is written in response to the letter of 9 April, what is not known is whether there had been any discussion between the respondent's solicitors and his insurer concerning the question of liability and whether that had influenced the decision to adhere to the initial offer of $150,000 notwithstanding the counter offer of the appellant to compromise the action in the sum of $182,000, inclusive of costs and disbursements. Nor is it clear whether the offer was to be made in full settlement of all aspects of the action, that is to say, both as to liability and damages, or was only in settlement of the amount of the claim for damages subject to the issue of liability. Nor is it clear whether there was any conversation concerning issues of liability either before or after the letter of 9 April 1992 had been written. In other words, the words "Please maintain our original offer of $150,000" may mean the insurer was adhering to his original offer with its initial qualifications and limitations or it may mean that the insurer adheres to the original offer but is prepared to offer it in full settlement of all aspects of the appellant's claim. There is nothing before the Court to show whether anything, and if so what, was communicated between the respondent's solicitor and the respondent's insurer on questions of liability or on the subject of the counter offer. Nor is there anything which assists to explain the meaning of the memorandum of 1 May. 15. In the absence of any statement to the contrary, negotiations concerning the compromise of a claim for damages are conducted on the footing that all issues in the action, both as a liability and as the amount of the damages, are to be resolved if a compromise is reached. That was undoubtedly the basis upon which the appellant's solicitor negotiated the compromise. While it is clear that the respondent's insurer initially qualified or limited its offer, the Court is not in a position to know whether that qualification continued. Alternatively, the insurer may in some way have contributed to the belief of the respondent's solicitor, at least in April or May 1992, that the offer was not limited to the amount of damages. The reference in the memorandum to reasonable costs and disbursements is language appropriate to a compromise of all issues in the action. It is not appropriate language if the offer is to be limited in the way initially expressed by the insurer. The memorandum is capable of leading to an inference that the insurer may have contributed to the belief of the respondent's solicitor that all issues were being compromised. The memorandum is also capable of meaning that the offer was to be made in settlement of all issues in the action. These matters are both very material to any exercise of discretion by the Court to refuse the appellant leave to sign judgment. I do not think, therefore, that the respondent has placed sufficient material before the Court to justify it in refusing the appellant leave to sign judgment. The learned Master failed to have regard to these very material considerations and this Court is, therefore, justified in substituting its decision for that of the Master. 16. Mr Quick QC, who appeared for the respondent, submitted that no prejudice would be suffered by either party sufficient to require the order of the Master to be set aside. If the order stands, he submitted, the appellant can still proceed to trial and recover such damages as the Court decides once it has determined the issue of liability. To that extent the only prejudice suffered by the appellant is delay and any physical harm or distress in consequence of the compromise being set aside. As to the latter, the respondent had conceded that, if the appellant's commission is exacerbated as a result of not being able to sign judgment, damages would flow as part of the damages recoverable in the action upon a finding that the respondent was liable to damages. If there was any delay in receiving the compensation to which he was entitled, the appellant will be compensated in interest. On the other hand, Mr Quick contended, the respondent will suffer irretrievable prejudice if judgment is entered against him. There is a good deal of force in these arguments. However, it cannot be overlooked that the appellant has now been effectively deprived of his capacity to negotiate a settlement. More significantly, for the reasons already given, I am not satisfied that when the insurer gave it instructions to the respondent's solicitors by the memorandum of 9 April 1992 it was not instructing the respondent's solicitors to compromise all issues in the action. 17. For these reasons, I would allow the appeal, set aside the order of the Master, and in its place give leave to the appellant to sign judgment. 18. I have assumed that the principles in Harvey v Phillips are to be applied. In the course of his argument, Mr Apps, who appeared for the appellant, questioned whether those principles were applicable in cases where, as here, the solicitors for the parties have struck the compromise. He submitted that policy considerations require the conclusion that solicitors should not have the same protection in this respect as barristers. Given the conclusions I have reached, it is not necessary to determine that question.

JUDGE2 KING CJ I agree with the order proposed by Debelle J and his reasons therefor.

JUDGE3 MILLHOUSE J I too agree.