Bastian v Travel Air International Pty Ltd and Chandershekar
[2011] NSWLC 33
•14 March 2011
Local Court
New South Wales
Medium Neutral Citation: Bastian v Travel Air International Pty Ltd and Chandershekar [2011] NSWLC 33 Hearing dates: 8/10/2010, 18/2/2011 Decision date: 14 March 2011 Jurisdiction: Civil Before: Magistrate B. Williams Decision: Motion to set aside judgment dismissed
Catchwords: CIVIL PROCEEDINGS - setting aside judgment - meaning of 'irregularly' - judgment entered without instructions from client - authority of solicitor Legislation Cited: Uniform Civil Procedure Rules, r 36.15 Cases Cited: Across Australia Finance Pty Ltd v Bassenger [2008] NSWSC 799
Coles v Burke (1987) 10 NSWLR 429
Donellan v Watson (1990) 21 NSWLR 335
Kendell v Carnegie and Ors [2006] NSWCA 302
Lewis v Combell Constructions Pty Ltd (1989) 18 NSWLR 528
Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd [2008] NSWCA 38
Neale v Lennox [1902] AC 465
Presrod Pty Ltd v Wollongong City Council [2010] NSWLEC 192
Roach v B & W Steel Pty Ltd (1991) 23 NSWLR 110
Smith v Bundandan Enterprises [2002] NSWCA 322
Swinfen v Swinfen (1859) 28 LJ Ch 84
Waugh v H.B. Clifford and Sons Ltd [1982] Ch 374Category: Principal judgment Parties: Applicants/Defendants:
Respondent/Plaintiff:
Travel Air International Pty Ltd
Indu Chandershekar
Raymond BastianRepresentation: Mr Fozzard for the Applicants/Defendants
Mr Prakash for the Respondent/Plaintiff
File Number(s): 2009/402953
JUDGMENT
The short facts of the matter are that following business dealings between the parties, the plaintiff issued proceedings against the defendant for damages.
Those proceedings came on for hearing before the Blacktown Local Court on 22 June 2010. At the hearing the plaintiff was represented by Mr Prakash, solicitor, and the defendants were represented by Mr Kells, solicitor.
Prior to the commencement of the hearing the Magistrate made a general inquiry as to whether the parties were aware of the cost implication should a party's claim fail. A further discussion took place regarding a Statement of Agreed Facts and Issues. The plaintiff was then called and the Magistrate adjourned to read the plaintiff's affidavit.
When the Court resumed, the Magistrate referred the parties to an authority that he believed had direct relevance to the issues before the Court. He then suggested that the parties should consider that authority and explore the prospects of settling the proceedings. At this point the solicitor for the defendant (who later gave evidence that he had a hearing impediment) indicated that he was having a problem hearing what the Magistrate was saying. The parties informed me (and the transcript bears this out) that an attempt was made to utilise a court-installed device to assist the solicitor. Whilst initially there appeared to be some difficulty with the device, the transcript of 22 June 2010 on page 7 at line 10 and thereafter seems to indicate that the defendant's solicitor was conversing freely with the Magistrate.
During the discussion the solicitor for the defendant made reference to the defendant's assertion that it had a claim against the plaintiff, and the Magistrate pointed out that as the defendant had not filed any cross claim, the Court was only dealing with the plaintiff's claim.
At this point Mr Kells asked for the matter to be adjourned for a short period so that he could speak to his client.
Mr Kells returned and asked the Court's leave to file a cross claim. This request was, quite understandably, refused and the Magistrate indicated that he was going to deal with the matter on the pleadings before him.
Mr Kells then in effect asked the court to allow him to get instructions from his client, and the court was adjourned.
After a short adjournment the parties returned to Court and the defendant's solicitor informed the court that a settlement had been reached. Mr Kells then informed the court of the terms of the settlement. I was told in evidence before me that all the parties were before the court when this occurred.
The Court then entered judgment in the terms of the compromise that was announced by the defendant's solicitor.
On 15 July 2010 the applicants/defendants filed an application to the Court seeking to set aside the judgment pursuant to rule 36.15 of the Uniform Civil Procedure Rules. That rule says as follows:
36.15 General power to set aside judgment or order
(1) A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith.
(2) A judgment or order of the court in any proceedings may be set aside by order of the court if the parties to the proceedings consent.
The grounds relied upon by the applicant can be summarised as:
(a) that the solicitor for the defendant was suffering from a defect of hearing and could not hear nor understand the proceedings before the Magistrate;
(b) that the defendant's had not given instructions to their solicitor, and that he had consented to the judgment without their authority.
In submissions to me on 18 February 2011, the applicants indicated that in relation to rule 36.15 they were relying on the ground that the judgment was given or entered up 'irregularly'. They were not relying on the grounds of illegality or against good faith.
Prior to the hearing before me a transcript of the hearing on 22 June 2010 was obtained. Initially, I understand that there was an indication by the applicants that they disputed the accuracy of the transcript. During the hearing before me on 8 October 2010, the applicants conceded the accuracy of the transcript and after discussion with the applicants it became clear that the only ground relied upon by them was that they had not instructed Mr Kell to enter the judgment against them.
At the hearing before me evidence was given by Mr Kells and by Mrs Chandershekar.
From the evidence it appeared that, when Mr Kells requested that he be allowed to get instructions from his client, the parties left the court room. The second defendant and other members of her family were sitting and Mr Kells was talking to them. The plaintiff's solicitor, Mr Prakash, approached and asked if he could speak to Mr Kells in front of Mr Kells' clients. Mr Kells deferred to his client and tacit agreement was given. Some discussion took place between the solicitors and Mr Prakash indicated his client would make a concession on the amount of the damages claimed by his client. As I have said this discussion took place in the presence of the defendants.
On 8 October 2010 during the hearing of this application, Mr Kells gave what can only be described as confusing evidence. At one point Mr Kells told the court that he did consent to the judgment but that he did not have the consent of his client (see page 11) but shortly thereafter he said "... at the time I believed that I had consent. I believed by the actions and demeanour of my client" (see page 17) and later "... and the certain demeanour of the client. I believed that she consented ..." (page 18).
Leave was given for the applicant to cross-examine Mr Kells, who indicated that while the settlement was being discussed in the presence of the defendants, the son of the second defendant said words to the effect "Let's walk away from this and we'll get him later on..." (see page 21). Mr Kells said further "... and I believe at that point my client was nodding. I decided that she was consenting to that move by that time..." (see page 21).
Mrs Chandershekar also gave evidence before me. Her evidence was that she did not instruct Mr Kells to settle her claim and that he did so without her authority. In cross-examination she conceded that she was present when settlement discussions took place between Mr Prakash and Mr Kells. She recalls the original Magistrate giving Mr Kells material to look at and said that whilst she was in court when the judgment was entered, she did not hear everything that was said. She heard the statement about the costs order and heard the Magistrate say "judgment for the plaintiff ".
The applicants' submission is that I should conclude that Mrs Chandershekar had not given her then solicitor instructions to settle the claim, therefore he acted without her authority. In such circumstances, the judgment has been entered irregularly.
Court's Power to Set Aside a Judgment
There are many examples where courts have determined to set aside previous orders or judgments on the basis that it would be against the interests of justice to maintain them.
For example in Neale v Lennox [1902] AC 465 the court was dealing with a defamation case where it was held that a mistake made during negotiations that resulted in a contractual compromise of the proceedings entitled the plaintiff to have the agreement set aside and the cause restored to the list for trial. Lord Halsbury said (at 469-470):
My Lords, as I said, I will not go through the cases, because to my mind there is a higher and much more important principle involved. The Court is asked for its assistance - and I entirely repudiate the technical distinction between what is called an application for specific performance and an order to be made that such and such things should be done - the Court is asked for its assistance when this order is asked to be made and enforced that the trial of the cause should not go on; and to suggest to me that a Court of justice is so far bound by the unauthorized act of learned counsel that it is deprived of its general authority over justice between the parties is, to my mind, the most extraordinary proposition that I ever heard."
And again (at 471-472):
...What injustice is done to the other side by the action being tried now instead of its being tried then? Nobody can suggest any. It is said, 'Your counsel made a bargain, and we will not let you off the bargain which he made.' It seems to me that it is unarguable to say, if it is a matter of discretion at all, that that is a matter that would prevent the court exercising its discretion ....
On the other hand, to tell me that the person whose character is alleged to have been attacked - I am not saying whether it is true or not - is to be deprived by this unauthorized act of the opportunity of vindicating her character in public, seems so gross an injustice that, upon the general jurisdiction that every Court has over its own procedure, this Court ought to refuse to allow that injustice to be committed.
In Lewis v Combell Constructions Pty Ltd (1989) 18 NSWLR 528 the court said (at 537-538):
Indeed this principle that the court is always master of its own process has been extended in appropriate cases to setting aside a consent order obtained without authority or as a result of a mistake on the basis that the court has an inherent jurisdiction to set aside the order if the interests of justice require it....
... But I repeat my previous observation that whenever parties agree to a compromise of litigation they do so subject to the procedures of the court which include the possibility that the court may consider it unjust to enforce the terms of settlement or that it is in the interests of justice that the matter proceed to trial.
In my view the overriding principle with which the court is here concerned is the interests of justice in all the circumstances.
Again, in Across Australia Finance Pty Ltd v Bassenger [2008] NSWSC 799 the court observed (at [25]):
Nonetheless, the Court has inherent jurisdiction to set aside orders made by consent, even after entry, on grounds on which the contract embodied in the orders could be set aside. Further, where the Court's assistance to carry the compromise into effect is required, the Court may decline that assistance if to provide it would lead to injustice, although the grounds may not be sufficient to invalidate the contract between the parties ( Harvey v Phillips (1956) 95 CLR 235 at 242-243).
Notwithstanding the above statements, t he Local Court is a statutory court and therefore one whose powers are limited to those conferred in express terms by statute (see Coles v Burke (1987) 10 NSWLR 429 below, where a similar statement was made in relation to the powers of the District Court). The only power this court has to set aside the judgement is that conferred by rule 36.15 referred to above. Therefore the consideration for me is whether the judgment was entered irregularly, illegally or against good faith. If I was to find that the judgment was in fact irregular illegal or against good faith, the court still has a discretion in that it will only proceed to set aside the judgment if sufficient cause is shown. The applicants had submitted that the only ground they rely upon is that it was 'irregular'.
The circumstance relied upon by the applicants to establish that the judgment was entered irregularly, illegally or against good faith is that the applicants' then solicitor consented to the judgment without the instructions from his clients.
Lawyers' Authority to Compromise Proceedings
This proposition has been the subject of numerous decisions.
In Swinfen v Swinfen (1859) 28 LJ Ch 84, the plaintiff was represented by counsel in a dispute over a Will. During the course of the proceedings her counsel purported to agree on her behalf, but without reference to her, to a compromise. She objected to the settlement and sued her former counsel for damages arising out of the compromise.
Pollock CB, in delivering the judgment of the Court of Exchequer, said (at 92):
... although a counsel has complete authority over the suit, the mode of conducting it, and all that is incident to it, such as withdrawing the record, withdrawing a juror, calling no witnesses, or selecting such as, in his discretion, he thinks ought to be called, and other matters which properly belong to the suit and the management and conduct of the trial - we think he has not by virtue of his retainer in the suit, any power over matters that are collateral to it.
The court went on to describe an example of something that would be collateral to a claim . In a suit for nuisance between adjoining landowners, counsel would have no authority to bind his client to the sale of his property, without his consent.
In Waugh v H.B. Clifford and Sons Ltd [1982] Ch 374, the court clarified the meaning of 'collateral to a suit' as an agreement "containing terms outside the subject-matter of the action." Brightman LJ, who delivered the leading judgment and traced the history of the law with respect to the authority of lawyers to compromise proceedings, said at 387:
The law thus became well established that the solicitor or counsel retained in an action has an implied authority as between himself and his client to compromise the suit without reference to the client, provided that the compromise does not involve matter 'collateral to the action'; and ostensible authority, as between himself and the opposing litigant, to compromise the suit without actual proof of authority, subject to the same limitation; and that a compromise does not involve 'collateral matter' merely because it contains terms which the Court could not have ordered by way of judgment in the action...
After further considering the implied authority as between the legal advocate and his or her client, his Lordship said further:
It follows in my view that a solicitor (or counsel) may in a particular case have ostensible authority vis-a-vis the opposing litigant where he has no implied authority vis-a-vis his client. I see no objection to that. All that the opposing litigant need ask himself when testing the ostensible authority of the solicitor or counsel is the question whether the compromise contains matter 'collateral to the suit'. The magnitude of the compromise, or the burden which its terms impose on the other party, is irrelevant.
In Waugh the court concluded that as the case concerned only the ostensible authority of counsel, not the implied authority, the only issue to be decided was whether the compromise could be described as a matter collateral to the action.
The above principle has been applied in New South Wales in a number of instances. In Donellan v Watson (1990) 21 NSWLR 335, Handley JA said ( at 342):
A solicitor retained to conduct litigation ordinarily has both implied and ostensible authority to bind his client to a compromise of those proceedings: see Chown v Parrott (1863) 14 CB NS 74; 143 ER 372; Prestwich v Poley (1865) 18 CB NS 806; 144 ER 662; Little v Spreadbury [1910] 2 KB 658 and Waugh v H B Clifford and Sons Ltd [1982] Ch 374 at 388. Any instruction from the client which restricts the solicitor's authority to compromise the proceedings will only affect the other party who is on notice of that restriction: see Thompson v Howley [1977] 1 NZLR 16 at 23-25 and the cases there cited.
In Presrod Pty Ltd v Wollongong City Council [2010] NSWLEC 192, the above authorities were referred to and Craig J said (at [70]):
The implied and ostensible authority of a solicitor or barrister engaged by a party to litigation to settle or compromise that litigation is well recognised. It is an authority which may exist even in circumstances where an individual or corporate client is found not to have authorised the compromise reached and which has resulted in orders adverse to that client.
In these proceedings it was not contested that the defendants had retained Mr Kells to act on their behalf in the proceedings. Accordingly I am of the view that Mr Kells had ostensible authority the settle the proceedings. In addition, it was not argued before me that the terms of the settlement that were dictated to the court by Mr Kells involved matters collateral to the cause of action. Accordingly, I am of the view that the terms of the settlement were within his ostensible authority.
Was the judgment entered 'irregularly, illegally or against good faith'
In its submissions, the applicant referred to Coles v Burke (1987) 10 NSWLR 429. In that case the District Court of NSW entered judgment against the defendant following its failure to comply with directions for the filing of documents. The self-executing order was made with the consent of the solicitor for the plaintiff and the solicitor for the defendant. The solicitor for the defendant failed to comply with the directions in the consent order and consequently the plaintiff entered judgment against the defendant.
Shortly thereafter, the defendant applied to the Court to set the judgment aside on the basis that they had not given any instructions for their then solicitor to consent to such orders and in fact that they had no knowledge of the orders ever having been proposed or made. The District Court described the defendant's solicitor's conduct as " being... either fraudulent or of such gross negligence that it beggars the imagination " (at 433). The Court was also satisfied that the defendant had no idea that their former solicitor had entered into the consent orders. The District Court set the judgment aside.
On appeal, Kirby P in the Court of Appeal noted (at 433) in relation to the defendants: "They were innocent of any wrongdoing leading to the judgment. They always wanted to defend on the merits."
The Court noted (at 436-437) in relation to a provision of the District Court Act, which was in similar terms to rule 36.15:
... It also refers to sufficient cause being shown. But it requires that, to succeed in securing an order, it should be shown that the judgment was made "irregularly, illegally or against good faith....
The genus which is involved in the phrase "irregularly, illegally or against good faith" appears to me to be misconduct or dishonourable conduct of the person who procured the judgment which it is suggested undermines the authority of that judgment warranting the exceptional course for which r 12 A provides. Here, there was no such lack of good faith on the part of the claimants. The signing of the judgment was made in accordance with the authority of the order earlier consented to and after a warning had been given by the letter to which I have referred.
Notwithstanding the Court of Appeal accepting the defendant's lack of knowledge of the consent orders, it found that the District Court had no grounds to set the judgment aside and accepted the proposition that the solicitor's lack of actual authority or explicit authority was irrelevant and did not make the entering of the judgment "irregular".
The finding in Coles that for the judgment to be irregular illegal or against good faith there must be 'misconduct or dishonourable conduct of the person who procured the judgment' was challenged in Roach v B & W Steel Pty Ltd (1991) 23 NSWLR 110, and further in Smith v Bundandan Enterprises [2002] NSWCA 322 where the court concluded (at [67]):
In my view Roach makes it clear that the ground of irregularity referred to in r 12A can be made out without misconduct or dishonourable conduct being established.
The apparent conflict between the decisions was dealt with in Kendell v Carnegie and Ors [2006] NSWCA 302. In this decision the court referred to Smith v Bundandan Enterprises and the observations of the conflict between Coles and Roach . The Court noted (at [52]-[53], emphasis added):
... The reference in Roach v B&W Steel to unconscionability in later relying in a judgment which had been entered up as a result of a mistake is not in my respectful opinion authorised by the terms of r.12A, which relates good faith to the circumstance in which the judgment was given ...
... The force of the words "against good faith" in their context in r.12A was well expressed in Coles v Burke by Kirby P.
It should be noted that in Roach the judgment was set aside on the basis that (at 114):
In our judgment the history of the proceedings... establishes that the legal advisers of the plaintiff 'knew or ought to have known' ... that the absence of the defendant from the court that day was the result of some mistake and did not reflect a deliberate decision on its party no longer to 'hotly contest' the making of an order extending time... Nevertheless the rule is satisfied if a party or his legal advisers knew or ought to have known the relevant facts.
It should also be noted that in Smith it was conceded that there was an irregularity in the entering of the judgment and decision turned on the exercise of the court's discretion.
Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd [2008] NSWCA 38 dealt with a situation where an application was made for the reinstatement of a deregistered company. On the final hearing of the application the solicitor who appeared for Miltonbrook in such matters, accidentally and without notice became aware of the proceedings. He attended the Court and observed the proceedings. An order was made against the interests of that solicitor's client.
On appeal to the Court of Appeal, Spigelman CJ said (at [85] and following), in relation to procedural fairness:
The denial of procedural fairness by a court is a "fundamental irregularity" which would entitle a person aggrieved to set aside an order as a matter of unconditional right. (See Cameron v Cole supra at 591; Taylor v Taylor (1979) 143 CLR 1 at 16.) The exercise of the discretion under r 36.15 must be similarly clear cut.
The respondents' submission that the circumstances of this case do not constitute an "irregularity" or "sufficient cause" within r 36.15 should be rejected.
In my opinion, the fundamental nature of the irregularity flows through to the exercise of the discretions under s 1322(4)(b) and under r 36.15. This Court must not be, nor appear to be, an instrument for procedural unfairness.
In Across Australian Finance v Bassenger, proceedings were brought for possession of a property following default under a mortgage. The applicant sought an order for summary judgment and following the court's refusal of an adjournment application, the defendant's solicitor signed consent orders. The defendant applied pursuant to rule 36.15 to have the orders set aside on the basis that she had not given instructions to her lawyer authorising him to agree to those terms. It was said that the orders had been irregularly obtained.
The Supreme Court, in dealing with the question of a solicitor's authority to settle proceedings, said (at [78)]:
A solicitor or barrister retained to conduct litigation ordinarily has implied as well as ostensible authority to bind his or her client to a compromise of the proceedings provided that he or she does not act contrary to instructions, the circumstances do not otherwise indicate that express instructions are required, the compromise does not include matters collateral to the action, and the compromise is effected in a fair and reasonable manner so that it is fairly within the limits of authority ( Donellan v Watson (1990) 21 NSWLR 335 at 342; Prestwich v Poley (1865) 18 CB (NS) 806; 144 ER 662; Waugh v H B Clifford & Sons Ltd [1982] Ch 374 at 387).
The issue of "irregularity" within rule 36.15 was again considered in Presrod Pty Ltd v Wollongong City Council . In that case orders were entered by agreement. On the application to set aside the orders it was not alleged that the order entering judgment was irregular or illegal, but rather that the agreement upon which the judgment was founded was irregular or illegal. The court had this to say (at [69] and following):
The agreement upon which the orders made on 23 October 2009 were founded was the agreement forwarded to the Court on 22 October by the Council's solicitor, being the agreement signed by the solicitors for the parties. As I have earlier indicated at [25], paragraph 1 of that document records in substance the fact that agreement has been reached for the resolution of Presrod's proceedings. It is therefore necessary to focus upon the context in which the agreement was reached and upon the signatories to it in order to determine whether it is attended by irregularity or illegality so that, in turn, the orders consequent upon it are similarly infected...
The implied and ostensible authority of a solicitor or barrister engaged by a party to litigation to settle or compromise that litigation is well recognised. It is an authority which may exist even in circumstances where an individual or corporate client is found not to have authorised the compromise reached and which has resulted in orders adverse to that client.
The Court then went on to recite, with approval, some of the case to which I have referred in relation to a solicitor's authority to settle proceedings on behalf of his client.
The Court continued (at [81]):
Moreover, as against Presrod and its solicitor, the Council's (then) solicitor had the ostensible authority to enter the agreement that was signed on or about 22 October. Presrod's solicitor was dealing with the solicitor on the record retained by the Council. Even if he had not proposed it, the Council's (then) solicitor certainly accepted that the proceedings should be referred for consideration at a section 34 conference. As would have been apparent to Presrod and its representatives at that conference, the Council's solicitor was instructed by Council staff, including Mr Panozzo whose position description suggested that he was a senior employee. Those factors are a clear demonstration that the ostensible authority which Presrod's solicitor was entitled to assume enabled the Council's (then) solicitor to bind his client by signing the agreement which founded the orders made on 23 October.
In these proceedings no issue was taken as to whether the defendants had retained Mr Kells to act on their behalf in the proceedings.
Further the applicant does not allege (and there is no basis to find) that the respondent or its lawyers engaged in misconduct or dishonourable conduct in procuring the judgement (as referred to in Coles above).
Nor is there any suggestion (and again there is no basis to find) that the respondent or its lawyers knew or ought to have known (as referred to in Roach above) that the applicants had not properly instructed their lawyer (if in fact that is the case).
I am satisfied on the authorities that the applicants' solicitor had ostensible authority to compromise the claim and that, as in Presrod , there was nothing in the way the case proceeded or the manner in which the settlement discussions took place, that would affect the respondent's solicitor from relying on that ostensible authority. In fact to the contrary, the parties left the courtroom with the express purpose of considering a compromise, a compromise was discussed between the solicitors for the applicants and the respondent in the presence of the applicants, and following those discussions the applicants and their solicitor re-entered the court together and their solicitor announced the settlement to the Court.
I am also of the view that, if in fact the applicants had not given express authority to their solicitor to settle the claim, that would not render the judgment irregular, illegal or against good faith. Whilst on the evidence before me I have some doubts about the applicants' claim that they did not instruct their solicitor to enter the consent judgment, I am of the opinion that having found that their lawyer had ostensible authority to settle the claim, I do not have to decide that issue.
Accordingly I dismiss the applicants' notice of motion.
In relation to costs I propose that the applicants/defendants pay the respondent/plaintiff's costs of the proceedings. On 18 February 2011 the respondent submitted that in the event that he was successful, he would seek an order for indemnity costs. I think there is some merit in that submission. The basis of that conclusion is that there is an argument that, having regard to the previous authorities, the applicants' case was always bound to fail. In addition the applicants' own list of authorities form the basis of the decision in this matter, and therefore a proper reading of those authorities should have alerted the applicants to the likely failure of their action. I do note, however, that on 18 February 2011 the applicants did not have the opportunity to make submissions to me on the question of indemnity costs. Therefore I propose to give them the opportunity to make written submissions to me on this question should they wish to do so. The order I make is that the applicants/defendants pay the respondent's costs on an indemnity basis, as agreed or assessed (the Proposed Order). In the event that the applicants wish to make submissions in relation to costs, they may file written submissions in the registry within 28 days, failing which the Proposed Order will be executed.
Magistrate B. Williams
14 March 2011
NOTE: Following submissions from the parties, the Magistrate reversed the decision on indemnity costs, and ordered party and party costs.
Decision last updated: 10 February 2012
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