Owerhall v Bolton & Swan

[2015] VSC 417

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

S CI 2015 00420

EERIK JUHANI OWERHALL	Plaintiff
v
BOLTON & SWAN PTY LTD (ACN 153 647 360)	Defendant

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JUDGE:	Bell J
WHERE HELD:	Melbourne
DATE OF HEARING:	7 August 2015
DATE OF JUDGMENT:	7 August 2015
CASE MAY BE CITED AS:	Owerhall v Bolton & Swan
MEDIUM NEUTRAL CITATION:	[2015] VSC 417

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COSTS – jurisdiction of Costs Court – application to set aside settlement agreement – whether relates to ‘assessment, settling, taxation or review of costs’ – reference of question to judge for direction – scope of power of direction – ‘direction’, ‘question’ – Supreme Court Act 1986 (Vic) s 17D, Supreme Court (General Civil Procedure) Rules 2005 (Vic) r 63.51.

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APPEARANCES:	Counsel	Solicitors
For the plaintiff	In person
For the defendant	Mr J Kenny	Kalus Kenny Intelex

HIS HONOUR:

1. Bolton and Swan Pty Ltd, a firm of solicitors, issued a civil proceeding in the Magistrates’ Court of Victoria against Eerik Juhani Owerhall, Sakary John Malberg and Sirkka Tuulikki Wendy Peltonen.  Alleging that those defendants had failed to pay legal costs and disbursements in respect of legal services provided, it claimed the sum of $21,158.24 plus interest and costs against them.

1. Mr Owerhall later issued a summons for taxation of costs in the Costs Court of this court in respect of those legal costs and disbursements.  After making various procedural orders in that proceeding, the Costs Court ordered by consent, among other things, that Mr Owerhall and Bolton & Swan attend a settlement conference.  Meanwhile the proceeding in the Magistrates’ Court was adjourned.

1. The conference occurred on 21 May 2015.  Mr Owerhall attended on his own behalf (with the assistance of legal representation) and, pursuant to written authority, on behalf of the other two defendants in the proceeding in the Magistrates’ Court.  By a deed of agreement dated that day and signed by Mr Owerhall on behalf of himself and those defendants, three matters were settled, namely:

·    the proceeding in the Magistrates’ Court, which was to be withdrawn by Bolton & Swan

·    the proceeding in the Costs Court, which was to be withdrawn by Mr Owerhall

·    a complaint made to the police by Mr Owerall and Sakary John Malberg about Bolton & Swan, which was to be withdrawn by those complainants

The deed of agreement contained mutual releases in relation to those matters.  Further, Mr Owerhall, Sakary John Malberg and Sirkka Tuulikki Wendy Peltonen, on the one hand, and Bolton & Swan on the other hand, signed minutes of consent orders requiring the proceeding in the Magistrates’ Court to be dismissed with no order as to costs.  Mr Owerhall and Bolton & Swan signed minutes of consent orders requiring the proceeding in the Costs Court to be dismissed with no order as to costs. 

1. Late in the afternoon of the day of the mediation and after it had concluded, Mr Owerhall notified Bolton & Swan, the two courts and the two other defendants in the proceeding in the Magistrates’ Court that he was unwell when he entered into the settlement agreement and withdrew therefrom.  He subsequently made application in the Costs Court for the agreement to be set aside.  In abundance of caution, Bolton & Swan have not sought to obtain consent orders in either proceeding in accordance with the signed minutes.  Only Mr Owerhall is seeking to have the settlement agreement set aside.  The two other defendants in the proceeding in the Magistrates’ Court want it to be implemented.

1. In response to Mr Owerhall’s application to have the settlement agreement set aside, the Honourable Associate Justice Wood made a reference under r 63.51 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic). Pursuant to that rule, his Honour ordered that the ‘application be referred to a Judge of the Court for hearing’.

1. When the reference came on before me for hearing in the Practice Court, Bolton & Swan contended that the Costs Court, and therefore me as the judge on the reference under r 63.51, did not have jurisdiction to hear and determine Mr Owerhall’s application. Mr Owerhall wanted me to hear and determine the application or make directions in relation thereto.

1. The Costs Court is established pursuant to s 17C(1) of the Supreme Court Act 1986 (Vic) within the Trial Division of this court. By s 17C(2), the Cost Court consists of such Associate Judges as are from time to time allocated to it by the Chief Justice. Although the Costs Court is established within the Trial Division of this court, it is a statutory court of limited jurisdiction. Under s 17D, that jurisdiction is ‘to hear and determine the assessment, settling, taxation or review of costs’ in the courts and tribunals specified in sub-s (1)(a)-(d). In relation to matters within its jurisdiction, s 17D(2) gives the Costs Court such powers of ‘the Court’, ie the Supreme Court,[1] as are necessary to enable the exercise of that jurisdiction.  But, if a matter does not relate to the ‘assessment, settling, taxation or review of costs’, the Costs Court does not have jurisdiction, and therefore may not exercise any powers, in relation to it.

   [1]Section 3(1) of the Supreme Court Act defines ‘Court’ to mean ‘the Supreme Court’.

1. Rule 63.51 provides:

The Costs Court may refer to a Judge of the Court for directions any question arising on a taxation.

The purpose of this rule is to enable the Costs Court, as a court consisting of associate judges, to seek, by reference, directions from a judge of the court in relation to any question arising on a taxation. Having regard to that purpose, r 63.51 would receive a liberal interpretation. So interpreted, the scope of the power includes, but is not confined, to procedural or like directions and would include directions of any kind relating to a question arising on a taxation. Therefore, in an appropriate case, it extends to giving a direction as to the substantive determination of such a question, including a question of law or of mixed fact and law.

1. However, the direction must relate to ‘any question arising on a taxation’.  That phrase in the rule recalls the limited jurisdiction of the Costs Court under the Supreme Court Act. As we have seen, s 17D confines that jurisdiction to the ‘assessment, settling, taxation or review of costs’ in relation to the specified courts and tribunals. Although referred questions may be procedural or substantive, they must relate to the ‘assessment, settling, taxation or review of costs’. On a reference, the judge only has powers of direction in relation to such questions. A river does not rise higher than its source.

1. In the present case I take the referred question to raise two sub-questions.  The first is whether Mr Owerhall’s application to set aside the settlement agreement is within the jurisdiction of the Costs Court.  In the relevant directions hearing in that court, Mr Owerhall asserted, and Bolton & Swan disputed, that jurisdiction.  The second is whether, if the Costs Court has that jurisdiction, the reference judge should determine that the agreement should be set aside and direct the Costs Court accordingly. 

1. To determine whether Mr Owerhall’s application to set aside the settlement agreement is within the jurisdiction of the Costs Court, it is necessary to determine whether it relates to the ‘assessment, settling, taxation or review of costs’.  To determine that, it is necessary to characterise the nature of the application by reference to its subject matter and the relief that is sought.

1. The subject matter of Mr Overall’s application is the settlement agreement.  The relief that he seeks is the setting aside of the agreement as it relates to him.  He might achieve that objective by seeking orders of several different kinds, but that is the essence of it.

1. As we have seen, the settlement agreement resolved the three matters identified above: the proceedings in the Magistrates Court and the Costs Court and the police complaint.  All were to be withdrawn.  The legal consequence of the agreement was that ‘new contractual obligation[s]’[2] took the place of the disputed rights and obligations of the parties in the proceedings and complaint. 

   [2]Hansen v Marco Engineering (Aust) Pty Ltd [1948] VLR 198, 201 (Fullagar J).

1. As a settlement agreement constitutes a contract, an application to set aside one involves consideration of the grounds upon which a contract may be set aside.  This principle and those grounds were explained in the well-known decision of Dixon CJ, McTiernan, Williams, Webb and Fullagar JJ in Harvey v Phillips:[3]

The question whether the compromise is to be set aside depends upon the existence of a ground which would suffice to render a simple contract void or voidable or to entitle the party to equitable relief against it, grounds for example such as illegality, misrepresentation, non-disclosure of a material fact where disclosure is required, duress, mistake, undue influence, abuse of confidence or the like.[4]

[3](1956) 95 CLR 235.

[4]Ibid 243-4.

1. It can be seen that the subject matter of Mr Owerhall’s application to set aside the settlement agreement is the contract constituted by that agreement and that the grounds to be considered in the hearing and determination of the application are the grounds upon which a contract may be set aside.  Therefore the application does not relate to the ‘assessment, settling, taxation or review of costs’.  It is true that, in the circumstances of the present case, the issues raised by the application to set aside the agreement are connected with the ‘assessment, settling, taxation or review of costs’ because, in great part, the agreement settled the issues relating to those matters in the Costs Court.  But a connection with those matters is not enough.  The issues must actually relate to those matters.  The issue is not that the set-aside application raises substantive issues of mixed fact and law, which it does, but that those issues do not relate to the ‘assessment, settling, taxation or review of costs’.

1. On the reference I therefore direct pursuant to r 63.51 that Mr Owerhall’s application to set aside the settlement agreement is beyond the jurisdiction of the Costs Court. Mr Owerhall must bring a separate application for the setting aside of the agreement and I will give procedural and other directions for the commencement of that application and the adjournment of the proceeding in the Costs Court pending its hearing and determination. Having regard to that direction, the second sub-question does not arise.