Tresize, J.C.M v National Australia Bank Ltd

[1994] FCA 133

JOHN COLIN MAXWELL TRESIZE AND OTHERS v NATIONAL AUSTRALIA BANK LTD
No. VG489 OF 1993
FED No. 133/94
Number of pages - 7
Practice And Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
NORTHROP J

CATCHWORDS

Practice And Procedure - Summary dismissal of application - jurisdiction to set aside consent order - unconscionable conduct alleged against applicant's solicitors and counsel - no allegations made against respondent

HEARING

MELBOURNE, 17 February 1994
#DATE 15:3:1994

Counsel for the Applicants: Mr C.A. Evatt with Mr T.S. Lynch

Solicitors for the Applicants: McNab and Harrison

Counsel for the Respondent: Mr R.A. Finkelstein QC with

Mr R.M. Garratt

Solicitors for the Respondent: Mallesons Stephen Jaques

JUDGE1

NORTHROP J On 17 February 1994, the Court ordered that the application be dismissed on the ground that it disclosed no reasonable cause of action. The Court made a number of consequential orders and announced that it would, at a later date, publish its reasons for making the order. These are those reasons.

1. On 16 November 1993, the applicants commenced this application seeking a number of declarations and orders. The essence of the orders sought was that a final order made in matter No VG 200 of 1992 on 1 April 1993 and entered on 2 April 1993 be set aside and that that proceeding continue as if that order had not been made. In these reasons, matter No VG 200 of 1992 will be called the first proceeding.

2. The applicants named in the first proceeding are the same persons as named as the applicants in this application. In both proceedings John Colin Maxwell Tresize ("Mr Tresize") was and is the principal applicant, the interests of the other applicants are more nominal than real. Without detracting from the rights of the other applicants, these reasons will refer to Mr Tresize although that reference, where appropriate, will include all applicants.

3. The first proceeding involved difficult questions of fact and of law. Mr Tresize was seeking relief against the respondent, National Australia Bank Ltd ("the Bank"). He was represented by a firm of solicitors ("the then solicitors") different from the firm representing him in the present application. At the hearing of the first proceeding, senior and junior appeared on behalf of Mr Tresize. After several days of hearing, the parties commenced settlement negotiations. The further hearing was adjourned. Eventually, by a deed which is undated but it is accepted was entered into about the end of March 1993, the parties to the first proceeding as well as other persons, including the then solicitors, agreed to resolve their differences on the terms contained in that deed. The terms of the deed related to legal proceedings other than the first proceeding, as well as other matters including the provision by the Bank of a sum of money to be held in trust for the maintenance of the wife of Mr Tresize. For present purposes, the important term of the deed is clause l2. This clause required Mr Tresize and the Bank to consent to orders in the first proceeding in the terms specified in that clause and Schedule 1 to the deed. It is not necessary to refer in detail to the other terms of the deed but it is noted that clause l9 referred to moneys to be paid to the then solicitors for application in the first proceeding and in other court proceedings. Obviously, this clause explains why the then solicitors were a party to the deed. On 1 April 1993, the Court, by consent, made orders in conformity with the terms of the deed. For present purposes it is noted that one of the orders made was that the first proceeding be dismissed with no order as to costs. The order was entered on 2 April 1993.

4. The general principle of law is that a final judgment or order of a court cannot be varied or set aside once it has been entered except by way of appeal. There are a number of exceptions to this general principle. For present purposes, the relevant principle is referred to in O35 r7(2)(b) of the Federal Court Rules, the relevant part of which provides:
   

"(2) The Court, where it is not exercising its appellate ... jurisdiction ... may if it thinks fit vary or set aside a judgment or order after the order has been entered where:

(a) ...

(b) the order was obtained by fraud;

(c) ... "

1. Authorities support the view that a party to a final judgment or order seeking to set aside that judgment or order should proceed by way of a separate proceeding and not by motion or summons in the proceeding in which the judgment or order was made, see Spies v Commonwealth (1991) 24 NSWLR 691, and Cielo v M G Kailis Gulf Fisheries Pty Ltd (1991) 104 FLR 189.

2. By their application the applicants are seeking the orders on the grounds appearing in the affidavit of Mr Tresize. Other affidavits have been filed supporting the facts contained in the affidavit of Mr Tresize. It is not necessary to refer to the detail of the facts contained in the affidavits. For present purposes, it is sufficient to say that the facts refer to the conduct of the then solicitors and counsel for Mr Tresize and the state of mind of Mr Tresize. Without making any findings, the Court is prepared, for the purpose of this motion only, to assume that the conduct of the then solicitors and counsel for Mr Tresize could constitute duress or undue influence on their part which induced Mr Tresize to enter into the deed, that Mr Tresize was of unsound mind and that he entered into the deed under unilateral mistake. Nowhere, however, in the material is there any allegation adverse to the Bank. No attack is made on the conduct of the Bank. At no relevant time did the Bank know of the conduct of the then solicitors or counsel of Mr Tresize. Nevertheless, the Bank is the only respondent to the application to this Court.

3. Initially, a question arose as to whether the Court has jurisdiction to hear and determine the application. Under s19 of the Federal Court of Australia Act 1976, the Federal Court has such original jurisdiction as is vested in it by laws made by the Parliament, being jurisdiction in respect of matters arising under laws made by the Parliament. In reality, Mr Tresize is seeking relief with respect to the agreement constituted by the deed. This is not a matter arising under laws made by the Parliament. At the same time, the application seeks an order setting aside an order of the Federal Court.

4. In my opinion, the Court has jurisdiction to hear and determine the application. In so concluding, I rely upon what was said in Parsons v Martin (1984) 5 FCR 235 by Bowen CJ, Northrop and Toohey JJ at 240-1. In that passage the Court said:
   

"In our opinion a court exercising jurisdiction conferred by statute has powers expressly or by implication conferred by the legislation which governs it. This is a matter of statutory construction. We are of opinion also that it has in addition such powers as are incidental and necessary to the exercise of the jurisdiction or the powers so conferred.

In view of the way in which the phrases "inherent jurisdiction" is used in many of the cases, it seems advisable generally to avoid the use of it to refer to this incidental and necessary power of a statutory court."

1. Issues relating to whether an order of the Federal Court should be varied or set aside must come within the jurisdiction of the Federal Court. The Court must have such jurisdiction and powers as are incidental and necessary to hear and determine those issues. The Court must be jealous to maintain the integrity of its judgments and orders.

2. By motion notice of which is dated 15 February 1994, the Bank sought an order that the proceeding be dismissed on the ground that no reasonable cause of action is disclosed. In so doing, the Bank relied on O20 r2(1)(a) of the Federal Court Rules. The relevant parts of that rule provide:
   

"2(1)Where in any proceeding it appears to the Court that in relation to the proceeding generally ...

(a) no reasonable cause of action is disclosed; ... the Court may order that the proceeding be stayed or dismissed generally ... ."

1. In moving the Court, the Bank must accept the facts alleged in the affidavits filed in support of the application. Further, on those facts, the Bank must establish that the claim cannot possibly succeed; generally see General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 per Barwick CJ at pp128-9. Counsel for the Bank accepted these principles.

2. It must be noted that this is not a case where the order of the Court was made pursuant to an agreement entered into between counsel appearing for the parties to the proceedings in which the order was made. Thus, the authorities relating to the question of the authority of counsel to bind clients are not relevant except to the extent that general principles of law are discussed. Here, the order was made pursuant to the terms of a deed entered into between the parties to the first proceeding. The fact that the deed was entered into by other persons not being parties to the first proceeding and involved matters not being the subject of the first proceeding cannot affect the main issue relevant to this application, namely that the order was made pursuant to the agreement between Mr Tresize and the Bank. Mr Tresize may have remedies against other parties to the deed, or, for that matter, against his former solicitors and counsel. The Court is not concerned to consider those questions on the hearing of the motion before it. The Court expresses no opinion on those matters. It is sufficient to say that the issue raised by the motion is limited.

3. Normally, a judgment or order made by consent of the parties will not be set aside after it has been entered except on grounds that would enable a contract to be set aside. Similarly, if a judgment or order is made by consent pursuant to an agreement between the parties to the action, normally that judgment or order will not be set aside, even before it is entered, unless there are established grounds sufficient to set aside that agreement. In both cases, the conduct of the parties with respect to the agreement, or the judgment or order as the case may be, is relevant to be considered. The conduct of third parties normally is irrelevant.

4. The case of Harvey v Phillips (1956) 95 CLR 235 is instructive on this point. There, an order had been made by the Court pursuant to an agreement entered into between counsel for the plaintiff and counsel for the defendant. The order had not been entered. The plaintiff sought to have the order set aside. The facts are of interest, but the main issue related to the authority of counsel to consent to the order made. At pp242-3, the Court, Dixon CJ, McTiernan, Williams, Webb and Fullager JJ, discuss a number of important issues relevant to the facts of that case and then continue at p243-4:
   

"But in the case of a compromise which is made within the actual as well as apparent authority of counsel a court does not appear to possess a discretion to rescind it or set it aside. 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 material fact where disclosure is required, duress, mistake, undue influence, abuse of confidence or the like. The rule appears rather from positive statements of the grounds that suffice (cf Halsbury's Laws of England vol 26 2nd ed pp84-85), but there is a dictum of Lindley LJ which is distinct enough: " ... nor have I the slightest doubt that a consent order can be impeached, not only on the ground of fraud but upon any grounds which invalidate the agreement it expresses in a more formal way than usual ... To my mind the only question is whether the agreement on which the consent order was based can be invalidated or not. Of course if that agreement cannot be invalidated the consent order is good": Huddersfield Banking Co Ltd v Henry Lister and Son Ltd (1895) 2 Ch 273 at p280."

1. The same principle must apply where the consent order is made pursuant to an agreement entered into between the parties to the action. Reference is made also to Paino v Hofbauer (1988) 13 NSWLR 193 especially per Clarke JA at p200.

2. In General Credits Ltd v Ebsworth (1986) 2 Qd R 162, in reasons agreed with by Connolly and Thomas JJ, de Jersey J in speaking of a consent judgment as being the expression of an agreement between the parties said at p165:
   

"It was first contended, although rather faintly, that the agreement might be invalidated for mistake. But clearly the only relevant mistake was that of the appellant, a mistake induced, on her evidence, by her solicitor. Such a unilateral mistake, occurring without knowledge or complicity of the respondent, could not operate to avoid the agreement. See Riverlate Properties Ltd v Paul (1975) 1 Ch 133, 144-5 and Powell v Smith (1872) LR 14 Eq Cas 85, 90."

1. In Hart v O'Connor (1985) 1 AC 1000, the Privy Council held that the validity of a contract entered into by a person of unsound mind who was ostensibly sane would be determined only on the basis that it had been entered into by a sane person. It could only be determined on the basis of unfairness if the conduct of the other party constituted equitable fraud which would have enabled the contract to be rescinded as if the person was sane and that since the complaining party's lack of mental capacity was unknown to the other party and there were no implications against his conduct, the contract could not be set aside. In this respect, it is interesting to note what was said by Lord Brightman at pp1027-8 when delivering the reasons of their Lordships:
   

"To sum the matter up, in the opinion of their Lordships, the validity of a contract entered into by a lunatic who is ostensibly sane is to be judged by the same standards as a contract by a person of sound mind, and is not voidable by the lunatic or his representatives by reason of "unfairness" unless such unfairness amounts to equitable fraud which would have enabled the complaining party to avoid the contract even if he had been sane. Their Lordships turn finally to issue (C), whether the plaintiffs are entitled to have the contract set aside as an "unconscionable bargain." This issue must also be answered in the negative, because the defendant was guilty of no unconscionable conduct. Indeed, as is conceded, he acted with complete innocence throughout. He was unaware of the vendor's unsoundness of mind. The vendor was ostensibly advised by his own solicitor. The defendant had no means of knowing or cause to suspect that the vendor was not in receipt of and acting in accordance with the most full and careful advice. The terms of the bargain were the terms proposed by te vendor's solicitor, not terms imposed by the defendant or his solicitor. There was no equitable fraud, no victimisation, no taking advantage, no overreaching or other description of unconscionable doings which might have justified the intervention of equity to restrain an action by the defendant at law. The plaintiffs have in the opinion of their Lordships failed to make out any case for denying to the defendant the benefit of a bargain which was struck with complete propriety on his side."

1. In the Federal Court, the position is limited further by the provisions of O35 r7(2)(b). Even on the assumptions of fact made in favour of Mr Tresize, it must appear that the deed pursuant to which the order was made and entered was obtained by the fraud of the Bank. No question of onus of proof arises. It is not necessary in this matter to determine the limits of fraud sufficient to enable a judgment or order to be set aside. The fraud must be fraud on the part of the Bank. No allegation of fraud, or, for that matter, of unconscionable conduct, has been made against the Bank. There is no suggestion that the Bank engaged in fraudulent or unconscionable conduct in inducing Mr Tresize to enter into the deed. There is no evidence to suggest the deed ought to be set aside as against the Bank.

2. Counsel for Mr Tresize had no real answer to the submissions made on behalf of the Bank. They referred to a number of authorities and texts including Foskett, The Law and Practice of Compromise, 3rd Ed, particularly Chapter 12 which is headed "Authority to Compromise and Liabilities of Legal Advisors Arising from Compromise", to Halsbury, Laws of England, 3rd Ed Vol 3 p51, to Meagher, Gummow and Lehane, "Equity Doctrines and Remedies" 2nd Ed paras 1208-1210 and 1214, to Neale v Gordon Lennox (1902) AC 465, to Emmerton v Emmerton, Supreme Court of NSW Common Law Division, McTierney J 13 August 1990, and unreported, and to Taylor v Johnson (1983) 151 CLR 422. None of these references detracted from the submissions made on behalf of the Bank. Most referred to the authority of counsel, a matter not in issue here.

3. As a result, the orders were made, including an order that the applicants pay the Bank's costs, including the costs of the motion. In addition, it was ordered that, if necessary, the applicants have leave to appeal from the orders made and that the time for appeal be extended to 21 days after publication of these reasons.