The contractual nature of consent orders

Chavez v Moreton Bay Regional Council [2009] QCA 348

His Honour Keane JA delivered the judgment with whom Holmes JJA and McMeekin J concurred. The plaintiff’s appeal was dismissed.

The claim was ultimately dismissed for failure to comply with item 3 of a self executing consent order in terms of:

“BY CONSENT IT IS ORDERED:

1. The Application be adjourned to a date to be fixed.

2. The plaintiff be given leave to take a step in this proceeding.

3. The plaintiff provide security for costs in favour of the defendant in the sum of $50,000.00 by way of a registered first mortgage upon real property on or before 4.00pm on
1 June 2009.

7. In the event the plaintiff does not comply with any of Orders 2-5 inclusive above, and upon the filing of an affidavit by the solicitor for the defendant to that effect, the proceedings be struck out for want of prosecution and the plaintiff shall pay the defendant’s costs of and incidental to the proceedings on a standard basis.”

 

The plaintiff brought an application for extension of time to comply, which was declined by the Chief Justice on 7 July 2009, from which he appealed.

Leaving aside the usual issues of prejudice and injustice the key consideration determinative of the appeal being dismissed was the contractual nature of consent orders.

His Honour put it as follows:

[36] One might be permitted to observe that in a case such as the present, one cannot be sanguine that the solicitors for the Council would have understood that under the agreed terms of the consent order Mr Chavez was entitled to apply for an extension of time in which to perform the obligations in return for which the Council had agreed to allow Mr Chavez to pursue his action. The Council’s solicitors (as well as the reasonable person postulated by the law of contract as the test of the parties’ intention) might have found surprising the suggestion that Mr Chavez had not been given his last chance to progress his action by the terms of the consent order. They may not have been at ease with the notion that Mr Chavez was free to seek further extensions of time to progress the action after the time for compliance with the consent order had expired and the Council had become entitled to seek the dismissal of the action. They may have been surprised by the suggestion that Mr Chavez might seek to justify an application for a further indulgence by reliance on a lack of competence or diligence on the part of his solicitor when the efforts, or lack thereof, of his various solicitors seem to have contributed to the occasion for the making of the agreement embodied in the consent order.

[38] Applying the reasoning of Jenkinson J to the circumstances of the present case, it may be said that in this case Mr Chavez’ breach of contract gave rise to a right in the Council to seek and obtain the striking out of the proceedings in the events which happened: for that right the Council gave up its claim to have the action struck out forthwith on the basis that Mr Chavez had not, after three years, provided the further and better particulars of his statement of claim. And Mr Chavez gave up his claim to seek unconditional leave to take a further step in the proceedings in return for leave to proceed qualified by the terms of the consent order. In these circumstances, the reasoning of Jenkinson J might be thought to suggest that Mr Chavez’ application to defeat that right was made contrary to an implied promise to allow the Council the benefit of the bargain which the parties had freely made.

[40] In this case I am unable to see any good reason why the Council’s rights under, and consequential upon, the consent order should be defeated by the exercise of the discretion conferred by r 7. To exercise the discretion in favour of Mr Chavez would permit him to proceed with a claim which arose more than a decade ago and which would otherwise be statute-barred. No impropriety or unfairness contributing to the default by Mr Chavez is asserted against the Council. And the circumstance that Mr Chavez’ default was due to his solicitor’s dilatoriness, rather than personal fault on Mr Chavez’ part, does not constitute good reason to deprive the Council of the benefit of its bargain. In this case, the role of Mr Chavez’ solicitor was not merely to act as an officer of the court assisting a party to litigation to meet the exigencies of the litigation: Mr Chavez’ solicitor was also engaged to assist
Mr Chavez to complete his contractual obligations. Where a party to a contract chooses to delegate the task of performing the contract to that party’s solicitor, the other party to the contract is entitled to treat the acts or omissions of the solicitor as the acts or omissions of the client. In Sargent v ASL Developments Ltd,[27] Mason J (as his Honour then was) said:

“The solicitor is to be regarded as the alter ego of the client and the rights of the other party to the contract cannot be made to depend upon the diligence or lack of diligence exhibited by the solicitor in his dealings with his client.”

NB:

See also:

 Short & Anor v Macedoner Pty Ltd & Anor [2010] QSC 218

Ann Lyons J

[38] In construing a consent order, the Court may have regard to the surrounding circumstances but not to direct evidence of the parties’ intention: Agricultural & Rural Finance v Atkinson.[3] Furthermore, a consent order operates as a contract between the parties. In Bakir v Douehi [4] Atkinson J stated:

“A consent order operates not only as an order of the court but also as a contract between the parties who therefore have an implied positive obligation to do all that is necessary to secure performance of the contract. There is also a negative obligation not to do anything to prevent the contract operating according to its terms. To do otherwise would put the party in breach of contract and therefore in breach of the order.” (footnotes removed)

[39] Where a consent order records a compromise between the parties, the Courts will usually only set aside the order where grounds exist which would justify the setting aside of the underlying contract. The authorities were recently considered by Applegarth J in Fairmont Suites and Hotels Pty Ltd v Duck Holes Creek Investments Pty Ltd [5] where his Honour noted:

“In Fylas Pty Ltd v Vynal Pty Ltd, McPherson SPJ (as his Honour then was) made the following observations in respect of consent orders or undertakings given in consequence of an agreement between the parties or as an element in such an agreement.

‘For a long time the rule has been that “the contract of the parties is not the less a contract, and subject to the incidents of a contract, because there is superadded the command of a Judge”. See Wentworth v. Bullen (1829) 9 B. & C. 841, 850 [1829] Eng R 253, per Parke J., which was adopted and applied by Chitty J. in Conolan v. Leyland (1884) 17 Ch D 632, 638. Such an order is capable of being set aside or varied, but essentially only on grounds or for reasons, such as mistake or misrepresentation, that would enable a contract to be invalidated or varied: cf. Mullins v. Howell (1879 (11) Ch D 763, Harvey v. Phillips [1956] HCA 27, (1956) 95 CLR 235, 243-244; Rayner v. Rayner [1968] QWN 42; Purcell v. F.C. Trigell ltd [1971] Q.B. 358; General Credits Limited v. Ebsworth [1986] 2 Qd R 162’

In Rockett v The Proprietors – ‘The Sands’ BUP 82, McPherson JA (with whom Williams JA and Wilson J agreed) stated:

‘Courts have only limited powers to set aside their orders, and the power to do so is even more restricted when the order in question has been made by consent of the parties to it; at least that is so when a compromise is involved, as it plainly was here … In Harvey v Phillips [1956] HCA 27; (1956) 95 CLR 235, 243-244, the High Court said that the question whether a compromise embodied in a consent order is to be set aside “depends on 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”.’

In H&G Group Pty Ltd v Pilot Developments Pty Ltd, Austin J reviewed leading authorities on the power to set aside a judgment or order, including a consent order. His Honour concluded that there was some authority for the view that the Court has a discretion to vary a consent order in ways going beyond an extension of time, in an exceptional case, even thought eh facts of the case provide no ground for varying or setting aside the underlying contract. Austin J regarded the point as doubtful in light of the restrictive language used by the High Court in Harvey v Phillips and in the absence of any more recent authoritative pronouncement by the High Court. I respectfully adopt his Honour’s analysis of the authorities. If, which is questionable, such a power exists in the absence of grounds to invalidate or vary the underlying agreement, then exceptional circumstances would need to exist in order to set aside or vary a consent order of the kind in this case.”

See also Chavez v Moreton Bay Regional Council [2009] QCA 348 and General Credits v Ebsworth [1986] 2 Qd R 146.

Footnotes:

3 [2010] NSWSC 311; 4 [2001] QSC 411 and 5 [2009] QSC 98.

 

Brisbane Barrister – David Cormack

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