(5) Discretionary considerations, if relevant, favour the public policy inherent in the finality of litigation and the class 2 appeal was, in any event, lacking in any merit.
Factual background
10 The factual dispute between the parties relevant to the present motion is limited to the instructions from the applicants to their (then) solicitor with respect to the consent orders, and the inferences I should draw about those instructions from certain documents produced under subpoena by the applicants' (then) solicitor.
11 The class 2 proceedings were commenced on or about 24 November 2004. The proceedings were commenced on behalf of the applicants' by their solicitor. On 2 February 2005, the applicants' solicitor served a statement of issues on the Council's solicitor. On 7 February 2005, a letter from the Council's solicitor to the applicants' solicitor records that there was a telephone call over before the Court at which the applicants' solicitor failed to appear and that certain directions were made. On 18 February 2005, pursuant to those directions, the Council's solicitor served on the applicants' solicitor a statement of basic facts. On 2 March 2005, the applicants' solicitor wrote to the Council's solicitor explaining and apologising for the failure to appear at the telephone call over. The letter referred to the likely need to request particulars and also stated as follows:
We should also indicate that we are now taking measures to retain a liability consultant to provide an expert's report in support of our client's contentions which will be served in accordance with the time limits prescribed by the Rules.
12 By letter dated 4 March 2005, the Council's solicitor wrote to the applicants' solicitor and said in part:
From the material you have advanced to date it is apparent that your clients' prospects in this appeal are less than negligible. In the circumstances we are instructed at this stage, to put the following offer to you:
(1) Applicant discontinues the appeal.
(2) Applicant to comply with the order of the respondent issued 21 October 2004 within thirty days.
(3) Applicant to pay the Respondent's party-party costs as agreed or assessed.
This offer remains open for a period of twenty eight (28) days and is made in accordance with the principles enunciated in the Calderbank case. If your clients' appeal is unsuccessful we shall tender this letter and seek indemnity costs on behalf of the Council from today's date.
13 At a callover on 7 March 2005, the class 2 appeal was fixed for hearing on 11 April 2005.
14 The applicants' solicitor requested particulars of the statement of basic facts on 10 March 2005. On the same date, the applicants' solicitor retained Greg Alderson and Associates, consulting engineers. The retainer letter indicated that a meeting was scheduled for 16 March 2005. The retainer letter noted, in part, that "...our client takes serious issue with the validity of the terms of the order in circumstances ... whereby local government approval is not required."
15 On the same date, the applicants' solicitor wrote to the applicants care of the applicants' business, Aero Marina Pty Limited, stating in part that:
In essence Council alleges there to be two sewerage management facilities located on the property relevant to the order: -
- an SMF at the southern most structure of the property;
- an SMF serving northern most structure of the property.
It is alleged that both facilities are failing for reasons previously particularised and non-compliant with relevant Authorities.
We note you take issues with these contentions. We note in doing so you rely on the recommendations issued by NSW Health April 2000 regarding Greywater Reuse in Sewered Single Domestic Premises where in essence it is indicated that if both facilities are construed as greywater diversion services which simply divert greywater (excluding kitchen wastewater) without storage or treatment they do not require local government approval.
It would appear from our preliminary discussions with Mr Greg Alderson, Consultant that he is not in agreement with these contentions.
In the event that the appeal is going to be successful in the Land and Environment Court there will need to be satisfactory evidence to support these contentions provided by an expert Engineer. It is insufficient to simply say that you do not consider the requirements apply.
In the alternative if the expert evidence confirms that approval is required measures ought to be taken to instruct the consultant to liaise with Council's offices to implement an appropriate procedure that complies with the recommendations of Council as particularised in the order.
In the first instance we propose liaising with Mr Greg Alderson in respect of the relevant contentions with a view to adopting an appropriate strategy.
16 This letter also referred to the foreshadowed conference with Mr Alderson on 16 March 2005.
17 There is no dispute in the proceedings that the applicants controlled the entity Aero Marina Pty Limited and that Mr Jacobson dealt with the correspondence sent to Aero Marina. Nor was there any dispute that, of the two applicants, Mr Jacobson was primarily (but not exclusively) responsible for dealings with the applicants' solicitor with respect to the Council's s 124 order and the class 2.
18 On 11 March 2005, Mr Jacobson sent a facsimile to his solicitor seeking to explain his contentions that the Council's s 124 order was misconceived. On 18 March 2005 the applicants' solicitor forwarded a further letter to the applicants which stated in part:
In light of the above, we confirm our advice that currently the only issue before the Court is whether or not your appeal in respect of the Order issued from Council is warranted.
The merits of the appeal are poor whilstever it is mandatory for Council approval to have been provided and it not having been obtained.
The issue currently before the Court is not an assessment of the merits of any sewerage system, i.e. performance standards etc., whilstever the Council is not, at the present time, seeking to prosecute you in respect of any alleged failure, but merely the fact that approval has not been obtained.
In these circumstances we reiterate that the appropriate approach to adopt is to defer the current proceedings and implement an appropriate waste management policy in conjunction with Greg Alderson, consultant, which Council is prepared to approve in respect of the relevant premises.
It is our recommendation that you liaise with Mr Alderson with a view to devising an appropriate strategy policy that can be settled upon. Council should then be approached with a view to it giving due consideration to the proposal and negotiating the proposed terms incorporated in the Order that has issued.
In the event that you wish to query any further aspect of this advice please immediately contact the writer. Otherwise, we await your further instructions.
19 A handwritten note from the file of the applicants' solicitor dated 16 March 2005 refers to a conference with the applicants' solicitor, Mr Jacobson and Mr Alderson. That handwritten note records:
without prejudice to our rights on merits.
appeal is misconceived.
develop a strategy ...
20 Mr Jacobson does not have any particular recollection of that meeting.
21 The Council's solicitor requested particulars of the applicants' statement of issues on 17 March 2005. On 21 March 2005 there was a telephone attendance between the applicants' solicitor and one of the applicants, whom I infer to be Mr Jacobson. On 23 March 2005, the Council's solicitors wrote to the applicants' solicitor stating that:
We have now reluctantly incurred further costs in this matter, receiving instructions and drafting answers to your prolix request for particulars.
We state reluctantly because on any proper analysis you will find that the cost of the works required by the subject order in this matter will be far exceeded by the costs of this litigation.
…
As noted above on our instructions the cost of rectifying the systems is now to be far exceeded by the costs of these proceedings and in such circumstances we again advise that the Council shall seek indemnity costs in respect of this matter and a copy of this letter shall be tendered to support such application.
22 On 23 March 2005, the applicants' solicitors wrote to the Council's solicitors stating:
Further to our letter dated 17 March 2005 and by way of update we advise as follows:-
We are now instructed that our client's consultant, Mr Greg Alderson, will be instructed to liaise with Council in respect of addressing all relevant issues set out in the order issued by your client, dated 21 October 2004.
In these circumstances we are now instructed to seek your client's consent to the filing of a Notice of Discontinuance which is now enclosed.
Please seek your client's immediate instructions and advise.
23 This letter attached a notice of discontinuance signed by the applicants' solicitor. The letter was expressed to be "without prejudice except as to costs". I consider that, given the issue in dispute between the parties relating to the scope of the authority of the applicants' solicitor to settle the proceedings, this (and related) "without prejudice" communications are admissible in these proceedings. If the Evidence Act 1995 applied (which it does not - s 38(1) and (2) of the Land and Environment Court Act 1979 and s 8 of the Evidence Act 1995), then I consider that the evidence would be admissible under s 131(2) (e), (f) and (g) of that Act. It is well settled at common law that the court may examine "without prejudice" communications to ascertain whether a settlement has been concluded (Tomlin v Standard Telephones and Cables Ltd [1969] 3 All ER 201). I consider that principle must apply to the present circumstances where the applicants maintain that their solicitor was not authorised to conclude the settlement on their behalf.
24 On 4 April 2005, the Council's solicitor responded by stating in part that:
Our client instructs us that it shall consent to your proposed Notice of Discontinuance on the basis that the consent orders provide that:
(1) your client shall comply with the order the subject of the proceedings with thirty (30) days; and
(2) your client shall pay the Council's party/party costs occasioned by the discontinuance .
25 On or about 6 April 2005, Mr Jacobson forwarded to his solicitor a copy of the Local Government (Approvals) Regulation 1999 marked with comments and underlining, which I construe as an attempt to explain his contention that no approval was required under the Local Government Act 1993 for the wastewater facilities on the land. The applicants' solicitor forwarded a facsimile on the same date to Mr Jacobson which, in part, stated "…we would strongly recommend that measures be taken to immediately discontinue the appeal so that ongoing costs are minimised". The letter sought urgent instructions from Mr Jacobson.
26 Correspondence continued between the solicitors. The applicants' solicitor wrote to the Council's solicitor on 6 April 2005, in a letter which in part stated:
Thank you for your facsimile dated 6 April 2005 but with respect, the consent orders that you have submitted do not properly reflect the terms of settlement.
We indicated our client was agreeable to paying your costs as agreed or assessed.
There has never been any agreement on the part of our client to pay costs in the sum of $5,720 (incl GST) particularly in circumstances where to date we have not been provided with any particulars of the costs which are alleged to be incurred by the Applicant.
Please amend Paragraph 3 of the consent orders to properly reflect the terms of the agreement, namely
(3) The applicant shall pay the respondent's party/party costs as agreed or assessed
We reiterate this matter is now settled and our client will not be responsible for any further costs associated with preparing the matter for hearing.
27 On 6 April 2005, the applicants' solicitor forwarded another facsimile to the Council's solicitor (the sequence of these facsimiles is not apparent) stating:
Thank you for your letter dated 4 April 2005, and we advise as follows-
We are instructed to agree to the terms set out in your letter dated 4 April 2005.
We now await receipt of executed Notice of Discontinuance on behalf of your client so that we can arrange for it to be filed with the Court.
We now enclose copy of correspondence forwarded to the Court which is self-explanatory.
28 The enclosed letter to the Assistant Registrar of the Court stated:
We refer to the abovementioned matter which we advise has now been settled.
The parties are in the process of executing a Notice of Discontinuance which will be filed with the Registry shortly.
In the circumstances we should be grateful if you could provide confirmation that the hearing date has been vacated.
In the event that you have any query in respect of the matter set out herein please do not hesitate to contact the writer.
29 Correspondence continued between the Council's and applicants' solicitors with respect to the terms of the consent orders on 6, 7 and 8 April 2005, relating particularly to the issue and quantum of the Council's costs. Two versions of the consent orders were apparently forwarded in the same terms except for order 3 (which concerned costs). In one version, the costs were quantified and, in the other, the costs to be paid by the applicants were to be "as agreed or assessed." At the same time, communications continued between Mr Jacobson and the applicants' solicitor with respect to the requirements of the Local Government Act 1993 (for example, a file note of 7 April 2003 records that Mr Jacobson did not understand the solicitor's advice about the operation of the statute).
30 On 8 April 2005, a facsimile from the applicants' solicitor to Mr Jacobson records:
Further to your telephone discussion with Kerren Thompson on 7 April 2005 we advise as follows:-
In respect of the further clarification sought we reiterate that we are only relying on the provisions of the Local Government Act 1999. The amendments to the Act make no alteration to position in that the mandatory requirements of Section 68 still apply.
Furthermore the amendments to the legislation does not alter the position in respect of DGTS and a GDD.
In the event that you require any further clarification please immediately telephone the writer, otherwise we have arranged a further conference with the writer Wednesday to ensure that full instructions have been provided to the Waste Management Consultant and clarify any outstanding issues. This is in circumstances where an appeal needs to be stayed pending clarification of these matters .
31 On 8 April 2005, the solicitors for both parties signed the consent orders. Mr Jacobson raised a question whether the signature was that of the solicitor or his personal assistant. I consider that question to be immaterial as I am satisfied that the consent orders were signed by or under the authority of the applicants' solicitor. On the same day, the applicants' solicitor forwarded a facsimile to the Council's solicitor enclosing a communication to the Assistant Registrar of the Court attaching the signed consent orders and noting that he assumed that the matter had been removed from the list.
32 The communications between the applicant and the applicants' solicitor continued. Mr Jacobson sent two facsimiles on 14 April 2005 requesting information from his solicitor. Mr Jacobson gave evidence of a meeting on 13 April 2005 (which is also disclosed in the applicants' solicitor's bill of costs) with a Mr Chris Hill where he explained his arguments to the applicants' solicitor. This was, according to Mr Jacobson, the first occasion on which his solicitor understood Mr Jacobson's arguments.
33 The Council's solicitor served a sealed copy of the consent orders on the applicants' solicitor on 20 April 2005. The applicants' solicitor wrote to Mr Jacobson on 26 April 2005 stating, in part, that:
In the circumstances, the issues discussed in conference ought now be the subject of further discussion with Greg Alderson and he should be provided with instructions to liaise with Council's consultants as regards complying with that part of the order which:
· is valid and capable of being enforced and/or;
· which has not been already adequately addressed and complied with.
We reiterate that there is a need in the first instance for the consultant to be properly instructed and liaise with Council's staff.
In the event that an issue in respect of compliance still arises you ought to reconsult the writer, and provide us with further instructions.
34 Further correspondence ensued between the Council's and the applicants' solicitors. That correspondence discloses that the agreement as to payment of the Council's costs as quantified in the consent order was in issue and that instead, according to the applicants' solicitor, the agreement was that a bill of costs (to be assessed) was required.
35 The Council's solicitor sought to arrange personal service of the consent orders on the applicants and, in correspondence to their solicitor, adverted to contempt proceedings if the applicants did not comply with the consent orders. This led to yet further correspondence between the solicitors.
36 On 29 April 2005, Mr Jacobson sent a facsimile to his solicitor referring to Mr Alderson "reviewing the documents" and noting the "errors" (which I infer to be errors in the documents) which Mr Jacobson said were manifest. The facsimile also contains a reference to "FOI" which I understand to be a reference to a freedom of information request that had been lodged by or on behalf of the applicants with the Council.
37 On 6 May 2005, the applicants' solicitor wrote again to Mr Jacobson stating in part that:
We reiterate that your consultant, Greg Alderson, should be addressing the alleged non-compliance issues by way of report. That report needs to be prepared in a form consistent with the terms of an Environment Court Practice Note, a copy of which is enclosed.
38 On 10 May 2005, the applicants' solicitors wrote to the Council's solicitors as follows:
You will recollect that the correct Consent Order that should have been signed and adopted by us was that which was provided by you under cover of letter dated 7 April 2005.
Our client's instructions at all times have been that it is agreeable to payment of the respondent's costs as agreed or assessed.
You will no doubt acknowledge that there has never been any proper agreement in respect of the quantum of the costs.
In the event that you are now intent on seeking to pursue the current orders we will need to make application to seek a variation of Order 3 to make provision for payment of costs as agreed or assessed.
Please seek your client's urgent instructions and in the absence of the issue being resolved, we will take measures to relist the matter.
39 On 11 May 2005, Mr Jacobson sent a fax to his solicitor about the FOI documents and about Mr Alderson's status not being that of a Court appointed expert. The letter also repeated the request that he had earlier made for a copy of the brief to the barrister.
40 On 13 May 2005, the applicants' solicitor wrote to the respondent's solicitor stating:
Further to our letter dated 10 May 2005 we advise as follows -
We are now instructed to tender payment of what our clients consider to be a reasonable claim for the professional legal costs incurred by the respondent to date in the sum of $3,300 including GST.
41 Mr Jacobson gave evidence, as I understand it, that the applicants did not pay this amount.
42 On 16 May 2005, the applicants' solicitor wrote to Mr Jacobson in response to Mr Jacobson's 11 May 2005 facsimile.
43 On 15 June 2005, Mr Jacobson forwarded a facsimile to his solicitor stating:
Mark - please review. Something very wrong has happened. Please call after review.
44 On the following day, 16 June 2005, Mr Jacobson forwarded a further facsimile to his solicitor stating:
Mark,
Asking again. Something very wrong has happened. Has my position been compromised, without recourse?
What is our condition? This is unbelievable, what am I reading?
Please advise post haste. This is very stressful.
Report on inspection to follow.
Clay.
45 Mr Jacobson gave evidence that he first became aware of the consent orders around the time that these two facsimiles were sent.
46 On 20 June 2005, the applicants' new solicitors wrote to the Council's solicitors as follows:
We have received instructions to act for Lee Anne McMillan and Clayton Jacobson. Our clients were previously represented by Mark Flynn and Associates and you acted on behalf of Ballina Shire Council. We are in the process of obtaining our clients file from Mark Flynn.
Court records indicate our clients application was discontinued by consent on 8 April 2005. Our clients instruct us to apply to the Court to set those consent orders aside. The principal basis of that application will be that the orders were signed by their solicitor without their knowledge or consent.
The consent of Ballina Shire Council, as respondent, is sought. Please seek instructions and advise. In the event that we do not receive your response within fourteen days of the date hereof we are instructed to file the necessary motion and supporting material without further notice.
47 By letter dated 24 June 2005, the Council refused its consent to this request.
48 The notice of motion seeking to set aside the consent orders was filed with the Court on 30 June 2005 supported by affidavits from each of the applicants, sworn 28 June 2005. Both of the applicants said that they had not instructed their solicitor to discontinue the proceedings or enter into consent orders and that they were not aware of the consent orders until some time in June 2005. The applicants' former solicitor was not called to give evidence in the proceedings. I consider this fact to be irrelevant in the circumstances of this matter. I draw no inference from this fact one way or another.
Findings
49 I find that the applicants retained a solicitor to represent them in the class 2 proceedings and that the solicitor had the usual authority which the solicitor- relationship entails. By this I mean that I am satisfied on the evidence before me that the applicants did not place any limitation on their solicitor in his capacity to represent them in the class 2 proceedings.
50 I am satisfied that the applicants' solicitor was of the view that the class 2 appeal had poor prospects of success, and was concerned about the costs likely to be incurred in running the appeal, the possibility of the Council obtaining a costs order against the applicants, and the proportionality of those costs when compared to the solicitor's understanding of the costs likely to be involved in complying with the Council's s 124 order. As such, the solicitor was of the opinion that the appeal ought not to proceed and that, instead, the applicants (through their engineer, Mr Alderson) should resolve the issues in dispute with the Council outside of the context set by the class 2 appeal.
51 It is apparent that the applicants (or Mr Jacobson at least) believed that his solicitor did not appreciate the significance or the consequences of the s 124 order. Mr Jacobson and his solicitor also disagreed as to whether approval was required for the installation of the wastewater facilities on the land and the method of wastewater management.
52 I accept that the applicants did not fully appreciate the substance and ramifications of their solicitor's advice with respect to the proceedings; namely, to enable Mr Alderson to develop a strategy for wastewater management on the land. That is, Mr Alderson would liaise with the Council with respect to that strategy, the negotiated strategy would be incorporated within the Council's s 124 orders and that, importantly, this would be done outside of the context of the class 2 appeal which was fixed for hearing on 11 April 2005, the proceedings being deferred, stayed or put to one side for that purpose. I also accept that the applicants were not aware of the specific terms of the consent orders until some time in June 2005. As explained below, lack of awareness of the terms of the consent orders is not the same as lack of awareness (or rejection) of the course recommended by the applicants' solicitor.
53 I make the following further findings on the evidence: