Hunters Hill Council v Hakim [2016] NSWSC 1598 | Case summary

Construction of the deed

In Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407 Allsop P said at [19]: The essential character of the task of construction of commercial contracts can be seen in a number of authoritative decisions of the High Court, and of other courts authoritatively endorsed by the High Court. A commercial contract should be given a businesslike interpretation: McCann at 589 [22]. Thus, the nature and extent of the commercial aims and purposes of the agreement or parts thereof are part of the essential background circumstances: "the genesis of the transaction, the background, the context, the market in which the parties are operating": Codelfa at 350 quoting Reardon Smith at 995-996 cited by the Court in Zhu at 559 [82] and see Lake v Simmons at 509 cited by Gleeson CJ in McCann at 589 [22] and IATA at 160[8]. The need for a businesslike construction not only informs the nature and extent of the extrinsic material legitimately of assistance, but it also directs the approach to be taken to the ascription of meaning to the words used by the parties. The words should be given a construction so as "to avoid … [making] commercial nonsense or is shown to be commercially inconvenient": Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313-314 (Kirby P) cited by the Court in Zhu at 559 [82]. This is not only a reflection of the place of the informing surrounding circumstances, it is also a requirement not to approach words in a business contract pedantically or in a manner prone to defeat the evident commercial purpose. They should be read "fairly and broadly, without [the court] being too astute or subtle in finding defects": Hillas & Co Limited v Arcos Limited (1932) 147 LT 503 at 514 per Lord Wright cited in Australian Broadcasting Commission v Australasian Performing Right Association Limited [1973] HCA 36; 129 CLR 99 at 109-110. Similar expressions of the correct approach eschewing detailed semantic and syntactical analysis to lead to a construction contrary to business commonsense can be seen in what Lord Diplock said in Miramar Maritime Corporation v Holborn Oil Trading Ltd [1984] AC 676 at 682 and Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 at 201. As Gleeson CJ, Gummow J and Hayne J said in Maggbury at 198 [43] in the context of citing the relevant passage from Lord Diplock's speech in Antaios, what is "business commonsense" is an objectively ascertained matter and thus referable to the evidence, and a matter about which there may be dispute. (It is not to be forgotten that shipping cases such as Miramar and Antaois were dealt with by judges of great stature and experience in the context of markets and practices with which they were intimately familiar.)
What seems fairly apparent is that clause 2.5 of the deed sits uneasily with some the deed's other provisions. It seems likely that clause 2.5, being a general release clause, has been inserted in the deed without careful consideration of what was otherwise intended by the deed and the effect of some of the deed's other clauses. It is necessary to construe the whole of the deed including clause 2.5 in a way that means that all of the provisions of the deed operate as consistently with one another as is possible.
The deed, construed as a whole, is intended to reflect a compromise relating to costs twice ordered to be paid by the Hakims to the Council. There is first a compromise in the amount of those costs to the figure of $30,000 described as the Settlement Sum. Secondly, the Settlement Sum is to be paid over a period of 15 months mostly by equal instalments. Thirdly, the arrangement is that the person responsible for paying the Settlement Sum is Mr Hakim and Mrs Hakim is not to have any responsibility for those costs. That the costs are Mr Hakim's responsibility to the exclusion of Mrs Hakim is apparent from the wording of clauses 2.1, 2.3 and 2.4. Clause 2.4 contains an acknowledgment by the Council when it agrees to the terms in the deed that Mr Hakim is alone responsible for the payment of the Settlement Sum, but at the same time it not only releases Mrs Hakim from responsibility for the payment of those costs but also promises to keep her indemnified from all claims pertaining to the costs orders made in the Land and Environment Court proceedings.
It is necessary to read clause 2.5 consistently with those provisions. Otherwise clause 2.5 would suggest that Mrs Hakim only obtains a release on payment of the Settlement Sum. That is inconsistent with clause 2.4. Moreover, clause 2.5 read widely is inconsistent with clause 2.3 because a wide reading suggests that if the Settlement Sum is not paid the Council would be free to pursue (at least) Mr Hakim for the whole of the costs ordered in the Land and Environment Court proceedings. Clause 2.3, on the other hand, makes it clear that if there is a failure by Mr Hakim to make any instalment payment by the due date he becomes liable for the whole of the Settlement Sum.
The Plaintiff drew attention to the discussion in Osborn v McDermott [1998] 3 VR 1 at 9 about the distinction between mere accord executor, and accord and satisfaction. Phillips JA (with whom Winneke P and Charles JA agreed) said: But that having been said, it was the plaintiffs' contention that the terms of Annexure "A" demonstrated mere accord executory (so that there could be no enforcement, wanting performance), whereas it was the contention of the defendant that those terms demonstrated accord and satisfaction. But while the parties were thus disposed at first to consider only these two alternatives, there is a third possibility, as demonstrated by the judgment of Fullagar J. in Scott v. English [1947] VX.R. 445. In Scott, after rehearsing a great number of the earlier cases preceding McDermott v. Black, Fullagar J. at 451-2, first drew the distinction between accord and satisfaction and mere accord executory in classic terms, drawing for the purpose on the words of Parke B. in Evans v. Powis (1847) 1 Exch. 601 at 607-8; 154 E.R. 255 at 258, to the effect that where there was accord and satisfaction: ... the plaintiff agreed to accept the agreement itself, not the performance of it, as a satisfaction for his debt, so that if it was not performed, his only remedy would be by action for the breach of it, and not a right to recur to the original debt. A little further on, Fullagar J. at 452, added this, quoting from the judgment of Dixon J. in McDermott at 185: If the agreement is to accept the promise in satisfaction, the discharge of the liability is immediate; if the performance, then there is no discharge unless and until the promise is performed. Commonly that will be the contrast, so that the "satisfaction" will be immediate if the compromise is in return for a promise of something to be done. But that need not always be so, as Fullagar J. went on to point out; for there is no reason why, if they wish, parties may not make an immediately binding agreement for compromise but defer the satisfaction (or discharge) of existing obligations until performance, thereby rendering discharge conditional. As Fullagar J. put it in Scott at 453: The essence of the matter may be said to be that a mere "accord" is not a contract at all. But, if we find in any particular case that there is a contract - a promise accepted in "satisfaction" against a promise - our problem is not necessarily at an end. We have still, I think, in some cases to construe the contract to see whether its effect is to discharge the original cause of action absolutely, so that the plaintiff can never thereafter sue on it but can only sue on the new contract, or whether it effects only a conditional discharge, merely suspending the original cause of action, so that, if it is not performed by the defendant according to its tenor, the plaintiff may still maintain that original cause of action. Thus, his Honour contemplated a case in which the accord amounted to an immediately enforceable agreement (which suggests that there was accord and satisfaction), but that the "satisfaction" (the discharge of existing obligations) was itself only conditional, suspending the original cause of action, but not extinguishing it, unless and until performance by the defendant according to the tenor of the agreement.
The Plaintiff submitted that under the Deed the position was an accord and satisfaction with conditions, that is, there had to be performance under the Deed before the release operated.
However, the terms of the Deed, particularly clause 2.3 point strongly against that construction. If any payment (which would include the first) is not made, the Plaintiff's remedy is not to sue on the original agreement but only to sue for the whole of the Settlement Sum. That suggests that the Plaintiff agreed to accept the agreement itself and not the performance of it: Evans v Powis (1847) 1 Exch 601 at 607-8; 154 ER 255 at 258. Clause 2.4 then reinforces that construction both by the words "In accepting these Terms" (that is, accepting the promise in satisfaction) and also by indemnifying Mrs Hakim, something which does not occur under clause 2.5 on both execution and payment.
In my opinion, clause 2.5 must be construed as a release of Mr Hakim when the Settlement Sum is paid is full. Although the word "Parties" is used at the commencement of clause 2.5 the clause itself is concerned with two parties, not three. That is discernible from the references to "the other party", "either party" and "against the other". All of those references in ordinary English usage are speaking of two persons and not more. The use of the term "Parties" at the commencement of clause 2.5 is consistent with the construction of the deed because it is necessary for any release of Mr Hakim that Mrs Hakim executes the deed. Moreover, Mrs Hakim's position is dealt with in cluse 2.4 - a further matter pointing to clause 2.5 only dealing with the release of Mr Hakim.
Properly construed, upon execution of the deed Mrs Hakim is released and she obtains an indemnity from the Council against claims (including claims by the Council) whereas Mr Hakim obtains his release under clause 2.5 when he has paid the Settlement Sum.
It was not clear from the Council's submissions if it was being asserted that the Council was entitled to accept that the deed had been repudiated because its terms had not been performed at all. In other words, it was not clear if the Council was asserting that clause 2.3 did not operate simply to make the Settlement Sum payable but rather the position reverted to the position of the parties prior to the execution of the deed because there had been no performance of any sort by the Hakims. If that was being asserted there are difficulties with the assertion.
First, the letter purporting to accept the repudiation was never sent to Mrs Hakim. Secondly, Mrs Hakim had no obligations apart from the execution of the deed and she performed that obligation.
Thirdly, and significantly, the only evidence that is before the Court is that the first instalment was paid when Mrs Hakim returned the executed deed to the Council. There is no evidence from the Council contradicting her evidence in that regard. I cannot accept mere assertions in correspondence from the Council's solicitors at a later time as demonstrating that no instalments have been paid. The letters are, in any event, mistaken inasmuch as they assert that no deed was executed on or about 20 September 2013.
Accordingly, the evidence does not support the assertion that the Hakims, or at least Mr Hakim, have repudiated the deed entitling the Council to assess the costs as they have done. Even if no payment at all was capable (on acceptance of a repudiation) of restoring the parties to the status quo ante, once a payment was made clause 2.3 clearly operated. That is entirely consistent with what Dixon J said in McDonald v Dennys Lascelles at 476-477.
On execution of the deed Mrs Hakim was released from all claims (as defined) pertaining to the costs orders made in the Land and Environment Court.

Can the judgment be set aside?

Section 368 of the Legal Profession Act 2004 relevantly provides: 368 Certificate as to determination (1) On making a determination of costs referred to in Subdivision 2 or 3 of this Division, a costs assessor is to issue a certificate that sets out the determination. (2) A costs assessor may issue more than one certificate in relation to an application for costs assessment. Such certificates may be issued at the same time or at different stages of the assessment process. … (5) In the case of an amount of costs that has not been paid, the certificate is, on the filing of the certificate in the office or registry of a court having jurisdiction to order the payment of that amount of money, and with no further action, taken to be a judgment of that court for the amount of unpaid costs, and the rate of any interest payable in respect of that amount of costs is the rate of interest in the court in which the certificate is filed. (5A) The costs assessor must forward the certificate or a copy of the certificate to: (a) the Manager, Costs Assessment, and (b) each party to the assessment, unless subsection (6) applies. (6) If the costs of the costs assessor are payable by a party to the assessment as referred to in section 369, the costs assessor must: (a) forward a copy of the certificate to the Manager, Costs Assessment only, and (b) advise the parties that the certificate has been so forwarded and will be available to the parties on payment of the costs of the costs assessor. (7) Subsection (6) does not apply: (a) in respect of a certificate issued before the completion of the assessment process under subsection (2), or (b) in such circumstances as may be prescribed by the regulations.
In the present case the Certificate of the Costs Review Panel was registered in the Court on 17 August 2016. The effect of that registration was that the present proceedings came into being on that day. The effect of s 368(5) is that the amount of costs in the Certificate, $47,622.40, became a judgment of the Court for that sum. The issue is whether the provisions of Pt 36 Uniform Civil Procedure Rules 2005 (NSW) and in particular r 36.15, apply to such a judgment. If they do not, does the inherent power of the Court extend to the setting aside of a judgment brought about by the registration of the costs certificate under s 368 of the Legal Profession Act 2004?
In Doyle v Hall Chadwick [2007] NSWCA 159 a costs assessor issued a certificate under s 208J of the Legal Profession Act 1987 (NSW) (the equivalent of s 368 in the 2004 Act). The certificate was registered and became a judgment of this Court. The judgment debtor then appealed to this Court to have the costs re-determined on grounds of errors of law. At first instance the appeal was allowed with the certificate and the judgment being set aside. The judgment creditor then appealed to the Court of Appeal. One of the issues to be determined on the appeal was whether the appeal itself was incompetent because the judgment came about by the filing of the certificate - a ministerial act: Frumar at [42].
Justice Hodgson (with whom Mason P and Campbell JA agreed) said: [47] Dr. Doyle accepted that, on his submissions, the judgment pursuant to s.208J could qualify as a judgment of the Court in proceedings in a Division, and thus (with leave) be the subject of an appeal to the Court of Appeal under s.101 of the Supreme Court Act 1970. However, the problem with that approach is that there would be no ground on which such an appeal could be upheld, unless the relevant certificate underlying the judgment was set aside; and s.208K of the 1987 Act prevents that happening except pursuant to the appeal procedure provided by the 1987 Act. [48] The 1987 Act discloses a plain legislative intention that there be an appeal to the Supreme Court in a Division against decisions of costs assessors; and in my opinion it was plainly not the intention of the legislature either that the possibility of such an appeal should be wholly lost if a judgment was obtained under s.208J, because the certificate then merges into the judgment and can no longer be set aside; or that there would have to be also an application for leave to appeal to the Court of Appeal pursuant to s.101 of the Supreme Court Act. [49] Accordingly, in my opinion the clear legislative intention is that an appeal to the Supreme Court should be able to proceed after a judgment has been obtained under s.208J. Further, in my opinion, there is no difficulty in giving effect to this legislative intention. It is well recognised that there are judgments that are not based on any decision of the Court of which they are taken to be judgments, but have some other basis; and such judgments may be set aside or varied if that basis is defeated or varied. [50] One example is judgments entered by consent. They are "mere creatures" of the agreement, and may be set aside, without an appeal, on any ground on which the underlying agreement may be set aside: Logwon Pty.Limited v. Warringah Shire Council (1993) 33 NSWLR 13 at 28-30. [51] Another example is judgments arising from the registration of a certificate of judgment from another jurisdiction. If the judgment in that other jurisdiction is set aside or varied, then the judgment arising from registration can similarly be set aside or varied: Remilton v. City Mutual Life Assurance Society Limited (1907) 24 WN(NSW) 177, Bell v. Bell (1954) 73 WN(NSW) 7. [52] A judgment arising from a certificate pursuant to s.208J(3) of the 1987 Act is this kind of judgment; and is liable to be set aside or varied if the certificate on which it is based is set aside or varied: cf. Croker v. Commissioner of Taxation [2005] FCA 127, (2005) 145 FCR 150 at [14]. A further limitation of the effect of such a judgment is considered in Khoury v. Hiar [2006] NSWCA 47. [53] In relation to an appeal to the Supreme Court, there is no need for a provision of the kind contained in s.208KF. The Supreme Court has power to make appropriate orders in relation to its own judgments, and to make orders preventing parties from relying on judgments of other courts. (emphasis added)
It is apparent, therefore, that a judgment brought about by the registration of the certificate is capable of being set aside or varied at least in the circumstances that the certificate on which it is based is set aside or varied. The problem in the present case is that there may well be no basis for setting aside the certificate because the costs assessor and the review panel were asked to determine what costs were properly payable by the Hakims to the Council pursuant to the Court orders made. Although in Doyle Hodgson JA held that a costs assessor "assessing costs between a lawyer and client, can determine disputes as to the terms of the costs agreement", he went on to say at [61]: However, where the existence of the terms of the agreement are in dispute in a way that would require the hearing of evidence to resolve, it may be appropriate for the costs assessor to decline to resolve the dispute; …
Justice Hodgson made reference to the litigation in Muriniti v Lyons [2000] NSWSC 680 heard by Davies AJ. There was a dispute as to the terms of an agreement between a solicitor and a barrister where the agreement was apparently not in writing and the barrister was deceased. The solicitor objected to the costs assessor proceeding given the dispute, and commenced proceedings in this Court seeking a declaration to the effect that any agreement with the barrister was subject to a condition that had not been fulfilled. Davies AJ dismissed those proceedings, holding that any questions as to the terms of the agreement were to be determined by the costs assessor, not the Court. Hodgson JA said that that approach was correct except to the extent that there would need to be a hearing involving evidence about the terms of the dispute. In those circumstances Hodgson JA said it would have been open and reasonable for the terms of the dispute to have been resolved in the declaration proceedings brought in this Court.
In the present case the dispute is not over the terms of a costs agreement which the costs assessor might have resolved, following Doyle. The real issue is whether there should have been any costs assessment against Mrs Hakim by reason of the Deed of Settlement which, as I have determined, released her from any obligation to pay costs to the Council. That was not a matter which the costs assessor should have resolved. The review panel was correct in that regard in saying that the costs assessor should not have held that the costs assessed were not payable.
If Mrs Hakim had been given notice that the Council intended to have the costs assessed against her she could, if the Council could not be dissuaded from pursuing that course, have sought relief in this Court for a declaration that she was not liable to pay any costs pursuant to the Settlement Deed or for an order staying the costs assessment process against her.
No notice was given to Mrs Hakim to enable her to take that course of action. The costs assessment should not have proceeded against her. No notice was given to her pursuant to s 368(6)(b) of the Act. The Council should not have registered the certificate to bring about the position where there was a judgment against Mrs Hakim. There can be little doubt in those circumstances that the judgment entered by the Council by the registration of the certificate was entered against good faith.
In Cash v Wells (1830) 109 ER 826 a judgment by default was entered against the terms of an arrangement that the parties had that restrained the plaintiff from signing judgment unless there was default made in payment of a bill of exchange. The payment of the bill was punctually made. The obtaining of the judgment was against good faith. The correctness of that decision was affirmed in Roach v B & W Steel Pty Ltd (1991) 23 NSWLR 110 at 113. Although doubt has been cast upon the Court's statement in Roach that it would be contrary to good faith for a client to attempt to retain the benefit of an order innocently obtained by his legal practitioner (see Shirriff v Nominal Defendant [1999] NSWCA 152 at [19] and Kendell v Carnegie (2006) 68 NSWLR 193; [2006] NSWCA 302 at [52], the correctness of the decision in Roach was not doubted. As those later judgments explained the ratio of the decision in Roach was that it would be against good faith for a legal practitioner to obtain judgment contrary to an earlier promise or representation even if the legal practitioner was not aware that his or her conduct was contrary to that agreement.
Although the Court of Appeal in Doyle accepted that a judgment registered under the provisions of the Legal Profession Act was one from which an appeal could be brought and was one liable to be set aside or varied, the Court did not suggest that setting aside or variation was possible unless the underlying basis for the judgment was also set aside or varied - see at [49], [51] and [52]. Similarly, the Court said that there was no ground on which an appeal from the judgment could be upheld unless the underlying certificate was set aside. In addition, the limited nature of this type of judgment was discussed by the Court of Appeal in the later case of Frumar at [38] to [50].
Accordingly, in my view, the provisions of r 36.15 Uniform Civil Procedure Rules 2005 (NSW) do not apply to the judgment unless the underlying certificate is also liable to be set aside. In the present case I do not consider that there is any basis upon which the underlying certificate could be set aside if an appeal was taken under sub-div 6 of div 11 of the 2004 Act. In any event, that appeal must be determined by the District Court pursuant to s 384. No error is identified in the assessment and determination of the review panel.
Nevertheless, this Court is a superior court of record, it has inherent jurisdiction, and it has power to make appropriate orders in relation to its judgments: Doyle at [53].
In my opinion, the appropriate relief at the stage the matter has now reached is to stay permanently the judgment that has been registered in the Court. Mrs Hakim seeks in her Notice of Motion a declaration that she has been released from her obligation to pay the costs ordered by the Land and Environment Court. Ordinarily such a declaration should be sought in substantive proceedings rather than in the proceedings brought into existence by virtue of the registration of the certificate. On the other hand, I do not see any irregularity in seeking a stay on enforcement of the judgment in the proceedings in which the judgment is entered. If it had been possible to set aside or vary the judgment there is nothing in the Court of Appeal's judgment in Doyle that suggests separate proceedings ought to have been taken to do that. If, as Doyle accepts, a judgment obtained by registration can be affected in a variety of ways, it is appropriate that taking action to affect that judgment should be in those proceedings.
If I am wrong in relation to this I consider that s 56 of the Civil Procedure Act 2005 (NSW) brings about the result that form should not triumph over substance and that both the declaration and any consequential orders should be made in the present proceedings.

Hunters Hill Council v Hakim

At a glance

Court

Decision date

Before

Source

Judgment (7 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (16)

Cited By (2)