Plaintiffs v Defendants

3 Frank Guastalegname, by a summons issued on 6 November 2017, now seeks to have the proceeding reinstated.

4 On 14 March 2018, I dismissed the summons - essentially on the basis that the right of reinstatement, referred to in the order, was for a limited purpose (i.e. confined to non-compliance with the provisions for payment by the defendants in accordance with the terms of the settlement) and did not entitle Mr Guastalegname to reinstate the case generally and, presumably, then to set aside the consent orders as part of this proceeding.

5 I provided ex tempore reasons but promised the parties a more fulsome account of my rationale for refusing the application.

6 In September 2013, the plaintiffs issued this proceeding alleging negligence, misrepresentation, abuse of process and malicious prosecution.

7 On 4 September 2017, the trial commenced before McDonald J. The plaintiffs were jointly represented.

8 On 5 September 2017 the trial judge referred the parties to judicial mediation. The following day the trial resumed. That evening counsel for the parties negotiated a resolution of the plaintiffs' claims and a deed of settlement (the deed) was entered into on 7 September 2017, signed by all parties.

9 The deed contained the following 'operative provisions':

1. SETTLEMENT

1.1 The Defendants agree to pay the Plaintiffs the sum of REDACTED inclusive of all legal costs of the Proceeding (Settlement Sum) in full and final settlement of all claims the subject of the Proceeding.

1.2 The Defendants will pay the Settlement Sum to the Plaintiffs' solicitors trust account within 30 days of receipt of an executed copy of this Deed.

1.3 Time is of the essence in the payment of Settlement Sum.

1.4 If the Defendants default in the payment of the Settlement Sum as required under Clause 1.1 and 1.2 herein, then the Plaintiffs, upon 3 days written notice to the Defendants or their solicitors, shall be entitled to make application for the entry of default judgment for payment of the Settlement Sum, together with the interest on that amount at the rate prescribed by the Penalty Interest Rates Act 1983 from the date of such default and the reasonable costs of entering such judgment. The filing of an affidavit sworn by the solicitor for the Plaintiffs deposing to the default of payment by the Defendants and exhibiting a copy of this Deed of Settlement shall be sufficient proof of the Defendants default.

1.5 In consideration of the terms hereof, the Plaintiffs:

1.5.1 Waive all actions, suits, claims, demands, causes of action and claims for costs that they have or, but for the execution of this Deed, may have against the Defendants or any one of the Defendants arising directly or indirectly out of or in connection with the Building Notice, the Building Order, the BAB appeal, the Magistrates' Court Prosecution (save as specifically excluded under Clause 1.7 of this Deed) or any matter that is the subject of the Proceeding; and

...

3 DISMISSAL

3.1 In consideration of the Settlement Sum, the parties agree to orders being made that:

3.1.1 The Proceeding against the Defendants be dismissed without adjudication but with a right of reinstatement to be exercised no later than 60 days hereof;

3.1.2 There be no order as to costs; and

3.1.3 All previous cost orders made in the Proceeding be vacated.

10 A draft minute of the orders sought by the parties was handed to the trial judge and the following discussion ensued:

HIS HONOUR: Yes. Yes, I have the draft minute. The question I have is in relation to the right of reinstatement. Why is that there?

COUSEL FOR THE PLAINTIFFS: It is certain events to occur in the next 30 days, Your Honour, then there's a provision for something else to occur if something doesn't happen.

HIS HONOUR: All right. So you are placing on the record that the right of reinstatement, that the only circumstances in which that right could be exercised is if there is non-compliance with the terms of settlement - -

COUSEL FOR THE PLAINTIFFS: Correct.

HIS HONOUR: - - - which have been executed.

COUSEL FOR THE PLAINTIFFS: Correct.

HIS HONOUR: Providing that's on the record and that's clear, that the order of the court is not, in its terms, conferring an unqualified right of reinstatement - - -

COUSEL FOR THE PLAINTIFFS: No, I - - -

HIS HONOUR: - - - then I will make an order in those terms.

COUSEL FOR THE PLAINTIFFS: I accept that, Your Honour.

HIS HONOUR: Yes. The right is only to be exercised in circumstances where there is non-compliance with the terms of settlement which have been reached between the parties. Correct?

COUSEL FOR THE PLAINTIFFS: Yes. Correct.

HIS HONOUR: All right. Well, on that basis, Mr Rodbard-Bean, I will make the order in those terms.

COUSEL FOR THE PLAINTIFFS: Yes, and the BAB is agreeable too, obviously.

HIS HONOUR: Yes, all right. So that's the position, Mr Klempfner, Mr Dalton?

COUNSEL FOR THE FIRST TO THIRD DEFENDANT: Yes. Those orders are consented to, Your Honour. Thank you.

HIS HONOUR: Yes. And Mr Dalton?

COUNSEL FOR THE FOURTH DEFENDANT: Yes.[1]

1. The proceeding against the first to third defendants be dismissed without adjudication but with a right of reinstatement to be exercised no later than 60 days hereof.
2. The proceeding against the fourth defendant be dismissed without adjudication.

1. All previous cost orders in the proceeding between the plaintiffs and the first to third defendants be vacated.

12 As I pointed out at the commencement of the hearing of this application, the issue is particularly narrow - whether the orders made by McDonald J entitle Mr Guastalegname to reinstate the proceeding. This was not the time or place upon which to debate the legality (or otherwise) of the terms of the deed - which it is clear Mr Guastalegname wishes to challenge.

13 Bearing that in mind, the competing contentions were:

(a) whether, as Mr Guastalegname asserts, order (1) in providing for reinstatement was unlimited, in effect, so as to enable the proceeding to be revived by either party unilaterally; or

(b) whether, as the defendants contend, the right of reinstatement was limited to giving effect to the rights of the plaintiffs, in the event of a failure by the defendants to make the payment to the defendants as stipulated by the terms of the deed.

14 Although not entirely clear, in my opinion, there is authority for the proposition that in construing consent orders, a Court may have regard to evidence of the circumstances surrounding the making of such orders.[2] The circumstances which can be considered are those that would be 'used to construct a contract'.[3] In Rogers v Wentworth,[4] for example, regard was had to an affidavit in support to determine that 'caveat' as used in consent orders meant one caveat in particular rather than 'caveat' more generally. Mahoney JA reasoned 'it would not be contemplated that the consent order would be construed differently from the compromise which it was to carry into effect'.[5] While it can be accepted that the 'ordinary rules' in relation to the construction of contracts and orders may have been the subject of change,[6] at the very least, where the language of the instrument is susceptible to two meanings, evidence of surrounding circumstances is admissible.[7]

15 Although there are examples of this Court in the past refraining from looking beyond the orders in question to determine their meaning,[8] these cases relate to applications for contempt. Consequently, they have focused particularly on the question of whether the orders are 'clear and unambiguous'. In Livingstone v Ng,[9] however, Cavanough J noted that outside the context of contempt, courts appeared 'relatively free' to take into account extrinsic material to resolve ambiguities.[10]

16 I am satisfied that I should follow the decisions of intermediate appellate Courts, which entitle this Court to have regard to the circumstances surrounding the making of the consent orders in giving effect to them.

17 If, contrary to this view, it is necessary to identify a situation in which an expression used in a consent order is capable of two meanings, then I am satisfied such a situation occurs here - on its face order (1) containing a right to general reinstatement, appears inconsistent with the purpose of the orders viewed as a whole (including the balance of order 1). The competing meaning is clearly that of a limited right of reinstatement in the context of dismissal of the proceeding. It follows that the terms of the deed may be examined in determining the scope and purpose of the orders.

18 Once it is accepted that the circumstances surrounding the making of consent orders are relevant to the construction of those orders then the submissions of the defendant must, for the following reasons, be accepted.

19 First, the consent orders gave effect to the terms of the deed. This was a commercial settlement in which all parties were represented by legal advisors - including experienced counsel. The terms of the deed are to be read as a whole and construed objectively, with an appreciation of the commercial purpose underlying the contract.[11] Accordingly, clause 3.1.1, which provided for the right of reinstatement, cannot be viewed in isolation. Clause 1.4 entitled the plaintiffs in the case of default of payment to make application for the entry of default judgment. I think it patent that the two clauses were to work in conjunction with the right to reinstatement being conditional upon a failure to pay and, if exercised, then only in the manner set out in paragraph 1.4 - i.e. allowing for the entry of default judgment.

20 Second, the terms of the consent order (which is expressed as an unrestricted right of reinstatement) are consistent with the wording of clause 3.1, which was intended to provide for a right of reinstatement only if there was default in payment of the settlement sum.

21 Third, the trial judge was alert to the possibility of the right of reinstatement being exercised generally. The statement of counsel for the plaintiffs in open court was consistent with the meaning I have given to the provisions of the deed and the effect of the consent orders.

22 Fourth, it would make no commercial sense to permit the proceeding to be reinstated generally. The object of the settlement was to finalise the litigation - only a limited right in the event of default satisfies the commercial purpose of the contract.

23 Mr Michael Guastalegname, who appeared on behalf of his brother and Shout Rocks, made a number of points, each of which I consider does not affect the conclusion I have reached:

(a) that the consent orders were administrative rather than judicial. Nothing turns on their characterisation, although it is clear that his Honour was acting judiciously where he entered consent judgment;

(b) that the words of the consent order need to be read generally. As I have tried to point out, the context in which the orders were obtained was critical to determining the extent of the right of reinstatement; and

(c) that counsel had no authority to make the statements attributed to him at paragraph [10]. There was no evidence to support this proposition - quite the contrary. On the material available counsel had both actual and ostensible authority.

24 Accordingly, the application was dismissed and Mr Frank Guastalegname ordered to pay the defendants' costs on a standard basis. I made it clear to Mr Frank Guastalegname and his brother that the decision I have made in relation to reinstatement does not involve determination of the merits of any challenge he may have to the efficacy or legality of the deed.

1. The summons of 6 November 2017 be dismissed.
2. The second plaintiff pay the defendants' costs of the summons on standard basis.
3. The time for the lodging of any application for leave to appeal these orders be extended to 18 April 2018.

[1] Transcript of proceedings, Shout Rocks Cafes v City of Port Philip (Supreme Court of Victoria, S CI 2013 0583, 17 September 2017, T286.

[2] Rogers v Wentworth [1988] NSWCA 129 (18 April 1988) ('Rogers v Wentworth'); S & M Motor Repairs Pty Ltd v Caltex Oil (Australia) Pty Ltd (1988) 12 NSWLR 387; Kirkpatrick v Kotis [2004] NSWSC 1265; (2004) 62 NSWLR 567, 573 - 575 ('Kirkpatrick v Kotis'); Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234; (2009) 261 ALR 382, 405 [109]; Bindah v Carter Holt Harvey Woodproducts Australia [2014] NSWCA 264 (14 August 2014); Arrowsmith v Micallef [2015] 2 Qd R 208, 226; Nokia Corporation v Liu [2009] FCAFC 138; (2009) 179 FCR 422, 430 ('Nokia v Liu'); Benson v Doloraine Pty Ltd [2015] TASSC 41 (31 August 2015) [39] and [40] ('Benson v Doloraine');

[3] Nokia v Liu, 430 quoting Kirkpatrick v Kotis, 575; Benson v Doloraine, [39] and [40].

[4] (unreported, Court of Appeal of New South Wales, Hope, Samuels and Mahoney JJA, 18 April 1988) ("Rogers").

[7] Goyal, in the matter of ACN 154 520 199 Pty Ltd (in liq) [2018] FCA 129 (23 February 2018) [28] and [29]; Beck v Weinstock [2012] NSWCA 289 (13 September 2012) [76]; see generally John Tarrant, 'Construing undertakings and court orders' (2008) 82 ALJ 82; Perry Herzfeld, Thomas Prince and Stephen Tully, Interpretation and use of legal sources. The laws of Australia (Thomson Reuters, 2013) [25.4.730] and [25.4.740].

[8] McNair Anderson Associates Pty Ltd v Hinch [1985] VicRp 30; [1985] VR 309; Livingspring Pty Ltd v Ng [2007] VSC 9 (5 February 2007) [31] - [35]; Talacko v Talacko [2009] VSC 385 ( 10 September 2009) [21].

[9] [2007] VSC 9 (5 February 2007)

[11] See Electricity Corporation Generation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640, 656 [35]; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451, 461 [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 179 [40].