Travel Air International Pty Ltd v Raymond Bastion

The appeal 6Travel Air International and Ms Chandershekar appeal from the whole of the decision of his Honour Magistrate Williams dated 14 March 2011 on one ground only and that is that the Magistrate erred in fact and in law finding that the solicitor had ostensible authority to enter consent judgment for the defendant in the substantive proceedings. 7Essentially, Travel Air International and Ms Chandershekar submitted that they did not instruct their solicitor to consent to the judgment dated 22 June 2010 and sought to have the judgment entered in the substantive proceedings set aside. 8The appeal appears to be on a ground that involves a question of mixed law and fact. However, leave to appeal was not sought as required by section 40 of the Local Court Act . Nevertheless I have considered the plaintiffs' grounds of appeal in their entirety.

Background 9In the substantive proceedings Mr Bastion commenced proceedings in the Blacktown Local Court against Travel Air International and Ms Chandershekar seeking damages for breach of contract arising from the sale of a travel agency business to Mr Bastion. 10In short, there was an agreement for sale of business drawn up by the parties to the contract and, whilst not briefed with the details of who drafted that document, it would appear from the terms of the document and the way it is drafted that no lawyer was involved. The agreement involved a two tiered payment of monies of two amounts of $30,000 as a staged process. A transfer of ownership of the business was only to take place upon performance of particular matters stipulated as a condition precedent in the agreement. 11On 22 June 2010, the matter came on for hearing before Dr Brown LCM. Mr Prakash, solicitor, appeared for Mr Bastion, and Mr Kells, solicitor, appeared for Travel Air International and Ms Chandershekar . 12On 22 June 2010, the Magistrate stood the proceedings down so as to read Mr Bastion's affidavit, the agreed statement of facts and issues and the pleadings. He returned and referred the legal practitioners to Turner v Californian Cars and Sports Trucks Pty Ltd [2002] NSWSC 666. His Honour indicated that the case was relevant to the proceedings and dealt with similar issues arising for determination before him. He gave copies of that judgment to both parties and gave time to consider the import of that case. A short adjournment was given following which settlement was indicated to the court by Mr Kells. 13It is common ground that the Magistrate asked the parties to discuss the prospect of settlement (T22/06/10 - 2.36; 6.25). After a short adjournment Mr Kells informed the Magistrate that a settlement had been reached (T22/06/10 - 9.22). The Magistrate then entered judgment. 14Despite Mr Kells' hearing difficulties, during the earlier part of the Local Court hearing, it was Mr Kells who detailed the proposed settlement, as agreed outside the court, to the Magistrate. The resolution was as follows (T9-10): "SHORT ADJOURNMENT KELLS: We've reach (sic) a settlement. HIS HONOUR: Right, what's that going to be? KELLS: Pay the $30,000 plus four, four and a half ticket money for the plaintiff. HIS HONOUR: So judgment for the plaintiff, let me just get this right. KELLS: And seven and a half costs. HIS HONOUR: $30,000 plus $4,500. KELLS: $4,500 and $6,500 costs. HIS HONOUR: And costs how much, $7,000? KELLS: $7,500. HIS HONOUR: $7,500 COSTS. ALL RIGHT, WELL I WILL ENTER JUDGMENT FOR THE PLAINTIFF IN THOSE TERMS. PRAKASH: Your Honour, firstly there is no reinforcement for 28 days and there will be no interest payable if the amount is paid within 28 days. HIS HONOUR: All right, I'll note that. PRAKASH: Yes, just to be fair with what you discussed, your Honour. HIS HONOUR: All right, no enforcement for 28 days. PRAKASH: And no interest if proper amount paid within 28 days, yes. HIS HONOUR: All right, I note that agreement."

Notice of motion heard on 8 October 2010 and 18 February 2011 (to set aside judgment) 15On 15 July 2010, Travel Air International and Ms Chandershekar filed an application seeking to set aside the judgment pursuant to Rule 36.15 of the Uniform Civil Procedure Rules 2005 on the following grounds: (a) that their solicitor was suffering from a defect of hearing and could not hear nor understand the proceedings before the Magistrate; and (b) that they had not given instructions to their solicitor, and that he had consented to the judgment without their authority. 16UCPR rule 36.15 reads: "36.15 General power to set aside judgment or order (1) A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith. (2) A judgment or order of the court in any proceedings may be set aside by order of the court if the parties to the proceedings consent." 17In relation to UCPR rule 36.15, Travel Air International and Ms Chandershekar submitted that they did not rely on the grounds of "illegality or against good faith" but only that the judgment "was given or entered irregularly". It is not in dispute between the parties on this appeal that the Magistrate had the power to set the judgment aside pursuant to UCPR 36.15 on the basis of an irregularity. 18On 8 October 2010 Mr Kells (Ms Chandershekar's former solicitor) gave evidence in the motion proceedings. Ms Chandershekar gave evidence on 18 February 2011. Mr Hemant Prakash filed an affidavit sworn 31 August 2010 and Ms Chandershekar's current solicitor, Mr Vassili, also filed an affidavit. They were not cross examined. 19Mr Vassili (Aff 12/02/2011) deposed to a conversation he had with Mr Kells in his office on 14 July 2010 as follows: Vassili: "John, you know that Indu [Ms Chandershekar] is saying that she never instructed you to enter consent orders. She says that you did it by yourself without instructions and she never instructed you. She says that you came out and said to the effect that its all over and them (sic) without her instructions you went back in and then the judgment was entered and she knew nothing about what had happened. Kells: "His Honour wouldn't give me an opportunity, I have never seen anything like it he just made up his mind and without letting me put our case he had already decided it." Vassili: "Did your enter judgment with Indus (sic) instructions." Kells: "I couldn't hear anything my hearing aid was playing up and his Honour was speaking down and I don't know what happened. Prakash did it." Vassili: "OK so you say you were incompetent. I don't mean that in an unkind way, so what you are saying is that you were suffering from a defect of hearing and were merely unable to function competently through no fault of your own." Kells: "Yes that's right I didn't hear what was happening." 20Mr Kells (Aff 14/07/2011) deposed at [16] and [17]: "16. I was missing a lot of what the Magistrate said and even though I told him of the problem he was, unfortunately, no help to me in a practical way. In saying so I mean no disrespect to the Court and I am somewhat professionally embarrassed that I just could not hear all that was said and, of course, that inability to hear impeded my capacity to adequately represent my client including seemingly permitting by silence or some misunderstood consent on my part to permit a judgement to proceed by way of consent without capacity to advise the Court of my clients (sic) instructions. 17. I did not give consent on behalf of my client to the judgement nor did I hold those instructions to consent to the judgement." 21As to who was present and the contents of the conversation that occurred outside court during the adjournment on 22 June 2010, Mr Prakash deposed as follows: "I then exited the Court and approached Mr Kells who was sitting with the second defendant, her husband and her son. [Mr Prakash to Mr Kells]: I need to talk to you. Mr Kells signalled me to come to his table. Mr Prakash: "Do you want me to talk in presence of your clients?" Mr Kells said: "Yes." Mr Prakash: "the Court has clearly told you that you cannot file a cross claim. You should have filed a cross claim before the pre trial review. You have failed to file a cross claim, the Court will not entertain you to file a cross claim. His Honour has made it clear that you cannot file a cross claim." Mr Kells said: "Well we have got a claim and we want our money of (sic) damages." Mr Prakash: "Mr Kells, his Honour has told you that he will not allow a cross claim to be filed in the middle of a hearing an you can always file a separate claim if you want to, but not at this stage." Mr Kells: "Yes." Mr Prakash: "I have a proposal for you?" Mr Kells: "Well, what is it?" Mr Prakash: "My client will accept as follows:

1. That the defendants pay the plaintiff $30,000.
2. That the defendants pay the plaintiff the reduced amount of damages i.e. instead of $9,000, pay $4,500.
3. And the plaintiffs be paid their full costs of $7,5000." Mr Kells: "Yes, I'll discuss the matter" I saw Mr Kells looking and talking to his client. Mr Prakash: "What we can also offer is if the monies are paid within 28 days then our client will not charge any interest. Is that okay?" Mr Kells: "Yes, let me talk to my clients." 22Mr Prakash made notes of the proposal while he was talking to Mr Kells. He then left Mr Kells and his client and went back into court. 23Consent orders were then entered and the transcript of precisely what was said and by whom has been outlined earlier in this judgment. 24Ms Chandershekar's evidence was that she never gave Mr Kells instructions or authority to settle or otherwise compromise the dispute between her and Mr Bastion. It is her evidence that when she and Mr Kells came out of court during the short adjournment, Mr Kells did not ask her anything nor did she nod her head because he did not look or talk to them. 25On 8 October 2010 during cross examination, Mr Kells gave evidence that paragraph 17 of his affidavit was incorrect where it said that he did not give consent on behalf of his client. He gave evidence that after having had the benefit of seeing the transcript it was plain that he had consented (T15.43-47). Mr Kells then changed his position from that outlined in his earlier affidavit. 26His Honour Magistrate Williams asked Mr Kells the following (at T16): "Q. So you did consent to the judgment on behalf of your client? A. Correct. Q. What about the following words from the words "nor"? Are they correct? A. Sorry? Q. The balance of the paragraph, is that correct? A. The balance of that paragraph is - no, I'd rather amend that. ... Q. So you're now saying you did have - you did give consent, yes. A. And I haven't had consent from my client. Q. Sorry? A. That's all I can say. ... FOZZARD Q. Could you just repeat that, Mr Kells? A. Well, I didn't - I didn't have the consent to-- HIS HONOUR Q. You didn't have instructions from my client to consent to it? A. Correct. Q. So I'm clear, you did not have-- A. Yea. I was, to put it bluntly, disillusioned and, as you can see, you Honour, I do wear a hearing aid-- Q. All right. So you did not have instructions from your client to settle. Is that what you're saying? A. Correct." 27Later (T17.40-45) the Magistrate asked Mr Kells once again to clarify paragraph 17 of his affidavit. Mr Kells said that at the time he believed he had the consent of his client. He believed that by the actions and demeanour of his client he had consent. 28The Magistrate in his reasons stated at [17] to [20]: "17. On 8 th October 2010 during the hearing of this application, Mr Kells gave what can only be described as confusing evidence. At one point Mr Kells told the court that he did consent to the judgment but that he did not have the consent of his client (see page 11) but shortly thereafter he said "... at the time I believed that I had consent. I believed by the actions and demeanour of my client" (see page 17) and later "... And the certain demeanour of the client. I believed that she consented ..." (page 18). 18 Leave was given for the applicant to cross examine Mr Kells who indicated that while the settlement was being discussed in the presence of the defendants, the son of the 2 nd defendant said words to the effect " ... Lets walk away from this and we'll get him later on " (see page 21). Mr Kells said further " And I believe at that point my client was nodding. I decided that she was consenting to that move by that time " (see page 21). 19 Mrs. Chandershekar also gave evidence before me. Her evidence was that she did not instruct Mr Kells to settle her claim and that he did so without her authority. In cross examination she conceded that she was present when settlement discussions took place between Mr. Prakash and Mr Kells. She recalls the original Magistrate giving Mr Kells material to look at and said that whilst she was in court when the judgment was entered, she did not hear everything that was said. She heard the statement about the costs order and heard the Magistrate say " judgment for the plaintiff' ". 20 The applicant's submission is, that I should conclude that the applicant had not given her then solicitor instructions to settle the claim, therefore he acted without her authority. In such circumstances, the judgment has been entered irregularly." 29Magistrate Williams did not resolve the factual dispute as to whether or not Mr Kells had the actual authority of his clients to settle the dispute. Rather the Magistrate decided: "55 I am satisfied on the authorities that the applicant's solicitor had ostensible authority to compromise the claim and that as in Presrod (above) there was nothing in the way the case proceeded or the manner in which the settlement discussions took place, that would affect the respondent's solicitor from relying on that ostensible authority. In fact to the contrary, the parties left the court room-with the express purpose of considering a compromise, a compromise was discussed between the solicitors for the applicant and the respondent in the presence of the applicants, and following those discussions the applicants and their solicitor re-entered the court together and their solicitor announced the settlement to the Court. 56 I am also of the view that, if in fact the applicants had not given express authority to their solicitor to settle the claim, that would not render the judgment irregular, illegal or against good faith. Whilst on the evidence before me I have some doubts about the applicants' claim that they did not instruct their solicitor to enter the consent judgment, I am of the opinion that having found that their lawyer had ostensible authority to settle the claim, I do not have to decide that issue." 30The notice of motion was dismissed.

Grounds of appeal 31On this appeal, the solicitor for Ms Chandershekar made two main submissions. They are, firstly, that based on the evidence it could not be reasonably found that Mr Kells had ostensible authority to enter the order orders; and, secondly, that his Honour Magistrate Brown fell into error in contemplating and propounding Air Travel International and Ms Chandershekar's position in circumstances where only Air Travel International was a party to the original contract the subject of the dispute and in light of this Ms Chandershekar could not have been liable under the contract with more redress beyond the authorities and position placed before the parties by the Magistrate during the substantive hearing. 32As to the second ground, it has not been raised in the notice of appeal. Apparently, Mr Bastion's cheque in the sum of $30,000, which was the subject of the original proceedings, was placed into Ms Chandershekar's personal account. In any event, Ms Chandershekar was a party to the proceedings (she was the second defendant) and could therefore compromise any claim made against her. 33Returning to the first ground of appeal, the plaintiffs submitted that Magistrate Williams considered the evidence given by Mr Kells during the proceedings seeking to set aside judgment to be " confusing" (at [17]) . However, Magistrate Williams considered the overall impression of Mr Kells' evidence to be that he "believed [he] had consent. [He] believed by the actions and demeanour of [his] client" and from "certain demeanour of the client, [he] believed that she consented..." 34The plaintiffs further submitted that such authority was against the body of evidence which demonstrated (i) that Mr Kells was not a person of credit or rather to be fair to Mr Kells, his evidence was not credible, and (ii) that Mr Kells could not have reasonably held the belief that he held authority to bind his client. 35The plaintiffs also submitted that a solicitor representing a company or body corporate may carry out with it, him or her, an implied or ostensible authority to act, however such authority must arise from previous or concurrent instructions. The evidence that there was never any instructions given by Ms Chandershekar to settle or compromise the proceedings at any time in incontrovertible and therefore there can be no implied or ostensible authority arising from the instructions to act for the Air Travel International and Ms Chandershekar. 36According to Ms Chandershekar there was no express authority to settle or compromise the proceedings on the evidence. As stated out above, the Magistrate did not consider it necessary to decide whether express authority was in fact given to consent to the judgment, because his Honour found that Mr Kells had ostensible authority. 37The law on the authority of solicitors and counsel to settle or compromise litigation is clear. The implied and ostensible authority to settle or compromise that litigation exists even in circumstances where an individual or corporate client is found not to have authorised the compromise reached and which has resulted in orders adverse to the client - see Waugh v H P Clifford & Sons Ltd [1982] Ch 374; Donellan v Watson (1990) 21 NSWLR 335 per Handley JA at 342; Clayton Jacobson & Lee McMillan v Ballina Shire Council [2006] NSWLEC 114 at [71] and [72]; Presrod Pty Ltd v Wollongong City Council [2010] NSWLEC 192 at [70] to [79]. 38Any instruction from a client which restricts the solicitor's authority to compromise the proceedings will only affect the other party who is on notice of that restriction - see Thompson v Howley [1977] 1 NZLR 16 at 23 to 25. 39There is no suggestion that Mr Prakash, the solicitor acting for Mr Bastion, or Mr Bastion himself , had any knowledge that Mr Kells had any restriction on his authority to act. It is my view that in these circumstances Magistrate Williams was correct to decide that Mr Kells had ostensible authority to compromise the claim. 40The result is that the appeal is dismissed. The order of his Honour Magistrate Williams dated 14 March 2011 is affirmed. The summons filed 7 April 2011 is dismissed. Costs are reserved.

The Court orders that: (1) The appeal is dismissed. (2) The order of his Honour Magistrate Williams dated 14 March 2011 is affirmed. (3) The summons filed 7 April 2011 is dismissed. (4) Costs are reserved.

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