Von Schulz & Anor v Morriello & Ors [1998] QCA 236

During argument, counsel for the respondents moved for the summary dismissal of the appeal on the ground that it is a futility and alternatively vexatious process. Thus the contending submissions are those on behalf of the appellants for the reinstatement of the appeal pursuant to the "Amended Notice of Motion" of 31 July 1998; and of the respondents for the summary striking out of the appeal.

On 20 June 1997 the appellants instituted an action in the Supreme Court against the respondents alleging that in September 1995 the first respondents (their landlords) and the second respondents (a pest control company) had caused them to ingest arsenic trioxide when a termite extermination procedure was applied to parts of the unit which they occupied. They alleged that this poisoning was the result of a deliberate plan by the respondents or alternatively of their negligence. On 22 July 1997 the appellants entered default judgment against the second respondents consequent upon their failure to enter an appearance within the prescribed time. Applications were brought before a Chamber Judge by the second respondents to set aside the default judgment and to strike out the statement of claim. On 3 September 1997 the learned Chamber Judge set aside the judgment and granted the appellants leave to deliver an amended statement of claim. The appellants then applied to Williams J for an order reinstating the default judgment. The material before Williams J alleged that the judgment of the Chamber Judge was corrupt, unfair, motivated by a desire to discriminate against the appellants on racial grounds and "fabricated" as a result of collaboration between counsel and His Honour. There were also allegations of corrupt and criminal behaviour of counsel who had appeared for the appellants and the second respondents. On 17 September 1997 Williams J ordered the removal of certain material from the file as scandalous and an abuse of process, and refused the appellants' application to reinstate the default judgment.

As the appellants did not deliver an amended statement of claim, the respondents did not deliver defences. On 30 October 1997 the appellants entered judgment against the respondents, apparently in default of pleading. Accordingly the respondents applied to the Court to set aside these default judgments and to strike out the statement of claim as not disclosing a cause of action. That application was heard by Fryberg J on 24 November 1997. On this occasion the appellants were represented by a solicitor from Messrs Hemming & Hart. His Honour ordered by consent that the default judgments be set aside and that the appellants deliver an amended statement of claim. His Honour also ordered that the dispute between the parties be referred to mediation. The order designated as the mediator "Mr Hanger QC or such other mediator agreed to by the parties".

Because of Mr Hanger's previous engagements, other mediators were considered, and an agreement was reached between the solicitors for the respective parties that the mediation be conducted by Ms Wilson QC on 3 December 1997. On that day all parties were represented and the appellants personally attended and participated. No objection was made by them in relation to Ms Wilson as mediator, and there was no complaint or insistence that it be conducted by Mr Hanger. The appellants were represented by their solicitor and an experienced junior counsel. The mediation was conducted over a period of approximately five and a half hours.

The mediation concluded in an agreement to settle the action and relevant documents to that effect were signed. These included "Terms of Settlement" signed by the respective solicitors for the parties and further documents, signed there and then by the appellants described as "Release Discharge and Indemnity". The Terms of Settlement were in the following terms:

"1. There is no admission or acknowledgement of liability by either defendant.

2. Subject to paragraph 4, the defendants will jointly pay each plaintiff the sum of $20,000.

3. The defendants deny any claim for economic loss and the sums of $20,000 have been arrived at without there being any allowances made for the claims for economic loss.

4. Of each sum of $20,000 the defendants will pay $2,000 to the HIC and the plaintiff will pay the balance (if any) of any refunds owing to the HIC.

5. The defendants will not enforce any previously obtained costs orders against the plaintiffs.

6. Payment of the settlement sums will be made within 14 days.

7. In consideration of the defendants agreeing as aforesaid the plaintiffs will on the date hereof execute Deeds of Release Discharge and Indemnity".

The discharge signed by the appellants inter alia released the respondents and their insurers ("the persons discharged") from liability under or in respect of the designated proceedings and agreed that it could be pleaded in bar to any action or proceeding by the appellants against the persons discharged. It also contained the appellants' agreement to file immediately on receipt of the settlement money a notice of discontinuance in relation to those proceedings.

On 10 December 1997 the appellants wrote to the solicitors for the second respondents asking them not to pay any money to the Commonwealth or the HIC and requesting them "please hold this $8,000.00 (sic) in trust account for the time being". The thrust of their letter is to the effect that "the balance of about $32,000.00 we need very urgently" and "please can we pick up the cash or cash cheque on the 15 December 1997 2 pm confidentially and we can cash up the cash cheque quitely and peacefully". On 11 December 1997 the first $16,000.00 was paid to Hemming & Hart, and the remaining $20,000.00 was paid to that firm on 17 December. The material does not establish precisely what sums if any were deducted by Hemming & Hart for their costs, although during argument Mr von Schulz alleged that "they took $10,500.00 out of us". That however does not affect the rights of the respondents who, on the material have paid the full amount they were required to pay under the settlement.

There is also evidence that on 12 and 17 December 1997 the male appellant had telephone conversations with the respective solicitors for the respondents with a view to expediting payment of the money, at no stage expressing any dissatisfaction with the mediation, its conduct, or the agreement that had been reached. This is further evidence of affirmation of the agreement by the appellants.

On 23 December 1997 there appears the first evidence of discontent on the part of the appellants in relation to the settlement. On that day they wrote a letter to their solicitors referring to "the organised fabricated mediation from 3 December 1997" and "we did not inform you as from the 24 November 1997 at 9 am in your office, you did act for us as you did on your own, but wrong idea, your law philosophy was and is against our instructions destructive to our health..". It goes on to allege "You are very wrong and bias our case we believe without you having full knowledge your plot with the solicitors for first and second defendants and conspiracy against our instruction clearly stated in our affidavit from 24 October 1997..". It complains that it was ordered by the Court that the mediator be Mr Hanger and that "without our knowledge this mediator against the Court order, you changed to a Mrs Margaret Wilson QC, clearly was a setup against us when she Mrs Margaret Wilson QC said we eat arsenic with eating Chinese healing remedy herbs". It goes on to complain that "our barrister started talking very silly, weak and negatively, you stopped me Karl von Schulz to present the true evidence...it is clear you acted for the defendants". It also demands that the solicitors "repay to us without prejudice peacefully the amount of $10,372.50 plus $30.00 we had to pay to clear the not negotiable cheques". Without further quotation from the letter, it is enough to say that it amounts to an assertion against the solicitors of lack of authority to engage Ms Wilson QC, and of conspiracy with the solicitors for the other parties to act contrary to the interests of the appellants. It does not however allege that the settlement was understood by them to be a settlement only of their rights to economic loss. That allegation came later, in arguments presented to this Court.

The next step occurred on 21 January 1998 when an application was brought by the respondents before Shepherdson J under s.110 of the Supreme Court of Queensland Act 1991. Under that section a party may apply to the Supreme Court for an order giving effect to an agreement reached after mediation. Clause 3 of the Release Discharge and Indemnity signed by each appellant records their agreement "to file immediately upon receipt of the settlement money..a notice of discontinuance in relation to the present proceedings". The material before Shepherdson J included an affidavit of Mr von Schulz in which he referred to his letter of 23 December 1997 and stated "I believe the contents of this letter is true and correct". His affidavit also stated that the appellants intended to subpoena some fifteen witnesses (including the Health Minister and the Attorney-General), but there was no statement of what they might prove, other than medical facts concerning arsenic trioxide. The issue of course was whether a valid settlement had been made between the appellants and the respondents.

We have searched the voluminous material filed before the Chamber Judge on the application of 21 January 1998, and can find nothing that goes beyond mere assertion and suspicion on the part of the appellants. In this Court both appellants repeatedly asserted that their understanding when they signed the release was that the $40,000.00 was not in full settlement of their action but was only in settlement of any claim that they might have to economic loss. However no such allegation appears in the material when the appellants sought to challenge the settlement before Shepherdson J. The grounds that were there presented were along the lines that there was no power to compromise the action because the claim was based upon conduct that was criminal in nature, and also that "this case can only be settled by a judge". Neither point was tenable. There is no evidence of any application for adjournment before Shepherdson J, although the appellants' desire for some sort of proceeding in due course at which witnesses would be called was made clear. However on the material before His Honour there was nothing of any substance to negate the settlement agreement that was clearly proved.

In the event His Honour ordered that the appellants cause a notice of discontinuance to be filed within seven days, and that in the event of their failure to do so the action be dismissed.

As already noted, no appeal was brought against Shepherdson J's order. Instead, on 7 April 1998 the appellants brought an application before another Chamber Judge, Helman J, seeking to set aside or postpone Shepherdson J's order until about mid April 1998 "in the comprehensive hearing". There is reason to think that the appellants were at that time unsuccessfully endeavouring to make representations to the Chief Justice and the Senior Judge Administrator for special hearing dates, which understandably were not available for an action which had been dismissed. In the event Helman J considered that the action was at an end, that he had no jurisdiction to entertain an appeal against Shepherdson J's order, and that the application could only succeed if the appellants could show that the order of Shepherdson J was tainted by fraud, or alternatively if they could bring their application within the ambit of O.45 r.1. On the evidence before him, His Honour considered that the appellants failed to establish any of those matters.

Where then do the appellants stand in relation to the further pursuit of the present appeal? The present amended motion and the arguments presented to support it fail to show any arguable basis upon which the order of Helman J may be said to be in error. There is the assertion that His Honour "did not look at the essence and facts of the matter and we are poisoned to death with arsenic negligently by the first and second respondents" and that the barrister for the respondents "did with untruthful submissions smartly mislead the Honourable Judges in the Court below". Leaving aside any question of scandalousness, such allegations are embarrassing and entirely lacking in particularity.

On the material which has been presented to the Judges against whose orders the appellants seek to bring appeals, no error is shown. A settlement agreement is proven along with apparent assent and affirmation of the appellants followed by their repudiation of it and the assertion of gross impropriety against the appellant's former solicitors. On any view those solicitors had the ostensible authority to bind the appellants to a settlement (Waugh v HB Clifford & Sons Limited [1982] Ch 374; Insbury v Craig [1990] 1 Qd R 309) and they did so. As between the appellants and the respondents there is no basis to challenge the agreement on the ground of lack of authority. Insofar as the appellants desire to invalidate the agreement on the ground of fraud or conspiracy, no evidence was presented or foreshadowed that could make out these allegations. What was foreshadowed both below and here was no better than a desire for a lengthy fishing expedition.

Extensive allegations have been made in the broadest of terms against many people, but there is nothing in the material here or below which supports the conclusions that are asserted.

In the result the proposed appeal is futile. There is nothing in the written outlines of argument presented by the appellants, or their oral submissions, or the further arguments contained in documents presented to this Court as affidavits that can suggest any chance of success for the appellants.

Whatever other rights the appellants may have, the action which they commenced on 20 June 1997 is at an end and no arguable case is shown why the orders leading to that result should be set aside.

In these circumstances the appropriate order is to dismiss the Amended Notice of Motion of 31 July 1998 with costs.