KOGARAH COUNCIL v. PALM INTERNATIONAL PTY LIMITED No. 40084 of 1994 [1997] NSWLEC 125 (29 August 1997)

Land and Environment Court of New South Wales

Record of Hearing

Judge Talbot J

Number 40084 of 1994

Parties Applicant Kogarah Council

First Respondent Palm International Pty Limited

(ACN 059 072 552)

Second Respondent A International Pty Limited

(ACN 008 900 320)

Third Respondent Allan Raymond Weatherstone

Fourth Respondent Marjorie Estelle Weatherstone

Key Issues

* Consent orders - application to set aside

* Costs - application for indemnity costs

* Notice of Discontinuance - costs orders

Statutes

* Land and Environment Court Rules Part 15 r 9(a)

* Supreme Court Act s 48

Hearing Dates 18 - 19 August 1997

Judgment Reserved

Judgment Date 29 August 1997

Appearances Applicant Mr A D Ayling (Barrister)

Respondent Mr P E King (Barrister)

With Mr M J Watts (Barrister)

Solicitors Applicant Abbott Tout Solicitors

Respondent R Black & Associates Solicitors

No of pages 14

Summary of orders

* notices of motion dismissed

* costs

IN THE LAND AND							MATTER No. 40084 of 1994

ENVIRONMENT COURT			CORAM: Talbot J

OF NEW SOUTH WALES			DECISION DATE:29 August 1997

KOGARAH COUNCIL

Applicant

v

PALM INTERNATIONAL PTY LIMITED

(ACN 059 072 552)

First Respondent

A INTERNATIONAL PTY LIMITED

(ACN 008 900 320)

Second Respondent

ALLAN RAYMOND WEATHERSTONE

Third Respondent

MARJORIE ESTELLE WEATHERSTONE

Fourth Respondent

REASONS FOR JUDGMENT

THE PROCEEDINGS

On 20 June 1995 the Court made orders by consent restraining the company, Palm International Pty Ltd, and the two individual respondents from using premises 645 Princes Highway, Blakehurst for the purpose of a therapeutic natural massage centre and nail care centre without the consent of the applicant and from using the premises for any purposes without the prior consent of the applicant pursuant to the provisions of the Kogarah Planning Scheme Ordinance and the Environmental Planning and Assessment Act 1979 (the EPA Act). The respondents were also restrained from using, suffering or permitting the premises to be used for the purpose of prostitution.

By notice of motion 27 August 1996 the applicant council commenced proceedings for the punishment of the respondents for contempt of the Court's orders alleging that on 22 June 1996 the premises were used for a commercial purpose without the consent of the applicant and for the purposes of prostitution.

On 2 December 1996 I ordered that the contempt proceedings against the third and fourth respondents be stayed.

By notice of motion dated 12 May 1997 the first respondent moved the Court for an order that the consent orders made 20 June 1995 be vacated.

On 22 May 1997 the applicant filed a notice of motion returnable 18 August 1997 seeking to overturn the stay order made on 2 December 1996.

On 1 July 1997, while the two lastly mentioned notices of motion were extant, the applicant filed a notice of discontinuance of the proceedings in so far as they relate to the notice of motion for contempt dated 27 August 1996.

On 8 July the first and second respondents filed a notice of motion seeking the following orders:-

. Order to strike out the applicant's notice of discontinuance as not complying with the Rules of the Court.

. Order dismissing the proceedings.

. Order dismissing the applicant's notice of motion returnable 18.8.1997.

. Order for costs including an order for indemnity costs from 24.12.96 to date.

Mr Ayling, who appears for the council, has confirmed that the intention of the notice of discontinuance was to discontinue any matter arising out of, and unresolved in, the proceedings commenced by way of notice of motion for contempt on 27 August 1996.

The council acknowledges that, following the filing of the notice of discontinuance, it is exposed to an order for costs, but it disputes the claim by the respondents that there should be an order for indemnity costs from 24 December 1996.

The notice of motion dated 12 May 1997 was moved by the first respondent when only the first and second respondents remained as parties. After the commencement of this hearing, leave was granted to amend the notice of motion to refer to all respondents, including the individual respondents who had the benefit of the stay order made on 2 December 1996. There is no dispute that the first and second respondents are, at least for the purposes of the proceedings, the same corporation.

The Court record shows that on 13 June 1995 there was no appearance by the respondents and the Registrar stood the matter over to 20 June 1995. On that day the solicitor for the applicant appeared for all parties. The consent orders signed by the solicitor for the applicant and the solicitor for the first respondent company and the two individual respondents were handed up and made.

Michael James Soulos acted for the company and the two individuals at that time but he cannot explain the circumstances which caused his non-appearance on 13 June, nor was he able to recall the arrangements made with the applicant's solicitors in relation to the making of the consent orders on 20 June.

THE APPLICATION TO SET ASIDE THE CONSENT ORDERS MADE 20 JUNE 1995

Part 15 Rule 9(a) Land and Environment Court Rules

The rule provides, inter alia, for the setting aside of an order if the order has been made in the absence of a party, irrespective of whether the party is in default or had notice of the motion for the order.

Mr King submits, on behalf of the respondents, that the absence of Mr Soulos when the orders were made by the Court on 20 June 1995 means that the parties were absent within the meaning of the rule.

The Court record notes that Mrs Finn appeared as the solicitor for the applicant and for the respondents. The consent orders were endorsed with the signature of Mr Soulos as solicitor for the respondents. Mr Soulos has given evidence that the form of consent orders was forwarded by him to Mrs Finn after they were signed before 20 June 1995.

Although there is no direct evidence one way or the other, the Court is entitled to infer that Mrs Finn appeared on 20 June 1995 on behalf of the council and that she had the necessary authority from Mr Soulos to mention the matter on his behalf as the solicitor for the respondents. It was not suggested in argument that the rule can be satisfied only if the party appears in person. In the absence of evidence of untoward behaviour that would justify a finding that Mrs Finn did not appear with the authority of Mr Soulos, the Court accepts that there was a formal appearance by the respondents on that day.

The Court is not satisfied, on the balance of probabilities, that the orders were made on 20 June 1995 in the absence of the respondents as contemplated by Pt 15 r 9(a).

SETTING ASIDE THE CONSENT ORDERS BY THE EXERCISE OF THE COURT'S GENERAL OR ITS ANCILLARY OR IMPLIED POWERS

The provisions of Pt 15 r 9 are a reflection of the grounds upon which an order may be set aside where the orders have been obtained irregularly. The respondents allege that the following factors are relevant to the Court's exercise of its ancillary jurisdiction to set aside the consent orders:-

(i) the absence of any authority on the part of Soulos to agree to the consent orders;

(ii) the orders extended beyond the original objectives which gave rise to the applicant's litigation;

(iii) the inequality in the bargaining power of the two parties; and

(iv) the fact that the setting aside of orders would not result in any real prejudice to the applicant because the use has since been approved by the Land and Environment Court.

Further the respondents say it is unconscionable and unjust for the applicant to seek to maintain and rely upon orders which should be set aside as against all respondents (or the third and fourth respondents) in equity and pursuant to the Trade Practices Act s 51AA or s 51AB. Mr King also drew an analogy with the provisions of s 9(2)(a), (b), (c), (d) (e)(i), (g) (h) and (i) of the Contracts Review Act.

The legislature has vested a particular jurisdiction in the Land and Environment Court. It does not follow on that account alone that the Court does not have inherent jurisdiction to uphold, protect and fulfil the judicial function to review, correct or alter its judgment at any time, even though perfected, on the grounds of fraud or if the order in the form entered does not express or clearly express the intention of the Court, or procedural fairness demands it (Taylor v Taylor [1979] HCA 38; 1979 143 CLR 1; John Fairfax & Sons Ltd v Police Tribunal of New South Wales (1986) 5 NSWLR 465; Permanent Trustee Co (Canberra) Ltd v Stocks and Holding (Canberra) Pty Ltd 1976 28 FLR 195).

Dealing with the power to set aside consent orders in Harvey v Phillips [1956] HCA 27; 1956 95 CLR 235 at 243-244, the High Court said:-

"The question whether the compromise is to be set aside depends upon the existence of a ground which would suffice to render a simple contract void or voidable or to entitle the party to equitable relief against it, grounds for example such as illegality, misrepresentation, non-disclosure or a material fact where disclosure is required, duress, mistake, undue influence, abuse of confidence or the like."

In Lewis v Combell Constructions Pty Ltd (1989) 18 NSWLR 528, Finlay J referred to the principle that the Court is always master of its own process and that in appropriate cases it will set aside a consent order obtained without authority or as a result of mistake on the basis that the Court has an inherent jurisdiction to set aside the order if the interests of justice require it (see the passage from the judgment in Waitemata C.C. v MacKenzie [1988] NZCA 142; [1988] 2 NZLR 242 at 249 quoted at 537).

Mr Soulos gave evidence of a conversation with Mr Allan Weatherstone when, he says, the following exchange took place:-

Michael Soulos: "You have to decide what you are going to do. I do not think that you have any choice other than agree or press on to a hearing."

Allan Weatherstone "You know our position, I have no choice but to agree. You can tell the Council that it's under protest and I do not accept that we had anything to do with prostitution."

In cross examination, Mr Soulos disclosed that he did not make any file note of the conversation. No letter of advice was furnished and he did not keep a copy of the consent orders after they were signed by him. No copy of the consent orders was forwarded to the client by Mr Soulos.

The evidence supports the submission by Mr King that the two individual respondents were elderly, stressed by the litigation and not well versed in the Court's procedures.

Allan Weatherstone told the Court that he had no conversation with Mr Soulos in the above terms. He claims that the only relevant conversation with his solicitor before 20 June was a discussion in the context of whether to discontinue an appeal against a decision of an Assessor of the Court. According to Mr Weatherstone the following three matters were canvassed:-

(i) That council be persuaded to drop the case. If not, there would be continuing negotiations.

(ii) If a resolution could be achieved it was accepted the respondents would be required to pay the council's costs.

(iii) He was led to believe by Mr Soulos that the matter would be resolved in the Court in the presence of the parties.

Mr Soulos agreed that the first two matters were discussed but denied that he shared the belief expressed by Mr Weatherstone in (iii) above.

Notwithstanding a copy of the consent orders was not sent to the respondents by Mr Soulos, a copy was served upon them and they became aware of the contents within a few days. There is sworn evidence of personal service on the respondents on 22 June 1995. Mr Weatherstone conceded that he became aware of the contents of the orders shortly after 20 June 1995 and that he had a conversation at the subject premises with his solicitor when he told Mr Soulos he did not understand how the orders were made and that he never gave such instructions. Mr Soulos denied that a conversation took place in those terms.

After June 1995 Mr Soulos continued to act for the respondents for the purpose of settling the outstanding question of costs claimed by the council.

Mr Weatherstone says that he obtained legal advice from four different sources in the ensuing months. Correspondence produced in relation to that advice, and the evidence of Mr Weatherstone himself, leads the Court to conclude, on the balance of probabilities, that the question of moving the Court to set aside the consent orders for the reasons now relied upon was not raised with any legal adviser until instructions were given to the respondents' present solicitor, Mr Black. Those instructions resulted in the filing of the notice of motion dated 12 May 1997. Mr Black had filed a notice of appearance for the third and fourth respondents on 25 October 1996.

The Court does not accept the evidence of Mr Weatherstone when he says he did not appreciate the significance of what a consent order was or for how long the order lasted. In October 1996 Mr Weatherstone obtained preliminary legal advice from his present solicitor about the consent orders. After this the Court made orders on 2 and 10 December 1996. The effect of the orders was to stay the contempt proceedings against the two individuals. Mr Black wrote to Mr Soulos on 19 December 1996 asserting for the first time that his clients were not present in Court on 20 June 1995 and "could not have been consulted about the signing of the Consent Orders before they were handed to the Court".

The dissatisfaction with the orders expressed by Mr Weatherstone relates, generally, to their width and the reference to prostitution. His evidence does not lead to a conclusion that he was opposed to the making of any orders at all, only to their form.

There is evidence from a Licensed Private Inquiry Sub-agent that in June 1996 sexual services were available for a fee at the premises. The affidavit evidence was originally filed and relied upon by the council in support of the notice of motion for contempt. It has been read again for the purposes of supporting the council's case to resist the making of the orders now proposed by the respondents in the notices of motion. There is no evidence from the respondents to the contrary.

On 21 May 1997 Senior Assessor Jensen delivered a judgment in Appeal No 10056 of 1997 where he notes, by way of preamble, the matter involves a proposal to have a brothel that exists at the first floor of the subject premises approved.

On 2 December 1996 I found that the third and fourth respondents, as the then registered proprietors of the land, transferred the subject premises to Golden Paradise Corporation which became registered as proprietor of the land on 21 March 1996.

When the Court heard argument in support of the application for the stay of proceedings against the third and fourth respondent in December 1996, no issue was raised about the consent orders being made contrary to or without instruction from the third and fourth respondents, or for that matter, any other respondent.

The Court is satisfied that, on the balance of probabilities, Mr Soulos was instructed to bring the litigation to an end on the best terms that he could achieve in the interests of his clients. Ultimately the respondents accepted that they had no option but for the orders to be made and Mr Soulos was authorised to proceed accordingly. Although Mr Soulos might be criticised for his failure to keep a proper record of his instructions, or by omitting to formally give a written advice, including furnishing a copy of the orders signed by him, it does not lead the Court to a conclusion which supports the respondents' argument that the consent orders were made without their authority. There is no substance in the submission by Mr King that any competent solicitor would have insisted the orders be made, without admissions, bearing in mind the nature of the relief in question.

Issues raised seeking to apply the principles of the Trade Practices legislation and the Contracts Review Act are misconceived as they are based fundamentally on proposition that the respondents were in a position of disadvantage with the council. On any view of the evidence, Mr Soulos was available to give advice and did so from time to time throughout the conduct of the proceedings. It is not sufficient for the respondents to now suggest that their capacity to fight the council was limited by their financial situation. Mr Soulos was still advising them at the relevant time and continued to act for them for some considerable time subsequently without fee, although his instructions were limited to the question of costs. Although the orders made on 20 June 1995 are in some respects wider than absolutely necessary to protect the interests of the council, nevertheless they are not so outrageous in terms which justify setting them aside.

The Court agrees with the submission put by Mr Ayling on behalf of the council that the inherent power to set aside or re-open perfected orders "is not lightly to be exercised" (Wentworth v Attorney General NSW [1984] HCA 70; 1984 154 CLR 518 at 526).

The Court is obliged by authority to take into account the principle of finality of litigation (Haig v Minister Administering the National Parks and Wildlife Act (1994) 85 LGERA 143 at 155). There are no exceptional circumstances in this case which operate to upset the reliance which the council is entitled to place on the orders. It is not in the public interest to set aside orders which have been made for the purpose of upholding the integrity of the planning laws, in this case, the EPA Act and the relevant environmental planning instrument. The weight of the public interest must be balanced against the potential for prejudice to the respondents. Any perceived prejudice is to be considered in the light of their subsequent acquiescence and delay in seeking to have the orders set aside.

According to the evidence from Mr Soulos, he attempted to negotiate a form of order which omitted any reference to prostitution, but without success. There is nothing remarkable about his evidence which explains how the orders came to be made in the form in which they exist. He raised the concerns of his clients with the council's solicitors. The claim by Mr Weatherstone that the matter should have been resolved by the Court if negotiations to delete the reference to prostitution were unsuccessful is inconsistent with his own evidence that financial constraints imposed by the proceedings up to that time and a further hearing before an Assessor limited his capacity to proceed with the matter. It is also difficult to reconcile the delay in moving the Court to have the orders set aside with the reaction which Mr Weatherstone claims he had when informed about the form of the orders as being "deeply concerned" "unbelievable" "very unhappy" and "horrendous binding up". The advice that he sought in the ensuing months from legal advisers and town planners appears, from the evidence, to be referable only to the making of a development application to overcome the effect of the orders. Such a course of action presupposes that the orders were accepted and casts serious doubt on the proposition that Mr Soulos acted without authority.

COSTS

The council accepts that, following the filing of a notice of discontinuance on 1 July 1997, it is liable for the costs of the respondents in relation to the notice of motion for contempt dated 27 August 1996 on a party and party basis except for the following:-

(i) The corporate respondent was not represented until 25 February 1997.

(ii) The order made on 2 December 1996 that the applicant pay the costs of the third and fourth respondents up to that date.

(iii) Costs in relation to a notice of motion to vacate a hearing date on 15 May 1997, determined on 9 May 1997.

(iv) Costs in relation to a notice of motion dated 14 May 1997 seeking to exclude evidence.

(v) Costs thrown away by an adjournment granted on 15 May 1997 when council was ready to proceed except in relation to an issue in respect of jurisdiction about which no previous notice had been given.

(vi) An appearance on 6 June 1997 in regard to a notice of motion filed by the first and second respondent requiring reasons to be given for the applicant's failure to comply with a notice to produce.

Apart from the notice of motion returnable on 6 June 1997, when an appropriate order was made in terms which reflected the application by the respondents, the order for costs in relation to the notice of motion for contempt should not include the above matters as either they are already subject to an order or the costs were incurred in circumstances where the council was not in default and should therefore not be responsible for payment. Otherwise the council will be ordered to pay the costs of the respondents in respect of the notice of motion dated 27 August 1996.

The respondents seek an order for costs against the council on the basis that they are paid on an indemnity basis for the following reasons:-

(i) Council unreasonably pursued the contempt proceedings until filing the notice of discontinuance without any offer to pay costs.

(ii) Since 21 May 1997 development consent for the use of the premises as a brothel has been granted.

(iii) Until s 48(2)(i) of the Supreme Court Act was amended, following proclamation of the Courts Legislation Amendment Act 1996 on 30 April 1997, the Land and Environment Court had no jurisdiction to entertain proceedings for the punishment of contempt of the Court.

(iv) After orders were made staying the proceedings against the individual respondents, the council should have reconsidered its position.

The issue raised by the respondents' challenge to the jurisdiction of the Court to entertain a charge alleging contempt of the Court's orders has not, so far as I am aware, previously been raised in this Court. There are many cases where persons have been charged with and found guilty of an offence for failing to comply with the orders of the Court. The effect of s 48(2)(i) has not been the subject of argument before me. Although the respondents filed written submissions, they have not been addressed. The applicant filed no submissions in reply.

The Supreme Court Act has been amended to limit the range of proceedings for the punishment of contempt of court assigned to the Court of Appeal to those cases where there is contempt in the face of the Court of Appeal, disobedience of a judgment or order of the Court of Appeal or breach of an undertaking given to the Court of Appeal. It is not beyond argument that s 48 in its original form does not have the effect of creating exclusive jurisdiction but is limited to procedural matters in respect of the management of the business of the Court.

I do not regard the present case as one which has been commenced or continued in circumstances where the council had no chance of success. It has not been shown that it acted after disregarding relevant facts or any clearly established legal principle.

The reasons for judgment published on 2 December last cannot be construed as an indication by the Court that the prospect of success against the remaining defendants had been diminished.

There is nothing before the Court which shows that the conduct of the council involved any relevant misconduct in the litigation.

I have not been satisfied that this in an appropriate case where an order should be made for payment of costs assessed on a solicitor and client or indemnity basis.

The parties did not address the issue of costs incurred on 18 and 19 August 1997 when matters raised by the various notices of motion referred to at the commencement of these reasons were argued. Accordingly those costs will be reserved.

ORDERS

The formal orders of the Court are:

. Notice of Motion 12 May 1997 is dismissed.

. Notice of Motion 22 May 1997 is dismissed.

. Notice of Motion 7 July 1997 is dismissed.

. The applicant pay the respondent's costs in respect of Notice of Motion 27 August 1996, in accordance with Reasons for Judgment published 29 August 1997.

. Costs of hearing on 18 and 19 August 1997 reserved.

I HEREBY CERTIFY THAT THIS AND THE PRECEDING 13 PAGES ARE A TRUE AND ACCURATE RECORD OF THE REASONS FOR JUDGMENT HEREIN OF THE HONOURABLE JUSTICE R N TALBOT

ASSOCIATE