Kelly v Fiji Development Bank [2004] FJHC 526; HBC0489J.2002S (29 January 2004)

THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

Civil Case No. HBC489.02S

Between:

MICHAEL KELLY AND ANO.
Applicant

-v-

FIJI DEVELOPMENT BANK AND ANO.
Respondent

29 January 2004
Gates J

JUDGMENT

Consent orders; interpretation of; meaning of “pending the outcome of”; order should state that it is a consent order; estoppel by judgment; of what matters is the consent judgment conclusive; res judicata; available evidence to ascertain what had been decided; primary duty of court to interpret order without resort to extrinsic evidence; duty of counsel to draft consent orders with care and clarity; Order 42; English High Court Order 42 r.5A.

Mr V. Mishra and Mr R. Prakash for the Plaintiffs
Mr D. Sharma and Mr D. Prasad for the 1st Defendant
No appearance for 2nd Defendant

[1] The question here is whether the Lautoka High Court in another action in which the 1st defendant was not a party, in making an award of monies to the plaintiffs could cause a consent order in a Suva action, this action, which order contained the words “pending the outcome of the Lautoka High Court Civil Action No. 0323 of 1997 and further order of this court” to direct immediate payment out of monies held by the 1st defendant’s solicitors to the present plaintiffs. Was the Suva consent order sufficient to provide that the result of the Lautoka action was to be a complete trigger and remedy in the Suva action, without more?

[2] The two plaintiffs Michael Kelly and Rae McGill had earlier joined up with Rosedale Ltd. and a Michael Harvey to run an island resort known as Mokusigas near Rakiraki and made an agreement to purchase a stakeholding in it. Eventually the plaintiffs became disenchanted of this arrangement and commenced litigation in the Lautoka High Court. This action was decided in favour of the plaintiffs who were awarded over $1 million against Harvey and Rosedale.

[3] In 1990 the 1st defendant [the Fiji Development Bank] had been allowed a mortgage over the property on which the resort was situated. The bank also held a debenture over the resort business. After default by the debtors, the bank exercised its rights in respect of the debenture. Separate proceedings were taken by the plaintiffs to protect their interest in furniture and equipment.

[4] On 26 November 2002 by ex parte motion the plaintiff Michael Kelly had obtained an extension of his caveat over the same registered property CT 33162 till further order. Subsequently, the present parties through their solicitors, were in correspondence. The plaintiff had indorsed the caveat, noting the prior interest of the bank with its mortgage. Later the bank asked the court to remove the caveat. During the course of argument at the hearing of the 1st defendant’s motion on 5 December 2002 counsel informed me that the parties had reached an agreement.

[5] The court recorded that agreement in these words:

“Parties now indicate that they have agreed to an order, the terms of which will be drafted and submitted to the court by 12.30 pm tomorrow. The terms will reflect the priority of the 1st Defendant’s interest but yet allow some funds to be maintained in Mr Sharma’s trust account pending the decision of Byrne J in a related action.”

[6] The next day counsel produced their consent order which read as follows:

“IT IS THIS DAY ORDERED that:

Caveat No. 503088 lodged by Michael Kelly and registered against Certificate of Title No. 33162 be removed forthwith.

The First Defendant do lodge the sum of $79,000.00 into the Trust Account of R. Patel & Co. within 14 days from the date of settlement to be held by the said Solicitors pending the outcome of the Lautoka High Court Civil Action No. 0323 of 1997 and further order of this Court.

There be no order as to costs.

The First Defendant’s Solicitors are to inform the Plaintiffs’ Solicitors within 7 days of the date of settlement and lodgement of funds.

Both parties are at liberty to apply upon giving of 3 days notice.

DATED at Suva this 18th day December ,2002

BY THE COURT

DEPUTY REGISTRAR”

[7] As a matter of good practice, a consent order should state on its face that it is a consent order. In Michel v Mutch [1886] 54 L.T. 45 Chitty J is reported to have:

“refused to make an order upon the summons, and added, where an order has been agreed to and arranged between the parties to an action, and has not been sanctioned or directed by the court, it should appear on the face of the order that it is an order by consent.”

Indeed a rule 5A was inserted into Order 42 of the English Rules specifically providing for a particular procedure to be followed where a consent order is to be drawn up and sealed. The Fiji High Court Rules might usefully be amended along similar lines.

[8] I understand the sum of F$119,000 was paid into the Trust account of the bank’s solicitors in obedience to the order.

[9] On 13 March 2003 the plaintiffs filed a summons seeking payment out of the monies held in the 1st defendant’s solicitors trust account to themselves. The application was opposed.

[10] The plaintiffs through their counsel argue that the consent order puts an end to this piece of litigation between the parties. In the case of In re South American and Mexican Company. Ex parte Bank of England [1894] UKLawRpCh 184; [1895] 1 Ch 37 it was suggested that as a result of the consent order the court had never exercised its mind on the question raised by the pleadings, and the company was not estopped from raising the question in other proceedings. Vaughan Williams J said that there had been earlier authority, Newington v Levy [1870] UKLawRpCP 80; LR 6 CP 180, which had clearly established that there may be estoppel by judgment without the mind of the court having been exercised (at p.42).

[11] The judge continued (at p.44):

“It is quite true, of course, that a judgment by consent is based on agreement between the parties, and, if the judgment has not been drawn up in accordance with the agreement between the parties, that is, at any time, a sufficient ground for altering the judgment and modifying it so as to make it accord with the agreement. It was said that the proper way of getting that done was by some motion or proceeding to reform or set aside the judgment.”

[12] On estoppel, Mr Mishra referred me to a passage from Lord Herschell LC’s judgment in the same case in the Court of Appeal (at p.50):

“The truth is, a judgment by consent is intended to put a stop to litigation between the parties just as much as is a judgment which results from the decision of the Court after the matter has been fought out to the end. And I think it would be very mischievous if one were not to give a fair and reasonable interpretation to such judgments, and were to allow questions that were really involved in the action to be fought over again in a subsequent action.”

[13] Vaughan Williams J had concluded that the only other question he had to consider was “in respect of what matters is this judgment conclusive?” (p.46). In the instant case Mr Mishra urges me to decide that the Suva action was merely to await the order of the Lautoka court, and if the plaintiffs succeeded in Lautoka, the monies set aside by the bank, could be ordered across to the plaintiffs by the Suva order as it now stands. The bank argued that the order never stated that that should happen, nor was it ever intended, as is borne out in the correspondence between the parties solicitors. I shall consider this aspect further on.

[14] In Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; [1987-88] 164 CLR 502 a consent judgment had been entered for less than the amount of tax actually due and claimed in the pleadings from the taxpayer. The Deputy Commissioner brought an action to recover the balance. It was held the action was not maintainable. Brennan J said (at p.505):

“The Commissioner chooses not to impeach the first judgment for mistake; he chooses not to attack for mistake any agreement which led to the entry of the first judgment by consent. The first judgment stands. As the joint judgment demonstrates, the Commissioner’s second action is founded on the same cause of action. The doctrine of res judicata applies and that action must be dismissed.”

On mistake see Mullins v Howell [1879] UKLawRpCh 212; (1879) 11 Ch.D 763; Ainsworth v Wilding [1896] 1 Ch.673; Huddersfield Banking Co Ltd v Henry Lister & Son Ltd [1895] UKLawRpCh 64; [1895] 2 Ch. 273; need for setting aside by fresh action, Mohammed Rasul v Hazara Singh [1962] 8 Fiji LR 140; State Transport Ltd v Housing Authority [1989] 35 Fiji LR 13.

[15] Deane, Toohey, and Gaudron JJ in the leading judgment in Chamberlain commented (at p.508):

“The fact that a judgment is entered by consent may on occasion make it hard to say what was necessarily decided by the judgment,”

[16] In Kinch v Walcott [1929] AC 482 Lord Blanesburgh in the Privy Council tendered the advice (at p.493) that:

“an order by consent, not discharged by mutual agreement, and remaining unreduced, is as effective as an order of the Court made otherwise than by consent and not discharged on appeal.”

[17] In this case neither party has so far suggested that they need not be bound by the order. Each submits an interpretation of its meaning which is in conflict with the other. In “The Doctrine of Res Judicata” Ed: Spencer Bower, Turner and Handley (3rd edit by Mr Justice K.R. Handley)’ the authors wrote (at p.39):

“Judgments, orders and awards, by consent are as efficacious as those pronounced after a contest in creating cause of action estoppels and effecting a merger of the causes of action sued on.”

[18] They continued:

“Though consent judgment and orders are decisions and their operative parts binding, it may not be clear what questions were concluded. The court will examine the available evidence to ascertain the matters in dispute. Any issue which the parties recognized was the subject of the litigation and was fundamental to the judgment or order will be conclusively determined.”

[19] However the primary task of the court is to discover from the consent order itself what the order says and means. Paragraph 2 of the order appears to preserve monies in the bank’s solicitors trust account, namely $79,000, pending the outcome of the Lautoka High Court case. Nothing is said about what is to happen in this action in the event that the plaintiffs in the Suva action are successful in the Lautoka action also. Paragraph 2 merely adds “and further order of this court”. The inclusion of this requirement would seem to envisage a further step before a payment out could occur.

[20] The plaintiffs’ pleadings sought as remedies the extension of the caveat, that the defendant be committed or wound up for contempt, that the defendant be directed to obey the injunction order of the Lautoka High Court and that the defendants pay damages and costs.

[21] Unfortunately the purpose of retaining the sums was not clearly spelt out in the order itself. It is salutory to note what was said on the subject of drafting of consent orders by the editors of the Supreme Court Practice (1993 at p.719):

“Since a consent judgment or order under the procedure of this rule will not be seen, still less examined or scrutinised by any judicial officers, solicitors have an increased burden in ensuring that it is expressed fully, clearly and with precision, and carries into effect the intention of the parties, without ambiguity or possibility of a conflict of construction. Although the terms agreed are contractual in character, in form and effect they will have the force and consequences of an order of the Court, and this must be borne in mind in the draft of the agreed terms.”

[22] With this summons the plaintiff Rae McGill filed an affidavit sworn on 7 March 2003. She exhibited a letter from the bank’s solicitors of 14 February 2003. It read:

“We refer to the Order made by Mr Justice Gates on Monday, 16th December 2002 and advise you that settlement in the sale of the Mokusiga Island Resort was completed today.

As per the Order and our subsequent correspondence re: the Caveat No. 517913 lodged by Rae McGill, we are holding the sum of $119,000.00 in our trust account.”

[23] As far as the correspondence was concerned however that was not the whole story. Salote Tavainavesi, the Manager Legal for the bank, deposed in reply and stated that the bank’s solicitors were presently holding the sum of $119,000 pursuant to the court’s order “and pursuant to further correspondence between the said solicitors and Mishra Prakash & Associates.”

[24] Subsequently I allowed the bank to place before the court in evidence the other parts of the correspondence. A draft order had been sent on 6 December 2002 by the plaintiffs’ solicitors to the bank’s solicitors. The draft correctly stated on its face that it was a consent order. But paragraph 2 was vague as to what was to happen after the Lautoka High Court gave its judgment in the other matter. The bank’s solicitors scribbled on the draft at the margin of paragraph 2 “then what?”.

[25] The plaintiffs’ solicitors acknowledged the difficulty and wrote back “we agree that paragraph 2 of the order should be more precise.” A fresh draft righting the imprecision was either not sent back or perhaps not agreed to, for the bank’s solicitors made its client’s position plain. The same day they replied and said:

“Please note that whilst we can advise our client to put aside an agreed sum this does not mean that we (are) holding the funds on behalf of your client. Our client still claims priority to these funds but if your client were to establish a claim against our client then the Court will naturally make an order for payment at that stage. Any order for payment against the Bank must surely be made in the action commenced against the Bank.”

[26] The bank’s solicitors wrote again, this time on 9 December 2002 and said:

“We cannot accede to your request. The Bank feels that it is entitled to all the funds realised from the sale under its securities. In fairness, the Bank would put aside a certain sum in order to give the caveator Michael Kelly an opportunity to prove his claim against the Bank. The Bank cannot be fairer than this.

We have put a proposal to this effect. It is only fair that if the caveator feels that he is entitled to any funds he should prove his priority to the proceeds as against the Bank’s claim."

[27] This correspondence was not disclosed in the supporting affidavit of the plaintiff Rae McGill when seeking the payment out. She merely exhibited the letter to the bank’s solicitors of 14 February 2003. The decision not to do so may have been made because of the view which counsel formed on the stand alone quality of the order to be interpreted. Counsel had also referred to Handley on Res Judicata (supra) in which it was suggested ambiguities in an order could be clarified by an examination of the surrounding circumstances. This would necessitate a consideration of the correspondence which led to the settlement of the consent order.

[28] I do not consider such a course necessary. But the correspondence explains the stance of each of the parties prior to settlement. The order made was an interlocutory order. It secured the separation and isolation of funds by the bank which would be available in the event the plaintiffs were to succeed in convincing the court of the lawfulness of their claims in this action, the Suva action. Without agreement, payment out cannot proceed based on the wording of this order. The plaintiffs’ case is opposed by the bank and therefore the claim must proceed to trial.

[29] The plaintiffs’ summons is therefore dismissed with costs in the cause.

A.H.C.T. GATES
JUDGE

Solicitors for the Plaintiffs: Messrs Mishra Prakash & Associates, Suva
Solicitors for the 1st Defendant: Messrs R. Patel & Co., Suva
Solicitors for the 2nd Defendant: No appearance