Draft consent orders to avoid costly litigation

Barrister Paul Cutler, of Edmund Barton Chambers, discusses how to draft consent orders, including issues about estoppel and res judicata. Paul will present on the topic, Drafting Impeccable Settlement Agreements at the Mediation Masterclass: Positive Results for Pleased Clients on Thursday, 28 March in Sydney. 

Paul Carter

It has long been the case that most proceedings are resolved by some means other than judgment. A combination of the high cost of litigation (potentially emotional as well as monetary), the rise of mediation and modern case management all encourage parties to reach a settlement. Finality of litigation is in everyone’s interest and the last thing that the parties then want is a secondary dispute about their settlement.

Although the drafting of private settlement agreements is important, let me focus for present purposes on some of the issues that can arise in the drafting of consent orders.

Once an order disposing of proceedings has been entered, the judgment is final and beyond recall (Bailey v Marinoff  (1971) 125 CLR 529 at 53). The pronouncement of judgment, gives rise to a res judicata – latin for “a thing that has already been judicially decided”. This has a number of effects including:

1. that the original cause of action is extinguished and it merges in the judgment (Blair v Curran (1939) 62 CLR 464 at 531-2). The parties are then estopped from asserting the existence of the cause of action in the future;

2. the judgment is conclusive of the issues which were necessary for the decision. In other words, a judgment creates an issue estoppel; and

3. a judgment may preclude the parties from raising causes of action and issues in future proceedings which they could and should have raised in the former litigation. This is referred to as ‘Anshun estoppel’ (Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589).

All of these principles can be demonstrated by looking at the various cases involving a dispute between the ATO and Mr Chamberlain which all started with Mr Chamberlain consenting to judgment for an amount which he knew was incorrect.

Judgments by default and by consent both create a res judicata. However, res judicata can create a number of issues for the drafters of orders, some of which are not immediately apparent. Firstly, there needs to be a judgment on the merits. While it’s generally clear after a contested trial what the merits were, it’s not necessarily so clear when the judgment is by consent.

One way that the parties can help with interpretation of orders is to use notations on the orders. A notation is not itself order, but it can assist to identify the intention and context in which agreement has been reached and orders consented to.

Another issue which sometimes arises is that parties consent to orders “without admissions”. By doing so, they explicity exclude the merits and create a judgment in “naked and general form” (Isaacs v Ocean Accident and Guarantee Corp(1957) 58 SR (NSW) 69 at 76 per Street CJ). Such a judgmentdoesn’t estop a party from raising an issue again.

Finally, special care needs to be taken when drafting orders where a party agrees to accept a compromised amount within a certain time frame and the full (or at least a different) amount if the time is not met. As the parties in Katter v Melhem [2015] NSWCA 213, discovered if this is not done correctly, judgment for an unintended amount may be entered and one party may inadvertently benefit from res judicata. Those types of orders also need to meet the case management requirements of the courts, which are sometimes reluctant to adjourn settled matters lest the parties change their minds.

There are clearly a number of issues that draftspersons need to keep in mind when drafting orders and documenting settlement agreements. I have briefly discussed some of these issues in this note. The drafting of consent orders is in that category of legal task which is not necessarily as simple as it may first appear.

Following a decade-long career in industrial chemistry, Paul Cutler was admitted to practice as a legal practitioner in 1996 and has been in full time practise at the NSW Bar since 2006. Paul’s practice has been almost exclusively in commercial litigation. While he has a specialisation in bankruptcy and corporate insolvency, his practice is more diverse than that and he regularly appears in the District and Local Courts, as well as the various state and commonwealth tribunals. Paul is currently nearing completion of his masters degree in dispute resolution at UNSW. He has been involved in mediations both as advocate and as mediator. He is a Bar Association accredited arbitrator. He has also been a registered migration agent since 2001 and still assists people with visa applications as well as accepting instructions in both merit and judicial review applications. Contact Paul at pcutler@ebc44.com or connect via LinkedIn or Twitter. Paul also blogs as a barrister and as a migration agent.