¥. JUDGMENT No. 4 Sa pee CATCHWORODS HIGH COURT AND FEDERAL JUDICIARY - Federal Court of Australia - jurisdiction and powers generally - enforcement of agreement compromising action. PRACTICE - compromise of proceedings (Cth) - enforcement. Federal Court of Australia Act 1976, 383.22, 23, 32 Darling Downs Investments Pty. Ltd. v. Robert Ellwood Qld G10 of 1985 RECEIVED 2 2 APR 1988 FISHER, PINCUS & EINFELD JJ. FEDERAL COURT Of BRISBANE AUSTRALIA 21 APRIL 1988 Paaerey _ IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD G10 of 1985 GENERAL _ DIVISTON ) ON APPEAL FROM A_SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: DARLING DOWNS INVESTMENTS PTY. LTD. Appellant AND: ROBERT ELLWOOD Respondent MINUTES OF ORDER JUDGES MAKING ORDER: FISHER, PINCUS & EINFELD JJ. DATE OF ORDER: 21 APRIL 1988 WHERE MADE: BRISBANE THE COURT ORDERS THAT: i. the appeal be dismissed; 2. the appellant pay the respondent's costs of and incidental to the appeal, to be taxed. Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY No.G10 of 1985 GENERAL DIVISION ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIK- —OOSOS—S—~—~—~SsS BETWEEN: DARLING DOWNS INVESTMENTS PTY. LTD. Appellant - and - ROBERT ELLWOOD Respondent REASONS FOR JUDGMENT CORAM: Fisher, Pincus & Einfeld JJ. 21 APRIL 1988 FISHER J.: This is an appeal from a judgment of this Court in favour of the respondent Robert Ellwood ("Ellwood") in the sum of $57,500 against the appellant Darling Downs Investments Pty. Ltd. ("Darling Downs"). The judgment was entered ona notice of motion filed by Ellwood on 26 March 1987. He sought judgment against Darling Downs for the balance of an amount agreed to be paid pursuant to a compromise by the parties of proceedings under the Trade Practices Act 1974. Stated shortly, Darling Downs challenges the jurisdiction of the primary judge to make' the order the subject of this appeal. The matter arises in the following circumstances. 2. On 18 March 1985 Ellwood filed an application in this Court claiming orders, upon the grounds set out in the accompanying statement of clain, (a) declaring certain contracts of sale between Ellwood and Darling Downs to be void ab initio (b) that Darling Downs pay to Ellwood the amount of loss or damage suffered by Ellwood, including the sum of $68,000, which loss or damage allegedly resulted from Darling Downs' misleading or deceptive conduct. The statement of claim, as amended subsequently, alleged that the agent of Darling Downs made certain false or misleading statements to Ellwood, on the faith of which he entered into the contracts of sale and paid the full purchase price thereunder, namely $68,000, to the agent. One month after the date of the contracts the solicitors for Ellwood purported to repudiate them but the purchase moneys were retained by or on behalf of Darling Downs. The statement of claim repeated the claims in the application. There was no express reference to the particular provisions in the Trade Practices Act ("the Act") under which it was alleged the cause of action arose. The fact that reliance waS placed upon that Act was an assumption based upon the allegation in the statement of claim that Darling Downs was a corporation within the meaning of that term in the Act. There was also reference to the allegedly "misleading or deceptive" conduct of Darling Downs. Darling Downs filed its defence on 18 April 1985 in which there was raised no issue of present 3. relevance. The solicitors for Darling Downs at that stage were not the solicitors who subsequently negotiated on its behalf. In November 1986 negotiations took place between the parties concerning settlement of the proceedings. Correspondence to this end was in evidence before the trial judge which need not all be repeated. The negotiations concluded with the following letters. On 31 December 1986 the solicitors for Darling Downs wrote as follows to the solicitors for Ellwood - " 'WITHOUT PREJUDICE' Elliot Stubbs & Bonutto Solicitors and Attorneys DX 40126 BRISBANE UPTOWN Dear Sirs, Re: DARLING DOWNS INVESTMENTS PTY LTD ats ELLWOOD We refer to the abovementioned matter and to our recent telephone conversations with your Ms Reynolds. We confirm that we have firm instructions from our client to offer to pay your client an amount of $77,500.00 'all up', the payment to be made on or before the 8th February, 1987. You have responded by stating that your client seeks payment of $20,000.00 by the 5th January, 1987 and the balance by 5th February, 1987. We have written to our client recommending part payment prior to the end of February. The writer will be absent from the office until Monday, 5th January, 1987 and we expect to receive our client's instructions on or after that date. Quite frankly, with respect, the offer we are making on our client's behalf to your client is more than reasonable. 4. Should your client reject the offer and make an application to the Court, we reserve the right to produce this letter to the Court on the issue of costs. Yours faithfully, HAWTHORN CUPPAIDGE & BADGERY" On 15 January 1987 the solicitors for Ellwood replied as follows: " 'WITHOUT PREJUDICE' Messrs. Hawthorn Cuppaidge & Badgery, Solicitors, Dx 153, BRISBANE. Q. Dear Sirs, Re: Ellwood -v- Darling Downs Investments Pty. Ltd. We refer to the above matter and confirm that our client has instructed us to accept the offer proposed by you, namely: a. Payment of the sum of $20,000.00 on or before the 23rd January, 1987; b. Payment of the balance of $57,500.00 on or before the 28th February, 1987. We look forward to receiving the Deed of Settlement for our perusal as soon as possible. Yours faithfully, ELLIOTT STUBBS & BONUTTO" It was not disputed that the offer referred to in that letter had in fact been made by the solicitors for Darling Downs to Ellwood's solicitors. On 27 January 1987 the solicitors for Darling Downs wrote to the solicitors for Ellwood enclosing a cheque for the sum of $20,000. By letter dated 28 January the latter solicitors acknowledged receipt of the cheque for $20,000 and stated "We 5. note that the Deed of Agreement has not yet been prepared and look forward to receiving same as soon as possible." On 20 February 1987 the solicitors for Darling Downs wrote as follows: "Elliott Stubbs & Bonutto Solicitors DX 40126 BRISBANE UPTOWN Dear Sir, Re: DARLING DOWNS INVESTMENTS PTY LTD -ats— ELLWOOD We refer to the abovementioned matter. As requested, enclosed please find Deed of Settlement in duplicate. Would you please have your client sign and date the Deed of Settlement where indicated. We will then forward it to our client for signing and will request our client to arrange for the balance of $57,500.00 to be available on 28th February, 1987. Yours faithfully, HAWTHORN CUPPAIDGE & BADGERY" By letter dated 2 March 1987 the solicitors for Ellwood wrote in these terms: "Messrs. Hawthorn Cuppaidge & Badgery, Solicitors, Dx 153, BRISBANE. Q. Dear Sirs, Re: Ellwood -v- Darling Downs Investments Pty. Ltd. Please find enclosed Deed of Settlement, in duplicate, duly signed by our client. Upon execution by your client, would you kindly forward a copy to us. 6. We note that we have not yet received the balance settlement monies and look forward to receiving same without further delay. Yours faithfully, ELLIOTT STUBBS & BONUTTO" On 11 March they wrote a further letter as follows: "Messrs Hawthorn Cuppaidge & Badgery, Solicitors, DK 153, BRISBANE Dear Sirs, re: Ellwood -v- Darling Downs Investments Pty Ltd We refer to the above matter and note that we did not teceive any further communication from you regarding payment of the balance of settlement funds of $57,500 which was due to be paid on 28th February 1987. Our client has now instructed us to take action in relation to the compromise reached between the parties. We shall commence such action if the monies owing are not paid to our trust account by bank cheque or your trust account cheque by 5.00 p.m. on Friday, 13th March 1987. Our client is not prepared to consider any further proposals for payment of the monies owing. Yours faithfully, ELLIOTT STUBBS & BONUTTO" In his reasons for judgment the trial judge referred to a letter written by the solicitors for Darling Downs dated 13 March 1987 in the following terms: "We refer to your letters of 11th and 12th March, 1987. We would point out that our clients do not agree that there is any legally enforceable composition entered into with your client in that any settlement is subject to a Deed of Settlement. The Deed of Settlement has not been signed by our client nor returned to client on his behalf (sic)." 7. This letter did not appear in the appeal book which was certified by the solicitors for the parties but no issue thereon arose during the hearing of the appeal. On 10 February 1987, that is subsequent to the parties apparently reaching agreement on the terms of settlement as referred to in the letter of 15 January 1987 and the payment by Darling Downs of the sum of $20,000, the matter was mentioned before a judge of this court. The trial judge in his reasons stated that both parties were represented by solicitors and after hearing them that other judge said -— "T will note that the matter has been settled, and adjourn the application to the Registrar." It was conceded at the hearing of the appeal that Ellwood's proceedings had not thereby been discontinued or otherwise terminated and that they could be restored for hearing upon application to the Registrar. The Deed of Settlement was prepared by the solicitors for Darling Downs and executed by Ellwood. He was named as' the First Party and Darling Downs the Second Party. The Deed recited and provided as follows: " WHEREAS : ~ A. The First Party in 1985 by Application No. G10 of 1985 issued out of the Federal Court of Australia, Queensland District Registry, General Division against the Second Party claimed, inter alia, an amount of SIXTY-EIGHT THOUSAND DOLLARS ($68,000.00) together with interest and costs; B. The First Party denies that it is indebted to the Second Party for that sum or at all; (sic) c. It has been agreed between the parties that in settlement of their differences and to avoid the costs and expense of litigation that the Second Party pay to 8. the First Party the sum of SEVENTY-SEVEN THOUSAND FIVE HUNDRED DOLLARS ($77,500.00) inclusive of legal costs and interest in full and final settlement of the First Party's claim against the Second Party. THIS DEED WITNESSES:- 1. The Second Party hereby agrees to pay to the First Party at Brisbane the sum of SEVENTY-SEVEN THOUSAND FIVE HUNDRED DOLLARS ($77,500.00) on the Following basis:— (a) Payment of the sum of $20,000.00 on or before the 23rd January, 1987. (b) Payment of the balance of $57,500 on or before the 28th February, 1987. 2. The First and Second Parties will each pay their own costs of and incidental to the preparation, execution and stamping of this Deed. 3. That neither the First or Second Party to this Deed shall publish, cause to be published or in any way allow to be published these terms of settlement." Ellwood filed his notice of motion on 26 March 1987 as abovementioned, supported by an affidavit sworn by his solicitor. The affidavit deposed to the matters and correspondence which I have referred to with the exception of the letter of 13 March 1987. Darling Downs did not file an answering affidavit nor give any oral evidence on the hearing of the notice of motion, It made, as stated by the trial judge, two principal submissions, the first of which was that there was an issue whether the proceedings were validly compromised. Its primary contention was that, on the assumption that there was a legally enforceable agreement of compromise, the "Federal Court cause of action was extinguished and replaced by a right to sue on the compromise agreement and, that right being contractual in nature, the Federal Court has no jurisdiction to entertain such a claim." 9. The trial judge found in respect of the first submission that it could not seriously be argued that there was no concluded agreement to settle the proceedings in this Court. On the appeal there was, at the most, only a faint challenge to this finding. Counsel for Darling Downs merely contended that there was an issue whether the execution of the Deed of Settlement was a condition precedent to the formation of a binding contract. Such an issue, being essentially a disputed question of fact, it was not appropriate, he said, for the matter to be dealt with summarily. In my opinion this submission is in the circumstances of this matter wholly without merit and if, contrary to my view, the trial judge had jurisdiction he correctly entered judgment against Darling Downs. It is with considerable regret that 1f disagree with the view of the trial judge on his jurisdiction as convenience, if nothing else, would entitle Ellwood in this matter to conclude the proceedings by obtaining a judgment of this Court. However as Gibbs C.J. said in the Phillip Morris case infra at p.591 in regard to his view on the existence of jurisdiction: "If that conclusion leads to results that are inconvenient, that is no reason to blur distinctions that the Constitution insists should be drawn." I would add that to the extent that reasonably precise legal tests for determining jurisdiction have been worked out, in recent years, they must be followed irrespective of the fact that in particular case the result may be inconvenient and even exasperating. This view was also urged by Gibbs C.J. on the same 10. page when he said: --- only the adoption of precise legal tests can enable litigants to select their forum with any hope that it is the appropriate one." In this area the common substratum of facts test has generally been accepted as the most precise test in determining jurisdiction. To the extent that in this matter the result is seen as inconvenient, one can only hope that the forthcoming cross-vesting legislation will provide the remedy. The trial'judge correctly, in my opinion, rejected the contention of Ellwood's counsel that he had jurisdiction under 8.22 of the Federal Court of Australia Act 1976. That section empowered the trial judge, if he otherwise had jurisdiction, to conclude the proceedings by making the orders that he did make. However he correctly stated in his reasons that the High Court had ruled on a number of occasions that s.22 does not of itself enlargen the jurisdiction of this Court. If it did I would be more than happy to conclude the problem in the manner adopted by Smith J. in Roberts case infra. In so doing I endorse the view of the Full Court of this Court in McLeish v Faure (1979) 40 F.L.R. 462 at p.472, namely "We consider first 5.22. In our opinion that section should be construed liberally in order to achieve the object of the Act in attempting to prevent the necessity of a multiplicity of legal proceedings to be entered into by a party seeking relief. Our view is supported by the opinions expressed in Roberts v Gippsland Agricultural and Earth Moving Contracting Co. Pty. Ltd. TiSsey VER 555." However as the Full Court noted on that page the first question was whether the claim was "properly brought forward". It can ae 'ae ete 11. not be said that a claim which is beyond the jurisdiction of the Court is "properly brought forward". Furthermore as Gibbs C.J. noted in Phillip Morris Inc v Adam _P. Brown Male Fashions Pty. Ltd. (1981) 148 CLR 457 at p.490: "Section 22 applies only in every matter before the Court; in other words it is assumed that there is a matter which the Federal Court has jurisdiction to hear and determine, and the section, on that assumption, gives the Court the power and imposes on it the duty to dispose of the matter completely and finally." I have since drafting these reasons had the opportunity to peruse in draft form the reasons for judgment of Pincus and Einfeld JJ. But for the problem of jurisdiction I amin full agreement with what they say on the amplitude of the Court's powers and duties under that section. Turning to the crucial question of the jurisdiction of the trial judge to enter judgment based on the agreement to settle the proceedings, counsel for Darling Downs relied on the appeal as well as at first instance upon the decision of the Full Court in Pallas v Finlay (1985) 61 ALR 220. The trial judge held that he was not bound to follow that decision, it being distinguishable on the ground that the proceedings in that matter were compromised "on the promise of strangers to the proceedings to pay a sum of money to the applicant". In my view however, that which I see as the ratio of the decision of the Full Court, as opposed to remarks made obiter, is applicable and indistinguishable and therefore binding on the trial judge. That decision should be followed by this Full Court in my opinion, it being in accord with principle endorsed by the High Court and Taal 12. applied by this Court on many occasions. The facts of Pallas v Finlay were set out by the trial judge and need only be briefly repeated. The applicant Dr. Finlay alleged against a company Lincoln Hunt Australia Pty. Ltd. certain contraventions of ss.52 and 53 of the Act. When the proceedings were part heard the trial judge was told that the parties had settled the matter. Terms of settlement were signed by Dr. Finlay as applicant and Lincoln Hunt Australia Pty. Ltd. as the sole respondent and two persons, at that stage strangers to the proceedings, Mr. Pallas and Mr. Dubinski-Hunt. These terms included a provision that Dr. Finlay should be paid $150,000 in full settlement and that Mr. Pallas and "Mr. pubinsk TM should be "personally jointly and severally liable" for payment of that sun. The terms of settlement also provided that: "In default of payment of the said sum in accordance with the terms hereof the applicant (Dr. Finlay) should be entitled to enter judgment against Pallas and Dubinski-Hunt for the sum of $150,000 and they will agree to be joined for that purpose." Payment not having been made, application was made by Dr. Finlay to add Mr. Pallas and Mr. Dubinski-Hunt ("the appellants") as parties to the proceedings for the purpose of seeking judgment against them. Leave was granted for this purpose, the appellants were added and judgment was subsequently given against them jointly and severally for the sum of $150,000. The appellants appealed on a number of grounds but Beaumont J. with whose reasons the other members of the Court, Northrop and Lockhart JJ., agreed felt it necessary only to deal with the question of the jurisdiction of the Court to make the challenged order. His reasons for 13. allowing the appeal on the ground that the trial judge lacked jurisdiction were stated as follows on pp.222-3: "(1) (2) (3) (4) When those proceedings were settled, there was agreed to be substituted for the statutory causes of action brought against Lincoln Hunt Australia Pty Ltd a fresh cause of action in contract against the appellants alone. True, the compromise is executory only and the appellants and Lincoln Hunt Australia Pty Ltd have not performed their obligations under that agreement. But, unless and until it is set aside as a contract of compromise by a court of competent jurisdiction or otherwise discharged (see Harvey v Phillips (1956) 95 CLR 235 at 243-4), the agreement embodied in the terms of settlement is the sole source of the respective rights and obligations of the parties. The only cause of action available to Dr Finlay against the appellants is one based on that contract of compromise. That cause of action arises under the general law and not under the Trade Practices Act Or under any other statute in respect of which jurisdiction is conferred upon this court. It is submitted on behalf of Dr Finlay that this is a case for the exercise of the court's accrued or "pendent party' jurisdiction (see Kenned Vv Australasian Coal and Shale Employees Federation (1983) 50 ALR 735). But, in my opinion, there is here, at this stage at least, none of the common substratum of facts which is required to confer jurisdiction upon this court (see Fencott v Muller) (1983) 46 ALR 42 at 67;152 cLR 570° at 607). Rather, in my view, the present case is one of an attempt to advance ''a completely disparate claim constituting in substance a separate proceeding' {see Fencott v Muller, supra, (ALR) at p.67; (CLR) at p.607). The position may well have been different if the appellants had been joined in the proceedings on the footing that they were involved in the contraventions; or, if, before suit, the appellants had agreed to give Dr Finlay an indemnity in respect of the loss he now claims to have suffered. In those situations, as the decision in Fencott v Muller demonstrated, the accrued jurisdiction of the court, if not the associated jurisdiction under s.32 of the Federal Court of Australia Act 1976, may well have been attracted. In my view, the present case, at this stage at least, should be seen as an attempt to invoke the jurisdiction of the court to enforce a _ simple contract. Looked at in isolation, the court has no jurisdiction to entertain such a claim and, unless there is a substratum of facts common to a matter 14. in which the court has jurisdiction, the accrued jurisdiction is not available." For ease of reference hereafter I have numbered each of these paragraphs In my opinion the ratio of the decision is to be found in paragraphs (2) and (4) of Beaumont J's reasoning where he refers to the necessity to identify a common substratum of facts before the Court has jurisdiction in respect of the common law clain. The trial judge however made no reference in his reasons to the fact that Beaumont J. relied upon the necessity for a common substratum of facts. He found important and apposite to the facts of this matter paragraph (3) of the reasons set out above which he also set out in full. He went on to say: "In my opinion, the last quoted remarks of Beaumont J. are presently apposite. The Federal Court proceedings have not been. stayed, struck out or discontinued. The agreement between the parties is that the respondent will pay $77,500.00 in settlement of the matter. An amount of $20,000 has in fact been paid. There is here no question of further parties and, in my opinion, Pallas v Finlay (supra) is distinguishable. There is here no question of a compromise of the proceedings on the promise by strangers to the proceedings to pay a sum of money to the applicant. The agreement was that the proceedings would be settled by the payment of $77,500.00 in the agreed way. The Federal Court action was not exchanged for a promise to pay $77,500.00. The Federal Court proceedings being still on foot, in my opinion not having been extinguished by the agreement between the parties, it is competent for the Court to deal with the question of summary judgment on motion in those proceedings. In my view it is difficult to imagine a matter more closely associated with the Federal Court matter than the method of its disposition." 15. In my opinion the trial judge should have adopted the approach of the Full Court and sought to identify in the statutory and common law claims a common substratum of facts, in default of which he should not have concluded that he had jurisdiction. The passage upon which he relied to distinguish Pallas v Finlay on the basis that in his matter Darling Downs was from the outset a party to the proceedings, was as I see it not crucial to the reasoning and was in truth obiter. It was not a necessary step by which Beaumont J. reached the conclusion that the Court had no jurisdiction. He merely stated his tentative view that it might have been different if the circumstances were as stated and, in the absence of those different circumstances, indicated the unlikelihood of a common substratum of facts. If they had been joined from the outset it would normally have been on the basis of a common substratum of facts or involvement in accordance with s.75B. Having distinguished Pallas v Finlay to his satisfaction the trial judge concluded that it was competent for him to deal with the motion for judgment, as he said "The Federal Court proceedings being still on foot, in my opinion not having been extinguished by the agreement between the parties". I agree that the Pederal Court proceedings were still on foot the consequence of the agreement between the parties being at most to extinguish or discharge liability under, in appropriate circumstances, the statutory cause of action. Such would certainly have been the case if the agreement amounted to an accord and satisfaction. Whether however it amounted to an accord executory rather than an accord and satisfaction is a matter which was raised but in my 16. opinion need not and should not be determined if I am correctly of opinion that the Court has no jurisdiction. I refer to the reasoning of Dixon J. as he then was in McDermott v Black (1940) 63 CLR 161 at p.183~-5. In my opinion the trial judge should not have concluded that he had jurisdiction until he had considered, at the very least, the accepted tests for determining the existence of associated or accrued jurisdiction. No reliance was placed on the court's associated jurisdiction under s.32 of the Federal Court Act and there is little need for me to consider this aspect further. This jurisdiction enables the court to hear and determine claims arising under a federal law outside its s.19 jurisdiction which are associated with the claim within its jurisdiction. Examples of such claims are or were those under Trade Marks, Copyright and Designs legislation. Considerable reliance was however placed upon the accrued jurisdiction of this Court which is available in respect of non-federal claims i.e. common law and State statutory claims which are part of the same "matter" as the claim within the jurisdiction. The accepted test can be said shortly to be whether the resolution of the non-federal claim is essential to the resolution of the federal claim or whether the two claims so depend upon common transactions and facts that it can be said there is a "common substratum of facts". Other tests have arisen from time to time such as whether the non-federal claim is part 17. of the one controvesry or whether it is ''a completely disparate claim constituting in substance a separate proceeding' (Fencott v Muller (1983) 152 CLR 570 at 607). The test of "common substratum of facts" has been accepted by this Court on a number of occasions, and was, in my opinion, the test applied by Beaumont J. in Pallas v Finlay supra. Counsel for the respondent contended that Beaumont J. indicated in his reasons that this test would have been satisfied if the appellants had been parties to he proceedings. As I have already indicated I do not accept this as a correct reading of that Judge's reasons. His mention of this point was not part of his ratio and should be seen only as a reference to the fact that there was more likelihood of a common substratum if they had originally been parties. It was not a separate ground upon which the Court was in his opinion denied jurisdiction. Provided there is a common substratum of facts it is accepted that the Court can exercise jurisdiction even in respect of a person who was not a party to the federal claim. I refer to the position of Scrid Nominees Pty. Ltd. in Fencott v Muller supra referred to by Gibbs C.J. on page 593 and by the majority of the Court on page 610. The majority decided that the Court had jurisdiction notwithstanding the fact that Scrid Nominees was not a party to the federal clain. Although there has been on occasions certain divergence in views it does appear that the common substratum of facts test is most generally accepted as the appropriate positive test. I refer in particular to the statement of the majority of the High Court in Fencott v Muller supra on page 607 when they said: 18. "Whatever formula be adopted as a guide - and the formula of 'common transactions and facts' is a_ sound guide for the purpose ~ it must result in leaving outside the ambit of a matter a 'completely disparate claim constituting in substance a separate proceeding' (per Barwick C.J. in Felton v. Mulligan (1971) 124 C.L.R. at p.373), a non-federa matter which is 'completely separate and distinct from the matter which attracted federal jurisdiction' (per Murphy J. in Philip Morris (1981) 148 C.L.R. at p.521), or 'some distinct and unrelated non-federal claim' (per Stephen, Mason, Aickin and Wilson JJ. in Moorgate Tobacco (1980) 145 C.L.R. at p.482." It is interesting to note, as hereafter referred to, that the common substratum of facts test was applied in Fencott v Muller not only to include non-federal claims in which other parties were involved. It was also applied to exclude from jurisdiction claims arising out of the sale which was induced by the contraventions of s.52 and from events subsequent to the sale on the ground that they did not depend upon transactions and facts common to the federal claim. This necessity for the facts and transactions on which the federal and non-federal claims are based to be identical or almost wholly so, appears in_ the judgment of Mason J. (as he then was) in Phillip Morris Inc. v Adam P. Brown Male Fashions supra on page 516 and page 518. Subsequently in Stack v Coastal Securities (No.9) Pty. Ltd. (1983) 154 CLR 261 at pp.291 and 294 Mason, Brennan and Deane JJ., adopted the same approach. Finally judges of this Court have invariably adopted this test when determining at first instance the question of jurisdiction. I refer in particular to decisions in Maisey v First Coast Pty. Ltd. (1984) 1 FCR 316, Obacelo Pty. Ltd v 19. Taveraft Pty. Ltd. (1985) 59 ALR 571, Aristolite v Gladstone Parking Shopping Centre Pty. Ltd. (1984) 55 ALR 387 and T.J.M. Products Pty. Ltd. v A. & P. Tyres pty. Ltd. [1987] A.T.P.R. 40-770. In my opinion, which I hold with regret, this Court has no jurisdiction to determine the claim under the agreement of compromise whatever test is adopted. It is not part of the one controversy even though it can be regarded as a controversy which arises out of the earlier federal controversy. It can be said that it is "attached to" the federal claim but it can not be held to be "not severable" from that claim. Its determination will be based on facts which arose subsequent to and have no identity with the facts upon which the federal claim will depend. Thus it can not be said that there is the necessary common substratum of facts. Beaumont J. applied this test in Pallas v Finlay supra when he determined that the common law claim constituted in substance a separate proceeding. That this is the case is made abundantly clear by the difficulties revealed in reported decisions of courts of unlimited jurisdiction. It was only recently determined in these courts that in appropriate cases an agreement for compromise of an action could be enforced by motion in the action itself. I refer in particular to the Roberts v Gippsiand Agricultural and Earth Moving Contracting Co. Pty. Ltd. [1956] VLR 555. McLaren v Schuit (1984) 33 S.A.S.R. 139 and General Credits (Finance) Pty. Limited v Fenton Lake Pty. Ltd. (1985) 2 Q.D. 6. Lord Denning M.R. held strongly to the contrary view when he said in McCallum v Country Residences Ltd. [1965] 2 All E.R. 264 at p.265. 20. "When an action is compromised by an agreement to pay a sum in satisfaction, it gives rise to a new cause of action. This arises since the writ in the first action and must be the subject of a new action. The plaintiff, in order to get judgment, has to sue on the compromise. That is the only course which the plaintiff can take in order to enforce the settlement; unless he can go further and get the defendant to consent to an order of the Court." In my opinion the trial judge did not have jurisdiction to determine Ellwood's claim for enforcement of the agreement of compromise and therefore the appeal must be upheld. I certify that this and the/9 preceding pages are a true copy of the Reasons for Judgment of Mr Justice Fisher. Associate KtthT fhe. Dated: 2/-4 -88 IN ERAL COURT OF AUSTRALIA ) UERENS IcT STRY QLD G10 of 1985 GENERAL ISION ~~ ON APPEAL FROM A_ SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: DARLING DOWNS INVESTMENTS PTY. LTD. Appellant AND: ROBERT ELLWOOD Respondent CORAM: FISHER, PINCUS & EINFELD JJ. DATE: 21 APRIL 1988 REASONS FOR JUDGMENT PINCUS & EINFELD Jd.: In this appeal, an important question as to the Federal Court's powers arises. In essence, the case is fairly simple. A purchaser under contracts for sale of land paid the total price, but received no conveyance. Subsequently, asserting that he had been misled, the purchaser claimed damages including the price, by proceedings brought under the Trade Practices Act 1974. The respondent vendor agreed to pay $77,500 "all up", and the matter was settled on that basis; being so informed, Pincus J. adjourned the case to the Registrar. Subsequently, the vendor, not giving any substantive reason, reneged on the settlement and Spender J. gave judgment in the proceedings for the agreed sum, less $20,000 which had been paid under the compromise. The principal point argued on appeal was whether his Honour had power to do so, the appellant contending that the Proper course was to sue on the settlement by a writ in the Supreme Court. Stated broadly the question is whether the enforcement of the settlement was permissible as part of the Court's disposition of the federal matter. The point does not depend on the order's being for payment of money; it might equally arise if the compromise had required the performance of some other act, such as a transfer of property. Nor does it depend on the judgment's having been opposed; if it was beyond power, consent could not save it. It is conceded that where a claim 1s settled on an agreement to pay a particular sum the Supreme Court would have power to enforce the compromise by giving judgment, in the settled proceedings, for that sum. The question is whether the statute under which this Court was established, on its proper construction, intended that this Court should have a similar power. The provisions of 38.22, 23 and 32 of the Federal Court Act of Australia 1976 ("the Act") would, without the cases, lead towards the conclusion that ordinary ancillary powers of that kind were intended to be vested in this Court; but the question is whether this general intention of Parliament has been given effect to by appropriate language. No constitutional point is or could be raised and the question is one of construction of the statute; it is of course clear that the Federal Court may be empowered to make such orders. A somewhat similar question arose in this Court in Pallas v. Finlay (1985) 61 A.L.R. 220. There, proceedings were brought against a company under the Trade Practices Act. They were settled on the basis that two persons not parties to the suit undertook to pay a certain sun. When it was not paid, the applicant obtained orders joining the persons who had promised to pay the money as respondents in the proceedings and later obtained judgment against them - both those steps being contemplated by the terms of settlement. A Full Court set aside the judgment on the ground of lack of jurisdiction. There was some discussion, in the course of the argument before us, as to the basis of the reasons of Beaumont Jd. with whom Northrop and Lockhart JJ. agreed. The reasons are, it seems to us, capable of two interpretations. One 1s that where proceedings in this Court are settled on the basis of a promise to Pay a particular sum, the Court has no jurisdiction, if the settlement is not carried out, to enter judgment for the agreed sun. The second is that this proposition is correct only if judgment is sought against a person not party to the original proceedings. Beaumont J''s reasons emphasise the point that the two persons against whom judgment was sought were not parties to the original proceedings; no claim under the Trade Practices Act was ever made against them. On the other hand, there is some reason to believe that his Honour's reasons apply equally to the circumstances of the present case. This is because Beaumont J. accepted that there was not the common substratum of facts necessary to confer on the Court the accrued jurisdiction dealt with in Fencott v. Mulle (1982-83) 152 C.L.R. 570 and similar cases. However, the Court apparently did not in Pallas v. Finlay regard itself as giving reasons necessarily determinative of the present point. Beaumont J. said at p.223: "The position may well have been different if the appellants had been joined in the proceedings on the footing that they were involved in the contraventions ..." We have therefore concluded, not without doubt, that the Court should defer to that dictum and proceed on the basis that the present point is still open. Qne reason for doing so is_ that common sense suggests and authority requires the extension of a liberal construction to s.22 of the Act on which these reasons depend. Pallas v. Finlay appears to have been argued on the basis that the order in question was only justifiable, if at all, under the accrued jurisdiction. In this case, the respondent, who was successful below, relied in addition upon s.22 of the Act, reading as follows: "22. The Court shall, in every matter before the Court, grant, either absolutely or on such terms and conditions as the Court thinks just, all remedies to which any of the parties appears to be entitled in respect of a legal or equitable claim properly brought forward by him in the matter, so that, as far as possible, all matters in controversy between the parties may be completely and finally determined and all multiplicity of proceedings concerning any of those matters avoided." The appellant's contention was that this section deals inter alia with the enforcement of settlements in Federal Court proceedings. We have come to the conclusion that this contention is, on the authorities, correct. It is therefore not necessary to attempt to define the scope of the accrued jurisdiction in dealing with these circumstances nor to decide whether the necessity to apply Queensland law to the case affects the outcome. The Full Court of the Supreme Court of Victoria in Roberts v. Gippsland Agricultural and Earth Moving Contracting Co. Pty. Ltd. (£19563 V.L.R. 555, upheld a contention that such an order as is in issue here was within the power of the Victorian Supreme Court. The correctness of that decision was not challenged before us although it is not beyond dispute that the decision is correct; it is inconsistent with that of the English Court of Appeal in McCallum v. Country Residences Ltd. £1965] 1 W.L.R. 657 in which Lord Denning M.R. held that: "When an action is compromised by an agreement to pay a sum in satisfaction, it gives rise toa new cause of action. This arises since the writ in the first action, and must be the subject of a new action. The plaintiff, in order to get judgment, has to sue on the compromise." However, in our opinion, appellant's counsel's concession as to the correctness of the Victorian decision should be accepted, for four reasons. Firstly, there is authority in Queensland and in South Australia to the same effect: General Credits (Fi ce) Pty. Limited v. Fenton Lake Pty. Ltd. £1985] 2 Qd.R. 6 (McPherson J.) and McLaren v. Schuit (1983) 33 S.A.S.R. 139 (White J.). Secondly the Victorian case has been referred to with approval in this Court (in McLeish v. Faure (1979) 40 F.L.R. 462 at p.472). Thirdly, the view of the law upon which these cases is based reaches a result which is plainly more convenient and communally responsible than that adopted by the English Court of Appeal. In a case such as the present, it would seem technical, costly and wasteful that a judge could not simply give judgment for the applicant in the sum which the respondent had agreed to pay by way of settlement of the proceedings, without the institution of a fresh suit. Fourthly, the opposite view would encourage many litigants, especially those who settled reluctantly or were vindictive, to renege on settlements for the purpose of putting their opponents to great expense and inconvenience or to obtain a better result. Affluent litigants could even outlast or outspend their more impecunious adversaries. In Roberts (above) the plaintiff sued for the price of work and labour done. The case was settled on the basis that the defendant would pay a lesser sum in full settlement. There was a provision in the settlement that in default of payment, the plaintiff was entitled to move for judgment and that the defendant would consent thereto. Lowe and O'Bryan JJ. held that: ",.. in certain simple cases an agreement for the compromise of an action may be enforced on a motion for judgment in the action itself in accordance with the agreed terms" (p.557). They declined to follow dicta of Slade J. in Green v. Rozen [£1955] 2 All E.R. 797, suggesting the contrary. Their Honours commended the reasons of the third judge (Smith J.) as containing a "careful and critical examination ... of the principles involved and of the decisions ..." but found it unnecessary to determine the limits of the jurisdiction of the Court in such cases. Smith J. noted that there appeared to be a difference of view between the Victorian cases and those in England on the questions involved. The Court of Chancery, from which the jurisdiction had always been regarded as derived, would, his Honour said, "ordinarily leave a party to proceed by separate bill if the agreement involved matters extraneous to the suit compromised", but in cases not involving such matters would ordinarily enforce the agreement in the suit compromised. Smith J. referred to numerous cases supporting the view that, when the Judicature Act 1873 came into effect, summary jurisdiction to enforce compromises, formerly exercisable only in equity, was able to be exercised by the new court more freely. Section 24(7) of the Judicature Act 1873 (U.K.) read as follows: "The High Court and the Court of Appeal respectively, in the exercise of the jurisdiction vested in them by this Act in every cause or matter pending before them respectively, shall have power to grant, and shall grant, either absolutely or on such reasonable terms and conditions as to them shall seem just, all such remedies whatsoever as any of the parties thereto may appear to be entitled to in respect of any and every legal or equitable claim properly brought forward by them respectively in such cause or matter; so that, as far as possible, all matters so in controversy between the said parties respectively may be completely and finally determined, and all multiplicity of legal proceedings concerning any of such matters avoided." Smith J. said that this provision had been construed in two senses. On one view, which his Honour favoured, the provision "is not confined to the original claim made in a cause but applies to any claim relating to the matter in dispute in the cause which is in fact brought forward therein". That view is of particular importance here, because the English provision is so similar to s.22 of the Act. Smith J. went on to say, in effect, that the Victorian equivalent of $.24(7) of the Judicature Act 1873 "Should be liberally construed with a view to effectuating the purpose to which it is directed of avoiding multiplicity of legal proceedings". It thus included within its scope, Smith J. said, claims for summary enforcement of compromises, whether 1n actions at common law or equity. In General Credits (Finance) Pty. Limited v. Fenton Lake Pty. Ltd. (above) the Queensland analogue of s.24(7) of the English Judicature Act 1873 was said to justify enforcement of a deed of compromise of a suit without fresh proceedings, following the view of Smith J. in Roberts (above). McPherson J. also relied upon the decision of this Court in McLeish v. Faure (above). That case concerned a dispute within the Electrical Trades Union of Australia. In 1978 a Full Court of this Court held that the union's rules were invalid in part and adjourned the proceedings. In 1979, there came back to the Court the question whether a proposed alteration to the rules, in consequence of the 1978 judgment, was valid. The Full Court gave consideration to the question whether it had jurisdiction to grant a declaration sought as to their validity. After quoting s.21 (allowing the Court to make declarations of right), the Court said of s.22: "In our opinion that section should be construed liberally in order to achieve the object of the Act in attempting to prevent the necessity of a multiplicity of legal proceedings to be entered into by a party seeking relief. Our view 1s supported by the opinions expressed in Roberts v. Gippsland Agricultural and Earth Moving Contracting Co. Pty. Ltd. £1956] V.L.R. 555. In that case Smith J. as a member of a Full Court, considered a section in the Victorian Supreme Court Act being the equivalent of s.22 of the Federal Court of Australia Act. For present purposes it is sufficient to quote the following extract: 'In Salt v. Cooper (1880) 16 Ch.D. 544, the view was expressed that this provision is not confined to the original claim made in a cause but applies to any claim relating to the matter in dispute in the cause which is in fact brought forward therein. But on the other hand the provision has sometimes been construed in a restricted sense: compare Edwards on Compromises, p.189. The critical question would appear to be what meaning is to be given to the expression "properly brought forward". And I consider that, having regard to the nature and purpose of the provision, that expression should be construed liberally, so that its operation may not be unnecessarily restricted by reference to rules of mere practice and procedure which operated in the old Courts' £19561 V.L.R., at p.564" (p.472). These propositions appear to be consistent with other authority, old and new. It was established early that s.24(7) of 10. the English Judicature Act should receive an ample construction: McGowan v. Middleton (1883) 11 Q.B.D. 464 per Brett M.R. at p.468. In the following year, in Searle v. Choat (1884) 25 Ch.D. 723, the question arose as to the way in which proceedings should be brought against a receiver complaining of alleged wrongdoing by him. The receiver had been appointed in a certain suit (not, of course, one brought against him or complaining of his conduct) and it was held that the proper procedure was to move for relief against the receiver in that same suit "... because the whole tenor of the Judicature Acts is to require all proceedings as far as possible to be taken in one action..." (per Cotton L.J. at p.727). Lindley L.J. thought it was "improper" to bring a fresh action in the circumstances (p.727). McGowan v. Middleton and Searle v. Choat were referred to with apparent approval in the principal judgment of the High Court in Thomson Australian Holdings Proprietary Limited v. The Trade Practices Commission (1980-81) 148 C.L.R. 150 at 161. The same passage supports the view, taken by this Court in McLeish v. Faure, that s.22 of the Act has a purpose similar to s.24(7) of the English Judicature Act 1873, as defined in the two English cases mentioned: "Section 22 of the Federal Court of Australia Act is a 'Judicature Act' provision, designed to ensure that the Court can grant relief which is appropriate to both legal and equitable claims and to avoid multiplicity of proceedings. Its effect is to enable the Court to dispose of all rights, legal and equitable, in the one action, so far as that is possible ~ see, for example, The James Westoll £19053 P.47; McGowan v. Middleton (1883) 11 Q.B.D. 464, at p.468; Searle v. Choat (1884) 25 Ch.D. 723, at p.727." 11. However, The James Westoll [£1905] P.47, referred to in that passage, was an admiralty action in personam, in which it was held, among other things, that s.24(7) of the Judicature Act 1873 gave no power to make a certain order for security on the ground that it could not have been done by a court before the Judicature Act. It may be that such reasoning as that in McGowan v. Middleton (above) cannot be applied directly to 5.22, for the Act did not amalgamate jurisdictions or powers; it created a completely new Court. Nevertheless, the High Court as well as this Court have made it clear that s.22 must be given an effect similar to that of s.24(7) of the Judicature Act 1873, on whose language s.22 is so clearly based (see also the comments of Gibbs Jd. and Aickin J. in Philip Morris Incorporated v. Adam P. Brown Male Fashions Proprietary Limited (1980-81) 148 C.L.R. 457 at 489 and 529). We note, in addition, the recent remarks of the High Court criticizing attempts to limit a discretion vested in a Court by "judicial fiat": per Wilson J. 1n F.A.I, General Insurance Company Limited v. Southern Cross Exploration N.L., unreported, 25 March 1988 at p.11; see also per Gaudron J. at p.22. In the Philip Morris case, both Gibbs J. and Aickin J. made the point that the section could not be construed as conferring jurisdiction, but only as conferring power; Gibbs J., nonetheless, appeared to be of the view that the provision should be construed liberally. The words "power" and "jurisdiction" are often used interchangeably, but where they must be treated, as here, as mutually exclusive, it is necessary precisely to mark out 12. a division. To allow this appeal, therefore, it must be held that enforcement of compromises of proceedings in the Court is a matter of jurisdiction, not of power. As a matter of ordinary use of English language, we should have thought either description to be apposite, but the former to be less so. The issue here, however, is not about the substance of the matters which this Court may entertain, but rather about the consequences of their litigious resolution. It is clear that s.22 cannot have been intended merely to give the Court power to make orders of particular kinds "in relation to matters in which it has jurisdiction"; that work is explicitly done by the following provision, s.23. What the Court is required to do by s.2Z2 is to grant all remedies to which any party appears to be entitled in respect of a claim properly brought forward in a matter. Is an order enforcing a compromise of a case such a remedy? On general principles it would seem at least arguable that the enforcement of a compromise of a claim is a remedy in anew claim and ina separate case. However, both Smith J. and McPherson J., in the cases above mentioned, have taken the contrary view. If, as McPherson J. held (in our respectful opinion, correctly), the Queensland equivalent of $.24(7) of the English Judicature Act 1873 enlarged the circumstances in which a compromise may be enforced by order in the action compromised, that was only so because such an order is a remedy of the kind referred to in the section. McPherson Jd. did not decide the case before him on the basis that what was sought was nothing but a remedy in respect of a fresh cause of action in contract; nor should we so decide this case. 13. In summary: 1. Section 22 of the Federal Court of Australia Act must be construed as having an effect analogous to s.24(7) of the English Judicature Act 1873. 2. Section 24(7) and its Australian counterparts have been held to include, amongst other remedies, orders enforcing compromises of suits. 3. Section 22 should also be read as including such orders within its ambit. The objection as to power therefore fails. Counsel for the appellant also contended that if there was power, it was an inappropriate case in which to make an order, as a matter of discretion. It is difficult to imagine why; the compromise (which was effected by correspondence) was quite a simple one and no substantive reason was given for the appellant's failure to carry out his promise to pay the agreed sum. It was common ground that the contracts of sale had been abandoned. It is necessary to deal with three other arguments. The first is that there was no concluded agreement because the compromise was conditional upon a deed's being agreed 14. upon and settled. That is plainly not so and the matter requires no discussion. Counsel for the appellant also sought to draw a distinction between an accord executory on the one hand and an accord and satisfaction on the other. Here, it would seem clear enough that the agreement is in the latter category, but that is of no assistance to the appellant. The cases which appear to us to govern the matter do not confine the Court's power to enforce a compromise to instances in which the plaintiff has agreed to accept a promise, rather than performance of the promise, in discharge of a liability. Lastly, there was some discussion before us as to the effect of the decision of the High Court in Jackson v. Sterling Industries Ltd. (1987) 71 A.L.R. 457. Having given careful consideration to the various reasons there given, we have been unable to extract from them any proposition bearing upon the question in issue here. In our view, the appeal should be dismissed with costs. I certify that this and the 13 preceding pages are a true copy of the reasons for judgment herein of their Honours Mr Justice Pincus and Mr Justice Einfeld. ong Associate Dated: 21 April 1988 Counsel for the appellant: Mr A.J.H. Morris Solicitors for the appellant: Messrs Hawthorn Cuppaidge & Badgery Counsel for the respondent: Mr G.J. Gibson Solicitors for the respondent: Messrs Stubbs Bonutto Barbeler Grant Date of Hearing: 26.11.87