FEDERAL COURT OF AUSTRALIA Michael Hull & Associates Pty Ltd v Wood [2001] FCA 20 PRACTICE AND PROCEDURE – offer of compromise made under Order 23 of Federal Court Rules – application for leave to withdraw offer prior to expiry of the fourteen-day period fixed in O 23 r 5 of the Rules – action for infringement of copyright in design of "project home" – landowners have home built on their land in accordance with design – landowners make offer of compromise to applicant – action against landowners and builder –solicitor for applicant advises solicitor for landowners that once builder has been served, his client proposes to accept landowners' offer then pursue builder – landowners then appreciate possibility that builder may cross-claim against them for indemnity damages – offer has been made on erroneous assumption that acceptance of it would put an end to all potential liability of landowners – leave to withdraw offer of compromise granted. Federal Court Rules O 23 r 5 MICHAEL HULL & ASSOCIATES PTY LTD v JOHN WOOD & ORS N 1141 OF 2000 LINDGREN J 17 JANUARY 2001 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1141 OF 2000 BETWEEN: MICHAEL HULL & ASSOCIATES PTY LIMITED (ACN 000 366 629) APPLICANT AND: JOHN WOOD FIRST RESPONDENT JANE WOOD SECOND RESPONDENT PARMENTER-HOLLAND HAROLD CONSTRUCTIONS PTY LIMITED THIRD RESPONDENT JUDGE: LINDGREN J DATE OF ORDER: 17 JANUARY 2001 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The operation of Order 23 rule 8 of the Federal Court Rules be waived and that the rule not apply in respect of the application. 2. Leave be granted pursuant to Order 23 subrule 5(5) of the Federal Court Rules to the first and second respondents to withdraw the offer of compromise made by them to the applicant dated 3 January 2001 by 5.00 pm today, 17 January 2001. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1141 OF 2000 BETWEEN: MICHAEL HULL & ASSOCIATES PTY LIMITED (ACN 000 366 629) APPLICANT AND: JOHN WOOD FIRST RESPONDENT JANE WOOD SECOND RESPONDENT PARMENTER-HOLLAND HAROLD CONSTRUCTIONS PTY LIMITED THIRD RESPONDENT JUDGE: LINDGREN J DATE: 17 JANUARY 2001 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The substantive application in this proceeding is in respect of alleged infringement of the copyright of the applicant ("Hull") in the design of a "project home" known as the "Millennium Custom 'Prestige Inclusions'" design. The first and second respondents, Mr and Mrs Wood, are apparently the registered proprietors of Lot 3, 84 Marine Parade, Nords Wharf near Newcastle, on which, according to Hull's case, they have a house which has been constructed in accordance with the design. 2 The proceeding was commenced on 26 October 2000 and the application was supported by a statement of claim. The third respondent as named in the application and statement of claim was Parmenter-Holland Harold Constructions Pty Ltd ("Parmenter"). According to the statement of claim the same acts of infringement are alleged against all three respondents. Those acts of infringement are reproducing, or authorising or causing the reproduction of, the whole or a substantial part of the design in a material form both by drawing, or authorising or causing to be drawn, the plans of the house and by the actual building of the house. Apparently, Parmenter was sued as the actual builder of the house. 3 On the first return date, 7 December, I granted leave to Hull to discontinue against Parmenter and to add as a respondent, Design Built Pty Ltd ("Design Built"). Apparently, Hull had wrongly named Parmenter rather than Design Built as builder. Although no amended application or amended statement of claim has yet been filed, I understand that the pleading will remain the same subject to the change of identity of the builder. 4 Mr and Mrs Wood now seek, ex parte, by a notice of motion filed today in Court, leave under Order 23 subrule 5(5) of the Federal Court Rules to withdraw an offer of compromise which they made to Hull under Order 23 of the Rules. Order 23 subrule 5(5) provides that such an offer must not be withdrawn within 14 days after it is made unless the Court otherwise orders or the offer is replaced by an offer in terms more favourable to the offeree. 5 The background to the motion is quite simple. On 3 January 2001, Mr and Mrs Wood made an offer of compromise to Hull. In fact, their solicitors, Harris Wheeler, served it by facsimile transmission and through the Document Exchange on Messrs Warren F. Ball & Co., the solicitors for Hull. The offer stated that it would remain open until 19 January 2001 and that Hull might accept it by serving a notice of acceptance before 5.00pm on that day. That day is this coming Friday, today being Wednesday 17January. The offer having been made on 3 January, the 14-day period will not expire until midnight on 17 January and, therefore, the effect of the subrule is that it is not open to Mr and Mrs Wood to withdraw their offer until after midnight tonight. 6 The present application is made by Ms Stuckey-Clarke of counsel on instructions given to her by Matthew Smith, a partner at Harris Wheeler, by telephone to her at her home late yesterday afternoon. Ms Stuckey-Clarke contacted my Associate this morning for the purpose of having the motion listed. Mr Smith told Ms Stuckey-Clarke that because of a prior personal commitment he was not in a position to prepare an affidavit this morning as to the underlying facts which I will shortly mention. This has placed Ms Stuckey-Clarke in a somewhat awkward position. It is unsatisfactory that there is not even a facsimile affidavit before the Court. However, I have no hesitation in accepting Ms Stuckey-Clarke's assurance that Mr Smith did inform her of the matters referred to below, which she has reduced to writing in the form of written submissions. There is no doubt that, depending on exigencies, the Court may see fit in exceptional circumstances of urgency to make an order without supporting affidavit evidence. In the exceptional circumstances in the present case, in particular, the circumstance that further delay would render otiose the form of relief being sought, I will act on the unverified statement of counsel coupled with the offer of compromise itself which has been admitted into evidence as an exhibit. 7 Mr Smith instructed Ms Stuckey-Clarke that yesterday he had a telephone conversation with the solicitor for Hull who informed him that once Design Built was served, Hull would accept Mr and Mrs Wood's compromise offer and then pursue the proceeding against Design Built alone. Mr and Mrs Wood fear that Design Built may then cross-claim against them, Mr and Mrs Wood, for indemnity damages, on the basis, for example, of an implied warranty given by them to Design Built that they were entitled to authorise it to use the design in the building of the house. 8 Ms Stuckey-Clarke says that her instructions are that Mr and Mrs Wood made the offer of compromise on the mistaken assumption that, if accepted, their offer would bring the action to an end so far as they were concerned. She submits that the possibility of their being joined as cross-respondents betrays that assumption. 9 In various guises, the present situation is not an uncommon one, that is, that a person comes to an accommodation with a claimant against that person only to find that it remains open for other persons claimed against or yet to be claimed against, by the claimant, to seek indemnity from the first person, who had understood he or she was free of all potential liability as a result of the settlement reached. It is not difficult to accept that Mr and Mrs Wood made their offer under Order 23 on the assumption that upon its acceptance by Hull they would no longer be potentially liable to anyone as a result of the underlying facts. 10 In the result I propose to make the orders sought in Mr and Mrs Wood's notice of motion. When this matter is next before the Court on 6 February, I will raise with Hull's legal representative the question whether I should disqualify myself, having regard to the fact that it has been necessary for me to read the offer of compromise in order to deal with the present motion. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. Associate: Dated: 19 January 2001 Counsel for the first and second Respondents: Ms J. E. Stuckey-Clarke Solicitor for the first and second Respondents: Harris Wheeler Date of Hearing: 17 January 2001 Date of Judgment: 17 January 2001