FEDERAL COURT OF AUSTRALIA Tongue v Council of the City of Tamworth [2004] FCA 209 TERENCE RODNEY TONGUE v COUNCIL OF THE CITY OF TAMWORTH NG 425 OF 1998 ALLSOP J 23 MARCH 2004 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 425 of 1998 BETWEEN: TERENCE RODNEY TONGUE APPLICANT AND: COUNCIL OF THE CITY OF TAMWORTH RESPONDENT JUDGE: ALLSOP J DATE OF ORDER: 23 MARCH 2004 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Within 7 days the parties file an agreed draft minute of order conformable with these reasons under Order 29 of the Federal Court Rules. 2. In default of agreement within 7 days as to the form of order each party, within 14 days, file such a draft minute of order. 3. The matter stand over to a date to be fixed for the making of orders, any argument thereon and directions. 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 NG 425 of 1998 BETWEEN: TERENCE RODNEY TONGUE APPLICANT AND: COUNCIL OF THE CITY OF TAMWORTH RESPONDENT JUDGE: ALLSOP J DATE: 23 MARCH 2004 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This is a representative proceeding brought under Part IVA of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act). 2 In 2002, the applicant and the respondent agreed to settle the proceedings. On 23 and 24 April 2003, having given directions for the filing of evidence, I began to hear an approval hearing of that settlement. By that time, objectors, being members of the Class, had expressed their dissatisfaction with the settlement, after it had become known, through legal representatives separate from those appearing for the applicant. In April 2003, I proceeded with the evidence to a point at which it was necessary to adjourn the hearing to allow for the filing of further evidence to be completed by August 2003. I fixed further days to complete the approval hearing on 13 (and if necessary 14) October 2003. 3 Difficulties arose with the implementation of some of my orders. Further directions were made in July 2003. On 15 August 2003, further directions were made extending the time for filing evidence to September 2003 and providing for a regime for access to documents. 4 On 9 September 2003, I was informed by letter to my associate from the solicitor for the respondent (the sending of which letter was approved by the solicitors for the applicant) of the following: As you will also be aware, a number of the members of the class represented by the Applicant have objected to approval of the Agreement. In support of their objection, a large amount of evidence has been filed and served by the "Objectors". Upon review of their evidence, and material served by the applicant, our client has taken a view about the claims now being made by the class members and the extent of the opposition to the Agreement and has terminated the Agreement. It seems to us that the most appropriate way forward is to now have the matter re-listed so that our client might formally advise the Court of its position and seek to have the further dates for the Approval Hearing vacated. 5 The applicant contested these assertions. It said that it had a binding contract of settlement, subject to judicial approval. 6 I stood the matter over to 26 September 2003 for argument as to the disposition of the matter. On that day I made orders for the pleadings to be amended to reflect these assertions and for evidence to be filed dealing with these contract issues the timetable for which was to be completed by late November. I said I would be minded to hear these aspects of the case as a separate issue under Order 29. On 1 December 2003, I set a separate issue down for trial on 10 December 2003. 7 On 10 December 2003, I heard argument on the form of pleadings then filed, relevantly contained in annexures 1A, 1B and 1C of my reasons for judgment on the amendment application [2004] FCA 33. 8 The separate issue was identified in a notice of motion filed in Court on behalf of the applicant on 1 December 2003. That notice of motion sought the following orders: 1. The Court determine as a separate question under Order 29 rule 2 whether the Respondents have [sic: respondent has] validly terminated the agreement to settle the proceedings as alleged in paragraphs 22 to paragraph 26(g) of the Respondents [sic: Respondent's] amended defence. 2. Costs 9 As I explained in my reasons of 29 January 2004, the debate on 10 December 2003 led to an amendment to the defence (which I allowed) and which is contained in annexure 2 to my reasons of 29 January 2004. 10 The issues tendered on the notice of motion are as follows: a) Whether on 4 September 2003 the respondent lawfully terminated the written contract to settle the proceedings entered on 17 July 2002. b) Whether there were implied terms of the settlement agreement as set out in sub-paragraphs 26(a)(i), (ii) and (iii) of the defence, based on the matters adjacent to (A) and (B) in the particulars provided in the defence. c) Whether the matters in sub-paragraphs 26(b)(i), (ii), (iii) and (iv) were matters of common contemplation or common assumption at the time of entry into the settlement agreement. d) Whether the Common Assumption as defined in sub-paragraph 26(b)(iv) was an implied term of the settlement agreement. e) Whether on or about the date of the entry into the settlement agreement the applicant impliedly represented to the respondent the matters referred to in sub-paragraphs 26(d)(i), (ii) and (iii) (they being reflections of the implied terms otherwise pleaded in sub-paragraphs 126(a)(i), (ii) and (iii)). f) Whether the respondent was induced to enter the settlement agreement relying on the matters in sub-paragraphs 26(a) to (d). g) Whether the conduct of certain class members (the objectors) between the date of the settlement agreement and 4 September 2003 was a breach of the settlement agreement. h) Whether the representations set out in subparagraphs 26(d)(i), (ii) and (iii) were false or misleading. i) Whether the applicant or the class members have repudiated the settlement agreement, by the conduct adjacent to (A) and (B) under sub-paragraph 26(h). j) Whether the parties are discharged by frustration from their obligations generally or by operation of the Frustrated Contracts Act 1978 (NSW). The pleaded case 11 The claims of the applicant are as follows. 12 In the 1950s the respondent Council constructed the Dungowan Dam and a gravity diversion pipe for supply of water to the City of Tamworth. 13 From 1958 the respondent entered into agreements with landholders over whose land the pipe passed, including the applicant. 14 The applicant says that terms of these agreements included one that the respondent would supply water from the pipe suitable for domestic and stock watering purposes. 15 The applicant says that in 1993 the respondent ceased scouring, flushing and otherwise maintaining the pipe, and that from 1994 the water supplied was not fit for domestic and stock watering purposes. 16 The applicant says that from 1 November 1994 the respondent, without consent, purported to restrict the water supplied to domestic purposes (other than for human consumption) and stockwatering. 17 The applicant said that this conduct was a breach of contract, exhibited a breach of duty of care, exhibited a breach of statutory duty by an asserted failure to comply with s 17B(c) of the Water Act 1912 (NSW) and amounted to conduct that was misleading or deceptive or likely to mislead or deceive under the Trade Practices Act 1974 (Cth) (the TPA). 18 Further allegations of misleading and deceptive conduct were made based on representations made in August 1997 in a policy paper entitled "Dungowan Dam Gravitational Main Issues and Policy Paper". 19 Further, the applicant relies on implied terms based on the application of s 71(1) and (2) of the TPA, and says that from May 1995 to date and continuing the respondent has supplied water that was not of merchantable quality or reasonably fit for purpose. (This, in addition to the jurisdiction of the Court attracted by the assertion of a contravention of s 52 of the TPA, provides a basis for jurisdiction of this Court by reason of s 39B(1A)(c) of the Judiciary Act 1903 (Cth).) 20 The claim for relief included a mandatory order that the respondent provide consumers with potable water and/or water fit for human consumption and a claim for damages. 21 Particulars of these allegations were sought and supplied. The particulars of a claim for loss and damage were given in paragraphs 27.1 of a letter dated 30 June 1998 from the applicant's solicitors to the respondent's solicitors as follows: Damage to pipes, household fittings, fixtures, clothing including discolouration thereof; gastric problems, skin irritations, nausea, chlorine burns, and staining and ruining of various items of property. In so far as stock were concerned alternative water supplies had to be installed, as was the case with household consumption, to cater for the breaches by the Respondent. 22 Various statements were filed from 1998 to 2000 in the proceedings by or on behalf of the applicant as follows: (a) a statement of the applicant dated 1 September 1998 This statement recounted the history of usage of water and communications with the respondent. Various expenses were identified as caused by the asserted lack of quality of the water: the purchase of a water tank for the storage of substitute water, the placement of additional piping and the installation of pressure pumps. (b) a statement of a Mr Haworth dated 2 September 1998 The statement dealt with, amongst other things, expenses caused by the asserted lack of quality of the water, being the purchase of a filter system, damage to clothing washed, the purchase of a rainwater tank, various health problems said to be connected with the water and the construction of dams. (c) a statement of a Mr Gooch dated 3 September 1998 The statement dealt with the consequences of the asserted lack of water quality: the installation of a pressure reducer, various health problems in his family, the damage to tiles in the bathroom from staining, the affectation of milk supplied to purchasers through sediment in the milk leading to the rejection of some milk and a reduction in price for milk sold, the cost of installation of a deep well pump and the build up of sediment in pipes at his dairy. (d) a statement of a Mr Bligh dated 3 September 1998 The statement dealt with the consequences of the asserted lack of water quality being the installation of a filter, the replacement of a pipeline, the installation of a water tank and the staining of bathroom tiles. (e) a statement of a Mr Kelleher dated 27 January 1999 Mr Kelleher is a leading objector to the settlement. Mr Kelleher's statement was some 121 pages long. I do not propose to summarise it other than to say that in paragraph 428 the following damages claims are set out in the statement. Damages claimed by my company and or myself as a result of Council's breach of contract are but not limited to the following: a. Loss of rent from Glenholme cottage. b. Connection costs to the treated town supply serving Farrer College. c. Replacement of all contaminated internal house pipes from the meter to the their point of discharge. d. Loss of property value. e. Recompense for overcharged water accounts due to air passing through meters and Council's failure to reduce the account in consideration for allowing the pipeline to traverse the property. f. Replacement costs of hot water system. g. Cost of installing one rainwater tank, tank stand and associated plumbing. h. Pain, inconvenience, suffering and anguish caused to my late wife Barbara and myself when Council knowingly and recklessly supplied water, which was likely to inflict fatal injury to my wife. It should be noted that councillor Ester Halliday was well known to my wife as a friend and she was well aware that Barbara was terminally ill and likely to be seriously effected by the contaminated water. I am also aware that all other councillors and the General Manager were well aware of Barbara's condition. i. Damage to household fittings and fixtures. j. Damage to clothing.. It is to be noted that Mr Kelleher claimed loss of property value (see d above). (f) Statement of a Mr Smith filed 26 April 2000 Mr Smith was the local publican. He described staining from the water as a problem. Fixtures and fittings at the hotel became stained (from washing and content). He paid for the cleaning out and recommissioning of a well. He replaced fittings and fixtures. He replaced polythene in a pipe. (g) On 22 March 1999, an expert report prepared by A G C Woodward-Clyde Pty Ltd was filed. The report dealt with water quality guidelines, measured water quality, comparison of measured water quality with guidelines, risks to domestic use and sources of contamination. The conclusion of the report was that the water quality from the Dungowan pipeline fails regularly to meet nationally and New South Wales accepted guidelines and as such it represented a human health and aesthetic risk to the domestic users. (h) On 8 April 1999 another expert report was filed on behalf of the applicant, this one prepared by Hughes Trueman Reinhold. This expert report dealt with the pipeline history, its construction, its maintenance and aspect s of its water quality. (i) Various statements were filed in 2000 in reply to expert reports filed by the respondent, both lay and expert. Evidence in December 2003 23 Mr Phillip Lyon, the General Manager of the respondent, filed an affidavit sworn 30 October 2003. He was not cross-examined. I accept his evidence. He has been since 21 November 1999 the person responsible for giving instructions to the respondent's legal representatives. He was familiar with the evidence filed in the case and has been kept apprised of the issues. He indicated that it was his understanding that the damages in the case were confined to those particularised in paragraph 27.1 of the applicant's solicitors' letter dated 30 June 1998 and the statements of the applicant Mr Hayworth, Mr Gooch, Mr Bligh, Mr Kelleher and Mr Smith referred to above. 24 In relation to Mr Kelleher's statement of 3 February 1999, he said that he had read Mr Kelleher's complaints about his decision not to rent his property from 1994, purportedly resulting in a loss of income to his company in addition to Mr Kelleher's claim for loss of property value. Mr Lyon says that he dismissed these claims as inconsistent with the general subject matter of the class members' claims. He says that he considered Mr Kelleher to be an "agitator" within the class, having read his considerable correspondence to the respondent. Mr Lyons said that he believed that this was the unrealistic claim of one member of the class represented by the applicant. 25 At this point, a number of things should be noted. First, that the particulars provided by paragraph 27.1 of the applicant's solicitors' letter did not include damage of the kind referred to by Mr Kelleher in his statement of February 1999. However, in modern litigation with the exchange of statements such as that of Mr Kelleher there could be little force in an assertion that these matters could not be argued to be a form of particulars bounding the case. Secondly, Mr Lyon recognised that Mr Kelleher was, to use his words, an "agitator". However, thirdly, Mr Lyon (who was not cross-examined on the affidavit) formed his own view as to the atypical status of Mr Kelleher. 26 Mr Lyon also says that he dismissed as inconsistent with the subject matter of the class members claims the complaints by Mr Gooch, the dairy farmer, of sediment problems in his milk. Mr Lyon believed that Mr Gooch's claim for commercial losses was an unrealistic claim of one member of the class. 27 Mr Lyon's evidence of his understanding of the limited nature of the class members' claims for damages was said to be reinforced by joint field inspection reports which were documents created by participants in joint visits to all properties of the complaining members of the class as well as others. Mr Lyon said that understood from these field inspection reports that the claims for damages were limited to staining of clothes, staining of tiles and bathroom facilities, alleged damage to plumbing, to dishwashers, to sinks, to showers and to like equipment. 28 A mediation took place in 2002. I do not propose to deal with aspects of it, save as are essential for the disposition of this matter. 29 Mr Lyons said that the respondent's representatives were instructed by the respondent Council to agree to settlement only on the basis that the terms of settlement, amongst other things, resulted in a full and final disposal of the proceedings as well as being financially and socially responsible and were not only for the benefit of the applicant and class members but also equally for residents of the Dungowan Valley not party to the action. 30 Mr Lyon's said that as at 17 July 2002 (the date of the entry into the settlement agreement) he believed that Mr Kelleher might object to a settlement of the proceedings. He also believed that it was possible that John Hunt, Geoffrey Vere Reed and William Frederick Colin Hoad may support Mr Kelleher if he chose to object to the terms of settlement. Mr Lyon said that he otherwise did not suspect nor was he advised by the applicant that there would be any significant objections to a settlement of the proceedings. I conclude that Mr Lyon anticipated the real possibility of objection by more than one member of the class, one of whom (Mr Kelleher) he characterised as an "agitator". 31 On 17 July 2002, the parties held the mediation and reached an agreement. A draft settlement agreement was prepared which Mr Lyon read and which he understood to be no wider than the pleadings, particulars and evidence on damages detailed in the various statements filed (having, as he said, the view that some of those damages claims were unrealistic and unrepresentative). 32 As a consequence of his understanding he supported the respondent's representatives' recommendation to the Council that he be authorised to sign the settlement agreement. He later approved the settlement agreement on behalf of the respondent. 33 The agreement of July 2002 was short. The recitals to the agreement included recital E which was in the following terms: The Council and Class subject to the approval of the Court, agreed to settle the claims made in the Statement of Claim on the terms set out in this agreement. [underlining added] 34 The settlement was of the pleaded case. The terms of the settlement agreement included the payment of not negligible sums of money to the class and to the solicitors for the applicant. It is unnecessary to identify the amount of money lest the hearing of the case proceed in due course. The agreement in terms (clause 1.1.2) purported to bind the Council and the Class to a release in terms set out in an annexure (clause 1.1.3). The agreement also purported to bind the Council and the Class to terms and conditions of water supply set out in an annexure. Clause 1.3 provided that the legal advisers for the Council and the applicant would use their best endeavours to obtain the approval of the Court to the proposed settlement as soon as possible. Clauses 3.2 and 3.3 entitled "Entire Agreement" and "Further Acts", respectively were in the following terms: 3.2 This document contains everything the parties have agreed on in relation to the matters it deals with. No party can rely on an earlier document, or anything said or done by another party, or by a director, officer, agent or employee of that party, before this document was executed, save as permitted by law. … 3.3 The parties will promptly do and perform all acts and things and execute all documents as may from time to time be required, and at all times will act in good faith, for the purposes of or to give effect to this document. 35 Mr Lyon then proceeded to describe what he observed after signing the settlement agreement. In particular, he referred to exhibits behind tabs 21-69 in exhibit PLL 1 to his affidavit. These are further affidavits, statements, letters of claim and supplementary letters of claim from various people within the class. Mr Lyon summarised those further claims (to which he referred as the Documentation) as claims for amongst other things: (i) loss of income as a result of alleged destocking; (ii) loss of rental income on properties; and/or (iii) diminution of property values. 36 Mr Lyon said that the Documentation included claims that he never considered or that he was never made aware of prior to the mediation. He claimed that the Documentation contained claims which exceeded the extent and nature of damages that were represented to be owing to the class members prior to entering into the settlement agreement. By that he meant, I would understand it, that the Documentation contained claims exceeding what he understood to be the nature of the damages from the evidence then present at the time of the entry into the settlement agreement. He said that had he been made aware of the extent and nature of the damages claimed in the Documentation he would not have recommended to the respondent that it enter into the settlement agreement and he said that the respondent would not have authorised him to do it. He said that the Documentation contained claims for damages that exceeded anything he was anticipating or expected as a result of his reading the material available up to the mediation and considering the discussions with the applicant and his legal advisers prior to the mediation. 37 On or about 29 August 2003, Mr Lyon read a letter of that date from the applicant's solicitors which indicated that they were going to file with the Court documentation in support of claims made on behalf of fifty-two group members (counting apparent husband and wife or other groups parties as individual claimants). Of those fifty-two claimants some twenty-two were objectors. Mr Lyon said that this exceeded his expectations as to the level of opposition to the settlement. 38 The respondent tendered correspondence which included letters from the solicitors for the applicant which indicated that as early as January 2001, when a hearing of the matter was contemplated, the witnesses that the applicant proposed to call were only eight in number, including two experts. This reinforces the basis for Mr Lyon's view that the large number of witnesses in 2003, many of whom have become objectors was a significant change from the position that had obtained up to the entry into the settlement agreement in July 2002. 39 It is convenient at this point to identify what some of the evidence shows as to the extent of loss now claimed. There is now evidence filed on behalf of the class which reveals loss of income as a result of destocking cattle in the order of $1.9 million. Further, there is material claiming loss of rental income in the order of somewhat over $400,000 and evidence of some diminution in property value (with not all evidence complete), in the order of over $50,000. 40 The claim now appears to be one in which damages in the sum of over $2 million are claimed. These claims can be fairly said to dwarf the claims previously made as to financial loss. 41 Continuing with the evidence, an affidavit of the applicant sworn 25 November 2003 was read. Little of this affidavit was relevant. None needs to be referred to at this point. 42 The applicant also relied on the affidavit of Peter John Long, the solicitor for the applicant, sworn 26 November 2003. The affidavit is partly submission and partly evidence. However, it helpfully points out some pertinent matters. First, that the claim in the statement of claim was for damages, amongst other things. Secondly, that in the affidavit of a Mr Reynolds sworn 7 January 2000 and filed on 3 February 2000 Mr Reynolds stated that, amongst other things, to provide totally potable water to the consumers connected to the pipeline it would be necessary to install a full water treatment plant at the dam costing $15-$20 million. Thirdly, Mr Long pointed out that the joint inspections which led to the joint inspection reports were not carried out solely to limit and quantify damages. 43 Consequent upon the amendment which I allowed in January 2004, Mr Rowe, of counsel, indicated that his client wished to rely upon the affidavits of the applicant and Mr Long sworn on 15 January 2004 and 17 January 2004, respectively. Mr Hennessey indicated at a directions hearing that no cross-examination was required of these gentlemen on these further affidavits. I therefore take these further affidavits as read. In them, Mr Tongue, the applicant, said that on 17 July 2002 he did contemplate and assume that the pleadings and particulars filed and served before 17 July identified the nature and extent of the dispute. However, he said that as at 17 July 2002 he did not contemplate and assume the matters set out in sub-paragraphs 26(b)(ii), (iii) and (iv), those matters being that the proposed settlement would finalise the dispute with the respondent once and for all without the prospect of any further litigation between any member of the Class and the respondent concerning quality of water, that the respondent would only be bound to settle the proceedings in the manner agreed if the dispute between the parties to the controversy remained as identified by the pleadings, particulars and evidence filed before 17 July 2002 and there was no significant or substantial opposition to the settlement agreement, and that if the dispute extended beyond the identified controversy or there was any significant or substantial opposition to the settlement agreement the respondent would not be bound to settle the proceedings. Mr Tongue then described some conversations at the mediation which included one in which Mr Rowe said that there were group members led by Mr Kelleher who would oppose the mediation and who would oppose any agreement reached and that there would be problems having everyone sign the water supply agreements. It is this conversation one assumes which led to recital G in the settlement agreement to the following effect: The Council asserts that the legal representatives of the Class have authority to enter into this agreement so far as it relates to the Water Supply Agreement. Mr Tongue says that at no time at the mediation did he say or imply what opposition there would be to the settlement. He says that there was definitely some discussion that there would be opposition. 44 The affidavit of Mr Long sworn 17 January 2004 was to the effect that he did contemplate and assume on 17 July that the pleadings and particulars filed and served identified the nature and extent of the dispute but he did not contemplate and assume the matters set out in sub-paragraphs 26(b)(ii), (iii) and (iv) of the amended defence. Resolution of the issues 45 I will first deal with the alleged representation in subparagraph 26(d). I do not think it can be successfully asserted that because of the terms of the statement of claim, the particulars supplied and the correspondence between the parties as well as from the other matters particularised in paragraphs (A) and (B) under subparagraph 26(d) that the applicant made any representation of the kind set out in subparagraphs 26(d)(i), (ii) and (iii). Naturally, it goes without saying that parties to a settlement of litigation generally hope to resolve all their disputes. In most cases, there is little point in seeking to settle proceedings without seeking to settle the totality of the proceedings. However, Part IVA proceedings are somewhat special. The applicant is a litigant not only for himself but for others. It was clear in the circumstances here that there could well be objectors. Mr Lyon thought Mr Kelleher an "agitator". Mr Lyon thought that Mr Kelleher had allies. There was some discussion at the mediation of opposition. Mr Lyon made assumptions about the extent of any difficulty which may have not been unreasonable. However, they did not arise from any representation from Mr Long or Mr Tongue. Their silence did not convey any positive statement. I dismiss the claim based on the asserted representations. 46 The implied terms as originally pleaded should also be rejected. The terms set out in subparagraph 26(a)(i), (ii) and (iii) were said to be founded on the same facts as were the representations: the matters adjacent to paragraphs (A) and (B) immediately under subparagraph 26(d). There is no ground to assert that there was any implied warranty as to the extent of the claim. The matters to which I have already referred above make that plain. Nor was there any ground to conclude that there was a contractual warranty that there would be no significant or substantial opposition. There was no express warranty. Mr Tongue's evidence in his affidavit of 15 January 2004 indicated that there was some statement as to the likelihood of opposition. Mr Lyon, of course, was already aware that there could be opposition. The particulars to the damage claimed did include, at least in Mr Kelleher's evidence, loss of value. It may be that Mr Lyon was being reasonable in his views about this kind of evidence. However, in my view, it cannot be concluded in my view, that there was any warranty that there would be no significant or substantial opposition by Class members. 47 Likewise there was no warranty that upon approval by the Court of the settlement agreement all issues and disputes would be resolved between the respondent and the Class members. This no doubt was to a degree a desired outcome and some may have assumed it to be the case. There is no foundation, however, for any contractual warranty. 48 Therefore, the matters in subparagraph 26(a) do not form the foundation of any defence. 49 The respondent has stronger arguments, in my view, in relation to subparagraph 26(b). The evidence up to July 2002 was in fairly limited compass. It would appear that at some time earlier in 2001 the applicant was prepared to go to a hearing on this limited evidence. To a degree the parties probably hoped that the settlement would be one which resolved the issues between the class and the respondent Council. However, as I have said, the respondent (and I would infer, the applicant) knew that Mr Kelleher might be a problem. They also knew that he may be able to elicit some support. The characterisation of him by Mr Lyon as an agitator rather reflected the view of Mr Lyon that Mr Kelleher might garner support for any opposition. 50 Whilst I am, to a degree, sympathetic to the respondent in its belief that in some fashion the case has changed, when one analyses the matter, whilst the evidence now filed goes beyond the particulars previously provided, it can be seen to be evidence of damage flowing from the complaints. To the extent that it is not a legitimate consequence of the conduct complained of it will not found relief. To the extent that it can be seen to be connected to the conduct complained of it may found relief. If the parties have legitimately settled this matter in a fashion which can bind the Class, then pursuant to the law of contract as affected by Part IVA of the Federal Court Act, (should the Court approve the settlement) there either will or will not be a legally binding regime on some or all of the Class. 51 The agreement was entered against the back drop of the operation of Part IVA of the Federal Court Act. Some opposition was thought to be possible. What was not anticipated was the scope and extent of both the opposition and the size of the claim underlying the opposition. 52 Whilst Mr Lyon has indicated that he, in effect, had the assumption set out in subparagraph 26(b), Mr Long and Mr Tongue denied that they had the same assumption. This, of course, is to examine the assumption subjectively. 53 In all the circumstances, I think it was probably reasonable in July 2002 for parties to think that the dispute would not, in all likelihood, go substantially beyond the sorts of matters reflected in the then existing evidence. However, no party who has any experience of litigation could necessarily be surprised by a burgeoning case brought after the interposition of different solicitors advising clients who are apparently unhappy with the outcome of a representative proceeding run by other solicitors. The parties had the anticipation of possible objection. There was on record within the evidence already filed evidence going beyond the kinds of matters set out in paragraph 27.1 of the applicant's solicitors' letter of 30 June 1998. 54 Whilst I can conclude that if someone had the view, as Mr Lyon did, of the matters set out in subparagraph 26(b) he or she would not be acting unreasonably, I do not think I can conclude on the objective evidence that there was a plain common assumption (whether viewed subjectively or objectively) which had contractual force of an implied term to the extent and nature there identified. 55 A breach and repudiation is also alleged against the applicant. I do not think that there is any basis to conclude that the applicant's conduct is in breach of contract. Neither he nor his solicitors have evinced any intention not to be bound by the contract. Indeed, they plead the binding nature of it. 56 The contract was with the applicant. The agreement in terms seeks to bind the class; but only the applicant is a party. The effect of the agreement on the binding of the class was anticipated through the operation of the Federal Court Act. The agreement as a matter of contract did not purport to make members of the class parties. The members of the class, however, were group members who had not opted out pursuant to s 33J of the Federal Court Act. By their actions in filing further evidence and opposing the settlement the members of the Class who wished the matter to run to a hearing or at least not be settled on these terms are not acting as parties to a contract. Their conduct does not evince any intention not to be bound as parties to the settlement agreement. Their conduct is not a repudiation by the applicant of the settlement agreement. 57 Therefore, subject to the question of frustration, in my view, none of the matters set out in paragraph 26 is a defence. 58 As to frustration, the Frustrated Contracts Act 1978 (NSW), made applicable by both ss 79 and 80 of the Judiciary Act 1903 (Cth), regulates the consequences of frustration. 59 The question arises: Was the settlement contract frustrated by the significant growth in the evidence as to damage, its widening (at least beyond the evidence other than Mr Kelleher's assertion of loss of property value) and by the extensive objection of members of the Class? 60 The test as to whether a contract has been frustrated was stated authoritatively by the High Court in Codelfa Constructions v State Rail Authority of New South Wales (1982) 149 CLR 337. 61 Mason J (as his Honour then was) said at 360: The critical issue then is whether the situation resulting from the grant of the injunction is fundamentally different from the situation contemplated by the contract on its true construction in the light of the surrounding circumstances. 62 Stephen J in Brisbane City Council v Group Projects Pty Ltd (1979) 145 CLR 143 at 162-3 said: How dramatic must be the impact of an allegedly frustrating event? To what extent must such an event overturn expectations, or affect the foundation which the parties contracted, or, again, how unjust and unreasonable a result must flow or how radically different from that originally undertaken must a contract become (to use the language of some of the various expositions), before it is frustrated? These difficulties are inevitable when a broad principle must be applied to variable situations. 63 These are the questions which must be answered. Hardship is not enough: Scanlan's New Neon Ltd v Tooheys Limited (1943) 67 CLR 169. 64 The question is whether there is a fundamental difference between the contemplated and actual situations, which in turn depends upon the degree to which the benefit of performing the contract has been diminished by the event in question. 65 I do not think that there has been frustration here. The parties anticipated some objection or the real possibility of some objection. They have received more objections than they thought they would. The parties thought the damages were confined to particular amounts. There was some particularisation of a broader damage, which the parties thought, perhaps reasonably, would not reflect the claim. Unfortunately, that expectation has not been borne out. The parties' contract deals with an inherently unpredictable subject matter: litigation. The approval of the Court was required. It was anticipated that there would be some objection, fuelled perhaps by someone who was seen as an agitator. That possibility has arisen in a way perhaps not anticipated by the parties, but nevertheless, is a circumstance which could not be seen to be impossible to predict. 66 Also, importantly, the contract is made in the context of Part IVA of the Federal Court Act. On the approval hearing the objectors' evidence will be considered. If the settlement is thought to be inappropriate for relevant considerations I will not approve it. One of the considerations to which the Court will direct itself is the legitimacy of the claim within the framework of the proceedings. These objectors may or may not be bound by any contract between the applicant and the respondent if approved. That will be something for consideration in the approval hearing. 67 It was apparent that there could be some objection. It was apparent that there was at least one "agitator". If the parties had wished to deal with the real possibility of the intervention of Mr Kelleher, an "agitator", and any other objectors, beyond an agreement to support and propound the settlement agreement in clauses 1.3 and 3.3 of the agreement, they could have drawn a clause accordingly. I do not think, in all the circumstances, that the nature of the contract and the situation arising from the further evidence of the members of the class and their attitude to the settlement had so radically altered as to be beyond the situation contemplated objectively by the existing contract. 68 In these circumstances I do not think that it can be concluded that any of the matters pleaded in paragraph 26 of the defence form a foundation for the legitimate termination or discharge of the contract avowedly entered in July 2002. 69 I will direct that the parties bring in orders conformable with these reasons under Order 29 of the Federal Court Rules. 70 Subject to any application for leave to appeal from the orders that I make, I propose to continue with the approval hearing at the earliest opportunity. I certify that the preceding seventy (70) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Allsop. Associate: Dated: 23 March 2004 Counsel for the Applicant: Mr J E Rowe Solicitor for the Applicant: Long Howland Houston Counsel for Mr S Kelleher and others: Mr T F Robertson SC Solicitor for Mr S Kelleher and others: Woolf Associates Counsel for the Respondent: Mr D P F Officer QC with Mr J M Hennessy Solicitor for the Respondent: Phillips Fox Date of Hearing: 10 December 2003 Date of Judgment: 23 March 2004