Select any passage to save a personal note with optional tags.
FEDERAL COURT OF AUSTRALIA
Needlework Warehouse Pty Ltd v Chansonette Pty Ltd [2005] FCA 1525
PRACTICE AND PROCEDURE – Federal Court has jurisdiction to enforce contract which settles proceeding before the Court – appropriate to do so on a motion brought within the proceeding.
FEDERAL JURISDICTION – Federal Court has jurisdiction to enforce contract which settles proceeding before the Court – appropriate to do so on a motion brought within the proceeding.
CONTRACT – contract settling a proceeding pending before Federal Court – contract made by correspondence between parties' solicitors – whether parties contemplated that the agreement would not become enforceable until written agreement signed.
CONTRACT – 'without prejudice' – does not make correspondence inadmissible to prove that it constituted a concluded contract.
WORDS AND PHRASES – 'without prejudice' – does not make correspondence inadmissible to prove that it constituted a concluded contract.
Federal Court of Australia Act 1976 (Cth) ss 19, 22
Judiciary Act 1903 (Cth) s 39B(1A)
Trade Practices Act 1974 (Cth) s 86
Re Wakim; Ex parte McNally (1999) 198 CLR 511 followed
LNC Industries Ltd v BMW (Australia) Ltd (1983) 151 CLR 575 followed
Wenkart v Pantzer (No 3) (2004) 135 FCR 422 referred to
Darling Downs Investments Pty Ltd v Ellwood (1988) 18 FCR 510 followed
Reid v Interarch Australia Pty Ltd [2000] FCA 1328 followed
We Two Pty Ltd v Shorrock (No 2) [2005] FCA 934 followed
Jarraman Arts Aboriginal Corporation v Tourism Australia (No 3) [2005] FCA 983 followed
Pallas v Finlay (1985) 61 ALR 220 distinguished
Macteldir Pty Ltd v Dimovski (2003) 132 FCR 492 distinguished
Fencott v Muller (1983) 152 CLR 570 referred to
Minister for Immigration & Multicultural & Indigenous Affairs v SZANS (2005) 141 FCR 586 cited
Bank of Western Australia Ltd v Commissioner of Taxation (1994) 55 FCR 233 cited
Cooper v Commissioner of Taxation (2004) 139 FCR 205 cited
Roberts v Gippsland Agricultural & Earth Moving Contracting Co Pty Ltd [1956] VLR 555 followed
McLaren v Schuit (1983) 33 SASR 139 followed
General Credits (Finance) Pty Ltd v Fenton Lake Pty Ltd [1985] 2 Qd R 6 followed
Donellan v Watson (1990) 21 NSWLR 335 followed
Walker v Wilsher (1889) 23 QBD 335 cited
Tellerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93 cited
Bentley v Nelson [1963] WAR 89 cited
Tomlin v Standard Telephones and Cables Ltd [1969] 1 WLR 1378 cited
Rush & Tompkins Ltd v Greater London Council [1988] 3 WLR 939 cited
Quad Consulting Pty Ltd v David R Bleakley & Associates Pty Ltd (1990) 27 FCR 86 cited
Cedenco Foods Ltd v State Insurance Ltd [1996] 3 NZLR 205 cited
Masters v Cameron (1954) 91 CLR 353 referred to
McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 referred to
NEEDLEWORK WAREHOUSE PTY LIMITED & ORS v
CHANSONETTE PTY LIMITED & ANOR
NSD 1302 of 2003
LINDGREN J
31 OCTOBER 2005
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NSD 1302 OF 2003
BETWEEN: NEEDLEWORK WAREHOUSE PTY LIMITED
(ACN 101 863 709)
FIRST APPLICANT/CROSS RESPONDENT
ALAN JAMES MEIER
SECOND APPLICANT
TANCOT PTY LIMITED
(ACN 059 311 278)
THIRD APPLICANT
AND: CHANSONETTE PTY LIMITED
(ACN 092 507 938)
FIRST RESPONDENT/FIRST CROSS CLAIMANT
WILLIAM LOWE EDGE
SECOND RESPONDENT/SECOND CROSS CLAIMANT
JUDGE: LINDGREN J
DATE OF ORDER: 31 OCTOBER 2005
WHERE MADE: SYDNEY
THE COURT DECLARES THAT:
On or about 2 August 2005 the first applicant/cross respondent ('Needlework'), the second applicant ('Mr Meier') and the third applicant ('Tancot') of the one part entered into a contract with the second respondent/second cross claimant ('Mr Edge') of the other part whereby it was agreed that:
(1) Mr Edge would pay to Needlework, Mr Meier and Tancot, $900,000 as follows:
(a) $100,000 within 28 days of the date of settlement;
(b) $100,000 within 56 days of the date of settlement;
(c) $100,000 within 84 days of the date of settlement;
(d) the balance of $600,000 within 4 months after the date of settlement.
(2) Upon settlement, Needlework, Mr Meier and Tancot would execute and deliver a release in favour of Mr Edge of all causes of action set up against him in the proceeding or arising out of the circumstances leading up to, or associated with, the making of contracts of purchase the subject of proceeding NSD1302 of 2003 in this Court ('the contracts'), including a release of Mr Edge from the covenant in restraint of trade given by him;
(3) Upon settlement, Mr Edge would execute and deliver a release in favour of Needlework, Mr Meier and Tancot of all causes of action arising out of the circumstances leading up to, or associated with, the making of the contracts, including a release of the claim in respect of the agreement relating to consultancy services, the subject of Mr Edge's cross-claim against Needlework;
(4) Upon settlement, Mr Edge would execute and deliver, in favour of Needlework, Mr Meier and Tancot, securing payment to them of the amounts totalling $900,000, a charge over Lot 2 DP 803097 at Somersby, the subject of Folio 2/803097 ('the Property'), title to which was to be unencumbered, including a term that Needlework, Mr Meier and Tancot would be at liberty to lodge a caveat against the title to the Property, in respect of their equitable interest as chargees;
(5) Upon settlement, the proceeding and cross-claim would be dismissed with no order as to costs;
And that once the first three instalments totalling $300,000 were paid,
(6) Needlework would assign (and deliver) the trailer and remaining stock to Mr Edge;
(7) Needlework would assign to Mr Edge the registered business name, 'Leisurehouse'.
THE COURT ORDERS THAT:
The proceeding be stood over to 9 November 2005 at 9.30 am for 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 NSD 1302 OF 2003
BETWEEN: NEEDLEWORK WAREHOUSE PTY LIMITED
(ACN 101 863 709)
FIRST APPLICANT
ALAN JAME MEIER
SECOND APPLICANT
TANCOT PTY LIMITED
(ACN 059 311 278)
THIRD APPLICANT
AND: CHANSONETTE PTY LIMITED
(ACN 092 507 938)
FIRST RESPONDENT
WILLIAM LOWE EDGE
SECOND RESPONDENT
JUDGE: LINDGREN J
DATE: 31 OCTOBER 2005
PLACE: SYDNEY
REASONS FOR JUDGMENT
INTRODUCTION
1 The applicants move to enforce an agreement in settlement of this proceeding. Their motion raises three questions:
1. Does the Court have jurisdiction to enforce an agreement of compromise of a proceeding in the Court?
2. If so, is it appropriate for the agreement to be enforced by notice of motion within the substantive proceeding, or should a separate proceeding have been commenced? and
3. Did the parties intend the agreement to be immediately enforceable, or was enforceability to be subject to their negotiating, concluding and executing a written instrument?
The facts underlying the substantive proceeding
2 By a written contract dated 10 October 2002 the first applicant, Needlework Warehouse Pty Limited ('Needlework'), contracted to purchase from the first respondent, Chansonette Pty Limited ('Chansonette'), a 'craft work' business carried on under the name 'Leisure House' ('the Contract'). The second applicant, Alan James Meier ('Mr Meier'), is a director and shareholder of Needlework. The third applicant, Tancot Pty Limited ('Tancot'), is a company associated with Mr Meier.
3 The second respondent, William Lowe Edge ('Mr Edge'), at all material times worked in and managed Chansonette's business and acted as its agent and representative in all dealings with Needlework and Mr Meier. Apparently Mr Edge was in a de facto relationship with Chansonette's sole director, Ms Joyce Wakefield.
4 The priced fixed in the contract for the business was $600,000. Needlework also agreed to purchase trading stock up to a maximum value of $1,400,000. On 30 August 2002 Needlework paid $100,000 as a deposit.
5 The Contract was completed on 18 October 2002, when Needlework paid Chansonette $1,625,000.
6 In the substantive proceeding, Needlework sues Chansonette for breach of contract. As well, Needlework, Mr Meier and Tancot sue Chansonette and Mr Edge in respect of misrepresentations which preceded the making of the Contract. The misrepresentations are said to have constituted contraventions of s 52 of the Trade Practices Act 1974 (Cth) ('the TPA') by Chansonette, in which Mr Edge is said to have been 'involved' for the purpose s 82 of that Act. (In addition, Mr Edge is sued for having engaged in conduct that was misleading or deceptive in contravention of s 68 of the Fair Trading Act 1987 (NSW).)
7 According to the further amended statement of claim, Tancot was induced by the misleading or deceptive conduct to purchase for $1,375,000 industrial premises to be used in the business.
8 Chansonette and Mr Edge cross‑claim against Needlework for breach of agreements relating to the provision of post-completion consultancy services to Needlework.
9 Apparently, the business had to be closed down, Needlework sold such stock as could be sold, and Tancot sold the land at a loss.
10 The proceeding was commenced on 3 September 2003. The respondents were represented by John Dawson of Carneys, solicitors. In early 2005, apparently as a result of a falling out between Mr Edge and Ms Wakefield, Needlework began to be represented by Brendan Millar of Garland Hawthorne Brahe, solicitors. However, Mr Dawson continued to act for Mr Edge. The alleged settlement agreement and the present motion relate only to Mr Edge, not to Chansonette.
11 In late 2004 and early 2005 attempts were made to settle the proceeding. There was an unsuccessful Court‑directed mediation on 13 December 2004 and 15 February 2005.
12 On 23 March 2005, Hill J fixed the proceeding for hearing commencing on 19 September 2005. After the proceeding was set down, negotiations occurred between Mr Wenden of Barnes & Wenden, the solicitors for the applicants, and Mr Dawson on behalf of Mr Edge.
THE settlement agreement
13 It is necessary to refer to the exchanges which are said to have resulted in the settlement agreement.
14 On 22 July 2005, Mr Dawson wrote to Mr Wenden a letter marked 'WITHOUT PREJUDICE SAVE AS TO COSTS', which was, relevantly, as follows:
'We are instructed by Mr Edge to make the following final offer:
1. Payment of $900,000.00 in full and final discharge of all claims made by the Applicants.
2. Payment of the settlement sum within four (4) months.
3. Assignment of the Business Name "Leisure House".
4. The parties enter into a Deed providing mutual releases and Mr. Edge be released from the covenant of restraint contained in the Sale of Business Contract.
On our instructions this offer is to remain open until 5.00 pm Tuesday, 26 July 2005.'
15 On 27 July 2005 Mr Dawson and Mr Wenden had a telephone conversation as follows:
'Dawson: My client Mr Edge is coming in tomorrow at 3 pm and I expect that he will give written instructions to me tomorrow to make an offer of settlement. Those instructions may include a payment of $50,000 to $100,000 within 28 days and the balance as per my letter of 22nd July, namely within 4 months.
Wenden: What about security?
Dawson: He is prepared to offer security overt he Somersby vacant land which has no mortgage on it. He is waiting for a valuation of the property and says it is worth $700,000.
Wenden: Can you please set it out for us so I can have a look at it.
Dawson: There will possibly be a superior offer to that and I will write to you.'
16 Mr Edge was and is the registered proprietor of Lot 2 DP 803097 at Somersby being the land the subject of Folio 2/803097 ('the Property'), subject to a mortgage 9544895 to Atria Pty Limited (subject to Writ 8998220).
17 On 29 July 2005, Mr Wenden received a further letter from Mr Dawson, headed in the same way, which, relevantly, stated:
'We confirm that we have a final offer of settlement to be made in respect of these proceedings. Our client is prepared to settle on the following basis:
1. Payment of $900,000.00 in full and final settlement of all claims made by the applicants, such payment to be made as follows:-
(a) $100,000.00 within twenty‑eight (28) days.
(b) $100,000.00 within a further twenty‑eight (28) days.
(c) $100,000.00 within a further twenty‑eight (28) days.
(d) The balance within four (4) months.
2. Mr. Edge gives by way of security for repayments a caveatable interest in respect of the Somersby property.
3. Assignment to Mr. Edge or his nominee of the Business Name "Leisurehouse".
4. The assignment to Mr Edge of a trailer and the remaining stock which we understand is in Mr. Meier's possession and which was conveyed to the purchaser under the contract for sale.
5. That the parties enter into appropriate releases in respect of the Federal Court proceedings and the sale of business and that Mr Edge be released from the restraint provision contained in the contract for sale.
We look forward to hearing from you to finalise this matter.'
18 Following receipt of the letter, Mr Wenden telephoned Mr Dawson's office. Mr Dawson was away from the office and Mr Wenden told David Gall, the clerk handling the proceeding in the absence of Mr Dawson, that he (Mr Wenden) was not rejecting the offer but needed clarification of what was meant by a 'caveatable interest in respect of the Somersby property'. He asked Mr Gall to ask Mr Dawson to phone back, as he (Mr Wenden) thought there was a mortgage over the Property.
19 On 1 August 2005 Mr Dawson emailed Mr Wenden, stating, relevantly:
'It is intended that the mortgage over the Somersby property is discharged – your client would get a charge over the land – or Edge simply consents to a caveat – I think it is fairly common in Family Court matters to have an order entitling a party to lodge a caveat to secure moneys to be paid to the party lodging the caveat.
I note the trailer and stock is available – are you able to give some idea as to the amount of stock?
I have another busy day on Tuesday – I get my emails out of the office so if you could respond by email or call on the mobile ….'
20 After obtaining instructions from Mr Meier, Mr Wenden telephoned Mr Dawson on 2 August 2005 and they conversed as follows:
'Wenden: I received your email this morning. What do you mean by the charge? Do you mean a mortgage?
Dawson: Edge wants to develop this property and doesn't want to give a mortgage over it as he would need the security of the property for the purposes of a builder. Edge will give you a charge similar to what you get in the Family Court to secure payment of the settlement moneys and which will provide a caveatable interest.
Wenden: I don't know what happens in the Family Court unless there is some equitable interest. In any case my searches indicate that there is an existing mortgage over the property.
Dawson: The existing mortgage will be discharged and Edge will give a charge to secure payment of the settlement monies.
Wenden: When is the stock and business name to be transferred?
Dawson: That can be transferred once the $300,000 has been paid.
Wenden: I think my client will accept the offer. I'll come back to you in writing once I have my client's instructions.'
21 On 2 August 2005, Mr Wenden wrote to Mr Dawson by facsimile as follows:
'I refer to:-
1. Your letter of offer of 29th July 2005 (copy attached);
2. Your email transmission (copy attached) sent to me on 1st August 2005 in clarification of that offer;
3. The telephone conversations between Mr Wenden of this office and Mr Dawson when Mr Dawson confirmed that:-
(a) The security for repayment of the $900,000 is to be by way of charge over the Somersby property which would give the Applicants a caveatable interest in that property, with a caveat to be lodged by the Applicants, consented to by Mr Edge, prohibiting any dealings with that property.
(b) The Assignments referred to in paragraphs 3 and 4 of your letter to take place after payment of the $300,000 referred to in paragraphs 1(a), (b) and (c).
The Applicants accept the offer of settlement referred to above, made up of the three (3) elements itemised as 1, 2 and 3. A binding agreement has now been entered into between Mr Edge and our clients.
I am able to advise that the value of the stock is between $1,500 and $2,500.
I will commence preparation of Deeds of Release to reflect the terms as set out and will forward the same to you as soon as possible.
I confirm that I have had the Directions Hearing set down for Wednesday 3rd August 2005, stood over for seven (7) days. You should receive confirmation of same from Justice Hill's Associate.'
22 On 3 August 2005, Mr Wenden received from Mr Dawson a letter stating:
'Thank you for your letter received by facsimile earlier today. I note your comment made on the first page, that the offer is accepted and that "a binding agreement has now been entered into between Mr Edge and our clients". With respect, the agreement is in principle and must be subject to agreement as to the terms of the Deed of Release and also agreement as to how these proceedings will be disposed of.
We note that you are liaising with your counsel in relation to the Deed of Release. As soon as we receive the draft we shall be conferring with our client and also Mr. Bell.
Would you also please advise your views in relation to the disposal of the proceedings.'
23 Apparently Mr Bell was senior counsel advising Mr Edge.
24 On 3 August 2005 Mr Wenden replied to Mr Dawson acknowledging receipt of his letter, noting his comments, and stating that a Deed of Release would be forwarded shortly.
25 Mr Wenden drafted a 'Deed of Settlement and Release' and a form of consent orders. The former document was expressed to be between Needlework, Mr Meier and Tancot of the one part and Mr Edge of the other part. I need not discuss the terms of the form of deed, beyond stating that it provided:
· that Mr Edge would pay, in full and final settlement of the dispute and the proceeding as between himself and the applicants, $100,000 within twenty‑eight days of 2 August 2005, a further $100,000 within a further twenty‑eight days of 2 August 2005, a further $100,000 within a further twenty‑eight days of 2 August 2005 and a further $600,000 within four months of 2 August 2005;
· that Mr Edge would procure a discharge of Mortgage 9544895 over the Property and charge the Property with payment of the sum of $900,000; and
· that the applicants acquired an equitable interest in the Property as chargees and would be entitled to lodge a caveat to prohibit dealings with the Property.
26 In some respects, the draft went beyond the terms that had been agreed to.
27 The form of consent orders provided for the proceeding as between the applicants and Mr Edge and the cross claim as between Mr Edge and Needlework to be dismissed on the basis that all of the parties bear their own costs.
28 On 5 August 2005 Mr Wenden sent to Mr Dawson the draft Deed, and advised him that a directions hearing which had been fixed for 3 August 2005 had been stood over to 10 August 2005. Mr Wenden requested of Mr Dawson that if possible all the documents be executed by then, so that the proceeding could be dismissed on 10 August 2005.
29 Apparently Mr Dawson told Mr Wenden that Mr Edge owed his firm considerable fees and that Mr Dawson could not devote further time to the matter.
30 On 17 August 2005 Mr Wenden wrote to Mr Dawson noting this advice and seeking a resolution of the matter.
31 On 22 August 2005 Mr Dawson filed and served a notice of his ceasing to act for Mr Edge.
32 The applicants' present notice of motion seeking a declaration that a binding settlement agreement is on foot and an order for specific performance of that agreement was filed on 8 September 2005.
33 The applicants experienced difficulty in serving the notice of motion and supporting documents on Mr Edge. On 5 October 2005, I ordered pursuant to O 7 r 10 of the Federal Court Rules, that the notice of motion and other documents be taken to have been served on Mr Edge on 28 September 2005, and, pursuant to O 1 r 8, that to the extent that it may be necessary, the requirements of the Rules as to the time for service of those documents be dispensed with.
CONSIDERATION
Does the Court have jurisdiction to enforce an agreement of compromise of a proceeding in the Court?
34 Before considering the authorities, I will indicate my reasons for thinking that the Court has jurisdiction to enforce the compromise agreement.
35 Section 76(ii) of the Constitution provides that the Parliament may make laws conferring original jurisdiction on the High Court in any matter 'arising under any laws made by the Parliament'. Section 77(i) provides that with respect to, relevantly, the matter just mentioned, the Parliament may make laws 'defining the jurisdiction of any federal court other than the High Court'.
36 The TPA is a law made by the Parliament and s 86(1) of the TPA confers jurisdiction on this Court in any matter arising under the TPA in respect of which a civil proceeding has, whether before or after the commencement of s 86, been instituted under Pt VI of the TPA.
37 The present proceeding is a civil proceeding instituted under Pt VI. Section 82 of the TPA occurs in Pt VI, as does s 75B, which defines the notion of 'a person involved in a contravention' for the purposes of, relevantly, s 82.
38 The Court is a federal court created by s 5 of the Federal Court of Australia Act 1976 (Cth) ('the FCAA'). Subsection 19(1) of the FCAA provides that the Court has such original jurisdiction as vested in it by laws made by the Parliament. It is original jurisdiction which s 86 of the TPA vests in the Court.
39 The general jurisdiction to enforce contracts is non-federal jurisdiction. There are two bases, however, on which the Court has jurisdiction to enforce the compromise agreement: accrued jurisdiction, and s 39B(1A)(c) of the Judiciary Act 1903 (Cth) ('the Judiciary Act').
Accrued jurisdiction
40 The 'accrued' jurisdiction of the Court depends on the nature of the 'matter' referred to in s 76(ii) of the Constitution and in s 86(1) of the TPA.
41 I do not intend to explore this question as fully as it would be possible for me to do. In Re Wakim; Ex parte McNally (1999) 198 CLR 511, Gummow and Hayne JJ (with whom Gleeson CJ agreed) stated (at [139], [140]):
'[139] The central task is to identify the justiciable controversy. In civil proceedings, that will ordinarily require close attention to the pleadings (if any) and to the factual basis of each claim.
[140] In Fencott [v Muller (1983) 152 CLR 570 ('Fencott')] it was said that "in the end, it is a matter of impression and of practical judgment whether a non‑federal claim and a federal claim joined in a proceeding are within the scope of one controversy and thus within the ambit of a matter". The references to "impression" and "practical judgment" cannot be understood, however, as stating a test that is to be applied. Considerations of impression and practical judgment are relevant because the question of jurisdiction usually arises before evidence is adduced and often before the pleadings are complete. Necessarily, then, the question will have to be decided on limited information. But the question is not at large. What is a single controversy "depends on what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct and relationships" [Fencott at 608 per Mason, Murphy, Brennan and Deane JJ]. There is but a single matter if different claims arise out of "common transactions and facts" or "a common substratum of facts" [Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 ('Philip Morris')], notwithstanding that the facts upon which the claims depend "do not wholly coincide" [Fencott at 607 per Mason, Murphy, Brennan and Deane JJ]. So, too, there is but one matter where different claims are so related that the determination of one is essential to the determination of the other [Philip Morris at 512 per Mason J], as, for example, in the case of third party proceedings or where there are alternative claims for the same damage and the determination of one will either render the other otiose or necessitate its determination. Conversely, claims which are "completely disparate" [Felton v Mulligan (1971) 124 CLR 367 at 373 per Barwick CJ],"completely separate and distinct" [Philip Morris at 521 per Murphy J] or "distinct and unrelated"[Moorgate Tobacco Co Ltd v Philip Morris Ltd (1980) 145 CLR 457 at 482 per Stephen, Mason, Aickin and Wilson JJ] are not part of the same matter.'
42 Usually the notion of 'common transactions and facts' and 'a common substratum of facts' has been invoked with reference to facts, all of which precede the commencement of a proceeding. However, at least in the ordinary course, I think it also encompasses such facts as part of the substratum of facts underlying the making of a post-commencement agreement of compromise.
43 The starting point is the compromise agreement, not the initial claim. That agreement cannot be understood without an appreciation of its subject matter: the applicants' federal claim that Mr Edge was involved in misleading or deceptive conduct by Chansonette which induced Needlework and Tancot to enter into contracts of purchase (TPA, ss 52, 82, 75B). The compromise agreement provided for a release of that claim and for Needlework to assign to Mr Edge certain property which was part of the subject matter of the Contract. The applicants sought to recover from Mr Edge damages under s 82 of the TPA, and the compromise agreement provides for the payment of money by him to them in compromise of that claim.
44 When s 86(1) of the TPA confers jurisdiction on this Court 'in any matter arising under' that Act, it confers jurisdiction to quell justiciable controversies – in the present case, initially the justiciable controversy over Mr Edge's federal statutory liability to the applicants arising out of his involvement in Chansonette's misleading and deceptive conduct which caused loss to the applicants. The justiciable controversy arising out of the compromise agreement, the parties' own attempt to quell that initial justiciable controversy, takes that initial federal justiciable controversy as its very subject matter: cf LNC Industries Ltd v BMW (Australia) Ltd (1983) 151 CLR 575 ('LNC') discussed in a different context below. The substratum of facts underlying the justiciable controversy arising out of the compromise agreement includes at its core, the substratum of facts underlying the initial controversy.
45 For the above reasons, it is within the accrued jurisdiction of the Court to enforce the compromise agreement.
Section 39B(1A)(c) of the Judiciary Act 1903 (Cth)
46 Section 39B(1A)(c) provides:
'The original jurisdiction of the Federal Court of Australia also includes jurisdiction in any matter:
(a) ...; or
(b) ...' or
(c) arising under any laws made by the Parliament, other than a matter in respect of which a criminal prosecution is instituted or any other criminal matter.'
(See the discussion of the conferral of jurisdiction on the Court by s 39B(1A) by Justice Ronald Sackville in 'The re‑emergence of federal jurisdiction in Australia' (2001) 21 Aust Bar Rev 133 at 138 et seq; and by Justice JLB Allsop in 'Federal jurisdiction and the jurisdiction of the Federal Court of Australia in 2002' (2002) 23 Aust Bar Rev 29 at 33 et seq.)
47 In my opinion the enforcement of the compromise agreement is a 'matter' or part of a 'matter' (see the discussion at [41] above) arising under a law made by the Parliament, namely, ss 52, 82 and 75B of the TPA.
48 LNCconcerned a contract for the transfer of quota under a licence to import motor vehicles issued under the Customs (Import Licensing) Regulations made under the Customs Act 1901 (Cth). The transferor claimed a declaration that the transferee held the quota units on trust, an order that they be transferred, and damages. If the claim arose under a law of the Commonwealth Parliament within s 76(iii) of the Constitution, by reason of s 39(2) of the Judiciary Act an appeal did not lie to the Privy Council from a decision of the Supreme Court of New South Wales in favour of the transferee.
49 The High Court held that the claim did arise under a law of the Commonwealth, because the property the subject of the contract and of the alleged trust was the creature of such a law. This was so even though the contract and the alleged trust, considered independently of their subject matter, were creatures of State law and no question of construction of a Commonwealth law was involved. Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ stated (at 581):
'When it is said that a matter will arise under a law of the Parliament only if the right or duty in question in the matter owes its existence to a law of the Parliament that does not mean that the question depends on the form of the relief sought and on whether that relief depends on federal law. A claim for damages for breach or for specific performance of a contract, or a claim for relief for breach of trust, is a claim for relief of a kind which is available under State law, but if the contract or trust is in respect of a right or property which is the creation of federal law, the claim arises under federal law. The subject matter of the contract or trust in such a case exists as a result of the federal law.'
Their Honours also said (at 582):
'The contracts in the present matter were concerned solely with entitlements under the Regulations. The object of the plaintiff's claim was identified in the statement of claim as "any benefit accruing" after a certain time as a result of the utilization of a quota under the Regulations. It is common ground that the "benefit" mentioned is any "benefit" which might accrue under the Regulations. The subject matter of the contracts and of the action arose under and existed only by reason of the provisions of the Regulations and the Act in pursuance of which the Regulations were made. The Act was of course a law of the Parliament and the Regulations were made under it.'
50 In Wenkart v Pantzer (No 3) (2004) 135 FCR 422 ('Wenkart v Pantzer (No 3)', I held, applying LNC, that the Court had jurisdiction to enforce an agreement between a bankrupt and the trustee in bankruptcy of his estate. The bankrupt desired to put a proposal to his creditors, acceptance of which would result in immediate annulment of his bankruptcy. The problem was that the trustee was entitled to a sizeable amount by way of remuneration, costs, charges and expenses ('fees').
51 By the agreement, in consideration of the trustee's agreeing forthwith to convene a meeting of the bankrupt's creditors to consider the bankrupt's proposal, the bankrupt charged certain land in favour of the trustee as security for his fees, and acknowledged that the trustee would be entitled to recover the fees from the bankrupt after the annulment of the bankruptcy. Upon the creditors passing a special resolution accepting the proposal, the bankruptcy was annulled by the operation of s 74(5) of the Bankruptcy Act 1966 (Cth).
52 In relation to the Court's jurisdiction to enforce the charge, I held (at [98]):
'In my opinion, the fact that the charge secured the amount of Mr Pantzer's entitlement to remuneration under the Act and Regulations, and the fact that the consideration for the giving of the charge was Mr Pantzer's agreeing to perform a task assigned to him by the Act (calling a meeting of creditors) without asking the Court to impose terms and conditions safeguarding his entitlement under the Act and Regulations, suffice to characterise his claim to enforce the charge as a matter arising under the Act for the purposes of s 39B(1A)(c) of the Judiciary Act.'
53 In the present case, s 82 of the TPA gave the applicants a right to recover an amount of loss or damage from Mr Edge. That right owed its existence exclusively to a law of the Parliament. At the heart of the compromise agreement was the applicants' promise to release that right in exchange for Mr Edge's promise to pay. Therefore, the compromise agreement falls squarely with the words of Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ (with whom Murphy J agreed) in LNC noted at [49] above:
' [a] claim for damages for breach, or for specific performance, of a contract ... if the contract ... is in respect of a right ... which is the creation of federal law, ... arises under federal law. The subject matter of the contract ... in such a case exists as a result of federal law.'
Authorities
54 Authorities supporting the existence of jurisdiction are: Darling Downs Investments Pty Ltd v Ellwood (1988) 18 FCR 510 ('Darling Downs'); Reid v Interarch Australia Pty Ltd [2000] FCA 1328; We Two Pty Ltd v Shorrock (No 2) [2005] FCA 934 ('We Two') at [13]‑[16]; and Jarraman Arts Aboriginal Corporation v Tourism Australia (No 3) [2005] FCA 983 at [48]‑[50].
55 The only authorities which might be thought to suggest a negative answer are Pallas v Finlay (1985) 61 ALR 220 ('Pallas v Finlay') and Macteldir Pty Ltd v Dimovski (2003) 132 FCR 492 ('Macteldir'), which I will now consider.
56 In Pallas v Finlay, Dr Finlay sued Lincoln Hunt Australia Pty Ltd ('Lincoln Hunt'). Dr Finlay's federal claim was one of contravention of ss 52 and 53 of the TPA. He sought various forms of relief. Generally speaking, they can be described as an undoing of contracts which Dr Finlay had been induced to enter into by Lincoln Hunt's misleading and deceptive conduct. Pursuant to the contracts, Dr Finlay had transferred real estate to Lincoln Hunt and deposited $150,000 with it. Dr Finlay sought an order that Lincoln Hunt obtain a discharge of a mortgage over the property, reconvey the property unencumbered to him, and repay to him the $150,000. By a cross‑claim, Lincoln Hunt sought an order that Dr Finlay withdraw a caveat which he had lodged over the title to the property.
57 In the course of the final hearing, it was announced that the matter had been settled. By consent it was ordered that the proceeding be stood over generally, with liberty to either party to restore.
58 Two individuals, Messrs Pallas and Dubinski-Hunt, who had not been parties to the substantive proceeding, entered into terms of settlement with Dr Finlay by which they agreed that in consideration of his releasing Lincoln Hunt, they would pay him $150,000, and that upon default in payment he should be at liberty to enter judgment against them for that sum. To that end, Messrs Pallas and Dubinski-Hunt agreed, in the event of default by them, to be joined as parties to the proceeding for that purpose. Lincoln Hunt agreed that Dr Finlay should be entitled to maintain the caveat until payment of the sum of $150,000. Although the terms were signed by the parties to the proceeding, their counsel, and Messrs Pallas and Dubinski-Hunt, they were not filed in Court.
59 Messrs Pallas and Dubinski‑Hunt defaulted, and Dr Finlay obtained leave to add them as respondents. He successfully moved for judgment against them.
60 The Full Court allowed their appeal on the ground that the Court lacked jurisdiction to enforce the agreement between Dr Finlay and Messrs Pallas and Dubinski-Hunt.
61 The case is distinguishable. First, of course the case was decided prior to the enactment of s 39B(1A) of the Judiciary Act by the Law and Justice Amendment Act 1997 (No 34, 1997) s 3, Sch 11, Item 1. Secondly, the Full Court emphasised that Messrs Pallas and Dubinski-Hunt were not parties to the primary proceeding (except upon being joined pursuant to the terms of settlement and for the purpose of their enforcement). Beaumont J, with whom Northrop and Lockhart JJ agreed, observed that in these circumstances there was no common substratum of facts as between the federal cause of action and the making of the compromise, as is required to confer 'accrued' or 'pendent party' jurisdiction (citing Fencott v Muller (1983) 152 CLR 570 at 607). His Honour added that the position may have been different if, for example, Dr Finlay had joined the two men on the footing that they were involved in the contraventions: cf ss 82 and 75B of the TPA. His Honour observed that in such a situation, 'as the decision in Fencott v Muller demonstrates, 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' (at 223).
62 In the present case, Mr Edge has been a respondent throughout. In the application which commenced this proceeding, the applicants (then only Needlework and Mr Meier) claimed, relevantly, damages under ss 82 and 75B of the TPA against him. The accompanying statement of claim alleged, relevantly, that Mr Edge made misleading and deceptive statements for himself and as agent for Chansonette; that, in consequence, Chansonette contravened s 52 of the TPA; and that Mr Edge was 'involved' in that contravention and was liable to Needlework and Mr Meier in damages under s 82 of the TPA.
63 Tancot became third applicant subsequently, and by an amended application and an amended statement of claim, both filed on 2 December 2003, it made similarly based claims for relief against Mr Edge.
64 The current further amended application and further amended statement of claim, both filed on 28 July 2004, continue to make claims against Mr Edge under ss 82 and 75B of the TPA, based on his involvement in the contraventions of s 52 by Chansonette.
65 Pallas v Finlay was distinguished by majority (Pincus and Einfeld JJ; Fisher J dissenting) in Darling Downs, another claim under the TPA which was settled by an agreement to pay money, this time, however, by the only respondent to the only applicant. The basis on which Pallas v Finlay was distinguished was that in Pallas v Finlay, Messrs Pallas and Dubinski-Hunthad not been respondents in the primary proceeding, and for this reason the motion to enforce the settlement against them had not been 'properly brought forward … in the matter' within s 22 of the FCAA.
66 The majority in Darling Downs saw the question in that case as being whether enforcement of the settlement agreement was permissible as part of the Court's disposition of the federal matter (at 521). Their Honours thought that the grant of remedies to enforce the agreement was within s 22 of the FCAA.
67 I turn now to Macteldir. As I observed in Wenkart v Pantzer (No 3) at [87], the Full Court decision in that case has been criticised: see Mark Leeming, 'Breach of Contract in the Federal Court' (2004) 78 ALJ 96‑98. As I also observed in that case (at [94]), Macteldir is not binding on me because the Full Court was exercising original jurisdiction. Reference may be made to Minister for Immigration and Multicultural and Indigenous Affairs v SZANS (2005) 141 FCR 586 ('SZANS') at [35]-[38] and the authorities their cited. However, again as I observed in Wenkart v Pantzer (No 3), I would decide inconsistently with Macteldir only if I thought it 'clearly' or 'plainly' wrong. The reason is that this very restraint should characterise my approach if the three Judges who composed the Full Court in Macteldir had given three single‑Judge decisions to the same effect in the original jurisdiction of the Court: see Bank of Western Australia Ltd v Commissioner of Taxation (1994) 55 FCR 233 at 255; Cooper v Commissioner of Taxation (2004) 139 FCR 205 at [46]; SZANS at [38].
68 In Wenkart v Pantzer (No 3) I said that I did not need to form an opinion as to whether Macteldir was clearly or plainly wrong, because it was distinguishable. I noted that no submission had been made in Macteldir based on s 39B (1A)(c) of the Judiciary Act 1903 (Cth), and held that I had jurisdiction under that provision to enforce the charge. For that reason I said that I did not need to determine whether I also had jurisdiction to do so within the accrued jurisdiction of the Court.
69 The facts of Macteldir were unusual. The applicants sought relief against the respondents under ss 115 and 116 of the Copyright Act 1968 (Cth) in respect of the respondents' publication of a directory-calendar for 2001 ('the 2001 Directory‑Calendar'). The proceeding was compromised, but subsequently, according to the applicant, the same respondents published a directory-calendar for 2002 ('the 2002 Directory‑Calendar'). The applicant contended that publication of the 2002 Directory‑Calendar constituted a breach of the terms of settlement. An order had been made dismissing the substantive proceeding.
70 By the opening words of the terms of settlement, the parties agreed to 'the following orders'. There followed numbered paragraphs. Paragraphs 2, 3, 5 and 7 were expressed as promises by the first and second respondents not to do, or to do, certain things.
71 The Full Court noted that at a directions hearing before the Docket Judge those paragraphs had been 'transformed' into undertakings to the Court. The applicant did not however, institute a proceeding for contempt of court constituted by a breach of the undertakings.
72 At [49]‑[51], the Full Court noted that the applicant did not seek to enforce 'just an agreement in the nature of a contract between the parties, but an agreement to seek certain orders of the Court'. As noted above, the opening words of the terms of settlement were indeed expressed as an agreement to consent to orders. The Full Court appears in these paragraphs to have considered that the agreement was overtaken by the Judge's noting of undertakings to the Court in the same terms. As a result, the Full Court appears to have treated enforcement of the agreement by the making of orders as a remedy no longer available. That is to say, the Court appears to have treated the substitution of undertakings to the Court for the making of orders by consent, as a 'substituted performance' of the agreement.
73 The present applicants, by contrast, seek precisely to enforce the agreement of compromise according to its terms, and there can be no suggestion of such enforcement having ceased to be available by reason of its having been replaced by a substituted performance.
74 At [57] their Honours said that it was unnecessary for them to make 'any general statement about the jurisdiction of the court to enforce compromises of existing proceedings' (my emphasis). Thus, their Honours appear to have intended not to touch upon the jurisdictional issue presented here.
75 At [60] their Honours observed that 'it might have been possible' for the applicant to have moved for an injunction to restrain conduct which would otherwise have amounted to a contempt of court, but that the applicant had not done so.
76 At [62], the Full Court said that it was 'the applicant's departure from a claim to enforce the existing undertakings which takes the notice of motion away from the ordinary case'. The reference seems to be to the fact that the notice of motion sought an injunction expressed, not in the terms of the undertakings, but in terms which related expressly and specifically to the 2001 Directory‑Calendar. With respect, I have difficulty in understanding the nature of any problem to which this circumstance was thought to give rise.
77 While I have difficulty in understanding certain aspects of the reasons in Macteldir, it seems clear that their Honours were at pains to emphasise that the case was not, in their view, one in which the motion was simply one for enforcement of the compromise agreement according to its terms. They appear to have thought that this had become impossible by reason of the supervening undertakings given to the Court. A refusal to enforce on this ground did not go to jurisdiction. Moreover, their Honours said that they were not intending to make any general statement about the Court's jurisdiction to enforce agreements in settlement of proceedings before the Court.
78 For the above reasons, I would distinguish Macteldir.
79 Their Honours considered at some length Roberts v Gippsland Agricultural & Earth Moving Contracting Co Pty Ltd [1956] VLR 555 ('Roberts v Gippsland'); McLaren v Schuit (1983) 33 SASR 139 ('McLaren v Schuit') and General Credits (Finance) Pty Ltd v Fenton Lake Pty Ltd [1985] 2 Qd R 6 ('General Credits'). Those cases were, however, concerned with the procedural question whether a compromise agreement could be enforced by motion in the substantive proceeding, not with the anterior question of the jurisdiction of the Court to enforce the agreement at all. It is important to distinguish between the fundamental question of jurisdiction, and the non-jurisdictional question, whether a claim is properly brought forward in a proceeding already before the Court: cf s 22 of the FCAA, and Philip Morris.
Is it appropriate for the agreement to be enforced by notice of motion within the substantive proceeding, or should a separate proceeding have been commenced?
80 The answer to this non-jurisdictional and procedural question is yes: Roberts v Gippsland; McLaren v Schuit; General Credits; We Two.
81 The first three of these cases were decided in State Supreme Courts – courts of general jurisdiction, whose jurisdiction to enforce contracts could not be in question.
82 In the present case:
· the proceeding has not been dismissed but remains on foot;
· the applicants seek to enforce only a promise by Mr Edge to pay money;
· Mr Edge has not appeared to dispute any of the facts;
· the compromise agreement does not raise any matters extraneous to the substantive proceeding;
· there has been no likelihood that pleadings or discovery would be required.
All these considerations make it appropriate to enforce the compromise agreement by motion in the existing proceeding.
Did the parties intend the agreement to be immediately enforceable, or was the enforceability to be subject to their negotiating and executing a form of deed?
83 As Mr Edge's solicitor, Mr Dawson had at least ostensible authority to settle the proceeding and cross claim on his behalf: Donellan v Watson (1990) 21 NSWLR 335 at 342 per Handley JA, with whom Mahoney JA and, indirectly, Waddell AJA, agreed.
84 The appearance of the words 'without prejudice' in the headings to Mr Dawson's letters dated 22 July 2005 and 29 July 2005 present no obstacle to their being received as part of the evidence that an agreement of compromise was reached: Walker v Wilsher (1889) 23 QBD 335 at 337 per Lindley LJ; Tellerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93 at 110 per Dixon CJ and Fullagar J; Bentley v Nelson [1963] WAR 89; Tomlin v Standard Telephones and Cables Ltd [1969] 1 WLR 1378; Rush & Tompkins Ltd v Greater London Council [1988] 3 WLR 939 at 943 per Lord Griffiths (with whom the other Law Lords agreed); Quad Consulting Pty Ltd v David R Bleakley & Associates Pty Ltd (1990) 27 FCR 86 at 92; Cedenco Foods Ltd v State Insurance Ltd [1996] 3 NZLR 205 at 211.
85 The applicants submit that there was an agreement within the first category discussed in Masters v Cameron (1954) 91 CLR 353. In Masters v Cameron, Dixon CJ, McTiernan and Kitto JJ stated in a famous passage at (360):
'Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.
In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. Of these two cases the first is the more common.'
86 The concluding words in Mr Dawson's letter of 29 July 2005 were: 'We look forward to hearing from you to finalise the matter'. Although Mr Wenden sought clarification on one point, nothing in his letter of 2 August 2005 represented a departure from Mr Dawson's letter of 29 July 2005 and Mr Dawson's subsequent clarification. In my opinion, when Mr Dawson wrote his letter of 29 July 2005, he was inviting an acceptance which would bring into being a contract immediately enforceable, even though various instruments would have to be executed in order to implement the agreement.
87 The agreement contemplated a 'settlement occasion'. This is made clear by the provision for the giving of security in respect of the payment of the instalments. The first twenty-eight day period was to run from that occasion. At that time:
(1) Mr Edge was to pay to Needlework , Mr Meier and Tancot, $900,000 as follows:
(a) $100,000 within 28 days of the date of settlement;
(b) $100,000 within 56 days of the date of settlement;
(c) $100,000 within 84 days of the date of settlement;
(d) the balance of $600,000 within 4 months after the date of settlement.
(2) Upon settlement, Needlework, Mr Meier and Tancot were to execute and deliver a release in favour of Mr Edge of all causes of action set up against him in the proceeding or arising out of the circumstances leading up to, or associated with, the making of the Contract and the contract for the purchase of the land by Tancot, including a release of Mr Edge from the covenant in restraint of trade given by him;
(3) Upon settlement, Mr Edge was to execute and deliver a release in favour of Needlework, Mr Meier and Tancot of all causes of action arising out of the circumstances leading up to, or associated with, the making of those contracts, including a release of the claim in respect of the agreement relating to consultancy services, the subject of Mr Edge's cross‑claim against Needlework;
(4) Upon settlement, Mr Edge was to execute and deliver, in favour of Needlework, Mr Meier and Tancot, securing payment to them of the amounts totalling $900,000, a charge over the Property, title to which was to be unencumbered, and a term of the charge was to be that Needlework, Mr Meier and Tancot should be at liberty to lodge a caveat against the title to the Property, in respect of their equitable interest as chargees;
(5) Upon settlement, the proceeding and cross‑claim were to be dismissed with no order as to costs.
Once the first three instalments totalling $300,000 were paid,
(6) Needlework was to assign (and deliver) the trailer and remaining stock to Mr Edge;
(7) Needlework was to assign to Mr Edge the registered business name, 'Leisurehouse'.
88 Two matters should be noted. First, there was no express agreement as to when Needlework was to assign the trailer to Mr Edge. I do not think, however, that this was a matter remaining to be negotiated. The reference to the 'trailer and the remaining stock' in Mr Dawson's letter to Mr Wenden dated 29 July 2005 makes it clear that the trailer was to be treated identically with the remaining stock, and I think it is implied that the agreement reached in relation to the time for the assignment of the remaining stock also applied to the trailer.
89 Secondly, there was no express agreement as to the mode of disposition of the proceeding. Again, I do not think that this was a matter remaining to be agreed upon. I think it was implied from the agreement upon mutual releases, that the application and cross‑claim were both to be dismissed with no order as to costs, contemporaneously with execution and delivery of the mutual releases.
90 Either the agreement was within the first category recognised in Masters v Cameron or it was not within Masters v Cameron at all. Masters v Cameron is concerned with the situation in which the parties agree that the terms of their bargain are to be formally restated in a written contract. The parties did not agree expressly that the terms of their bargain were to be more formally restated. The releases and charge would not necessarily include the terms as to the assignment of the business name, the trailer and the remaining stock. Why, it may be asked rhetorically, is it not consistent with the parties' intention, that their agreement in the latter respects be allowed to remain a matter of parol contract?
91 I think that the better view is that the agreement was not within Masters v Cameron, even though aspects of it were to be implemented by written instruments, namely, the mutual releases and the assignment of the business name and the stock.
conclusion
92 I caused the proceeding to be relisted on 19 October 2005 and raised with counsel for the applicants certain questions as to the practical outworking of an order for specific performance, in view of the likely non‑participation of Mr Edge. The point raised is that the applicants would not become entitled to the sum of $900,000 as a debt, unless they furnished the full consideration for that amount becoming due and payable (cf McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 475‑6 per Dixon J, with whom Rich and McTiernan JJ agreed), and difficulties in this respect might arise touching, for example, the assignment to Mr Edge of the business name, the stock in trade and the trailer, without his cooperation.
93 Counsel agreed that as a practical matter, his clients may prefer to seek damages. He said that for the time being he would seek only a declaration as to the existence and terms of the settlement agreement. I will make a declaration accordingly and stand over the proceeding to a date for further directions.
I certify that the preceding ninety‑three (93) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.
Associate:
Dated: 28 October 2005
Counsel for the Applicants: Mr M Dicker
Solicitor for the Applicants: Barnes & Wenden
William Lowe Edge, the respondent to the motion, did not appear
Date of Hearing: 5 October 2005
Date of Judgment: 31 October 2005