Needlework Warehouse Pty Ltd v Chansonette Pty Ltd

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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

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Details
Case
[2005] FCA 1525
Decision Date

CaseChat Overview and Summary

Needlework Warehouse Pty Ltd and others brought an application to enforce a settlement agreement in their proceeding against Chansonette Pty Ltd and William Lowe Edge. The applicants sought to enforce the agreement to settle the claims and counterclaims between the parties, which included allegations of breach of contract and misleading or deceptive conduct under the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (NSW). The key issues before the court were whether it had jurisdiction to enforce the settlement agreement, whether the enforcement should be pursued through a notice of motion within the substantive proceeding or by initiating a separate proceeding, and whether the agreement was intended to be immediately enforceable or contingent upon the parties executing a written instrument.

The court determined that it had jurisdiction to enforce the settlement agreement, based on accrued jurisdiction and s 39B(1A)(c) of the Judiciary Act 1903 (Cth). It concluded that the agreement was not within the scope of Masters v Cameron, despite some aspects being implemented by written instruments. The court also noted practical difficulties in enforcing the agreement due to the non-participation of Mr Edge. Consequently, the applicants opted to seek a declaration regarding the existence and terms of the settlement agreement rather than specific performance. The court granted the declaration and stood over the proceeding for further directions.

The court's decision hinged on its interpretation of the jurisdiction to enforce the compromise agreement and the practical implications of enforcing it. The court's order was to make a declaration as to the existence and terms of the settlement agreement and to stand over the proceeding for further directions, reflecting the practical challenges in enforcing the agreement without Mr Edge's cooperation.

Orders

Orders of the court

The proceeding be stood over to 9 November 2005 at 9.30 am for directions.

Background

Background to the litigation

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? and3.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 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. 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. 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. The Contract was completed on 18 October 2002, when Needlework paid Chansonette $1,625,000. 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 Act1974 (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).) 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. Chansonette and Mr Edge cross‑claim against Needlework for breach of agreements relating to the provision of post-completion consultancy services to Needlework. Apparently, the business had to be closed down, Needlework sold such stock as could be sold, and Tancot sold the land at a loss. 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.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

LINDGREN J
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 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. 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.

Ratio Decidendi

Legal Principle Established

Established by: LINDGREN J

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.CONSIDERATIONDoes the Court have jurisdiction to enforce an agreement of compromise of a proceeding in the Court? Before considering the authorities, I will indicate my reasons for thinking that the Court has jurisdiction to enforce the compromise agreement. 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’. 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. 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. 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. 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 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. 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.’