Re Apple Computer Inc and Apple Computer Australia Pty Ltd v Computer Edge Pty Limited and Michael Suss [1989] FCA 299 (9 August 1989)

FEDERAL COURT OF AUSTRALIA

Re: APPLE COMPUTER INC. and APPLE COMPUTER AUSTRALIA PTY. LTD.
And: COMPUTER EDGE PTY. LIMITED and MICHAEL SUSS
No. G405 of 1983
FED No. 430
Contract - Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart J.(1)

CATCHWORDS

Contract - Settlement of proceedings in Federal Court - whether binding agreement in existence.

Practice and Procedure - Jurisdiction of Federal Court to hear and determine motion seeking declaration as to existence of settlement agreement.

HEARING

SYDNEY
9:8:1989

Counsel for the Applicants: Mr. D.K. Catterns

Solicitors for the Applicants: Abbott Tout Russell Kennedy

Counsel for Second Respondent: Mr. P. Donohoe

Solicitors for Second Respondent: Whiting and Kirby

ORDER

The notice of motion of 24 July 1989 be dismissed.

There be no order for the costs of either the applicants or the second respondent.

The matter be adjourned to a date to be fixed for further directions.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

This matter has a long history. There remains the question of determining damages following the contraventions of the Trade Practices Act 1974 which this Court found were committed by the respondents. The hearing of the issues on damages came before me recently; but, before I embarked upon the hearing, counsel for the applicants (to whom I shall for convenience refer as "Apple Computer") and counsel for the second respondent, Michael Suss, informed me that there was a preliminary question to be determined, namely, whether a binding agreement to settle the proceedings as between Apple Computer and Mr. Suss had been reached. If it had, it would dispose of the question of damages. No questions as between Apple Computer and Computer Edge Pty. Limited, the first respondent, remain because orders were made by the Court, by consent of Apple Computer and Computer Edge, dismissing the application as against Computer Edge (except for the injunctions granted by a Full Court of this Court on 5 June 1984) and dismissing Computer Edge's cross-claim against Apple Computer.

2. Accordingly, I heard a motion of Mr. Suss against Apple Computer seeking an order declaring that there is a binding agreement to settle the proceedings as between Apple Computer and Mr. Suss on the terms appearing in a letter from the solicitors for Apple Computer to the solicitors for Mr. Suss dated 5 July 1989.

3. I am satisfied that the Federal Court has jurisdiction to hear and determine the motion and to make appropriate declarations and orders and to enforce them if it should decide that the proceedings were in fact settled as alleged by Mr. Suss. I note that Spender J. reached the same conclusion in Ellwood v Darling Downs Investments Pty. Limited (1987) 14 FCR 580.

4. The evidence on the hearing of the motion consisted of the affidavits of Mr. D.E. Whiting (the solicitor for Mr. Suss), Mr. J.M. FitzSimons (the solicitor for Apple Computer) and Mr. J.M. Gyngell (a solicitor who assists Mr. FitzSimons in this matter). Both Mr. Whiting and Mr. FitzSimons gave oral evidence and were cross-examined. All three witnesses gave their evidence as to events relating to the alleged settlement of the proceedings and there is no large area of dispute between them, but such dispute as there is is significant.

5. I shall state my findings of fact. On 3 July 1989 Mr. Gyngell telephoned Mr. Whiting, and, amongst other things, they discussed on a without prejudice basis the possibility of settlement of the outstanding matters in the proceeding.

6. Mr. FitzSimons sent a letter dated 5 July 1989 to the solicitors for Mr. Suss, the terms of which are central to this matter, so I shall set them out in full omitting formal parts:

"APPLE COMPUTER INC AND ANOR -V- MR SUSS
There are a number of outstanding issues arising
out of the above proceedings. Solely for the
purposes of settling each and every one of those
issues our client is prepared to resolve the
matter as set out below.
The Issues
a. Damages arising out of the contravention of
the Trade Practices Act, 1974 found by the
Full Court ofthe Federal Court of Australia
to have been committed by the Respondents;
and
b. the Respondents' cross-claim.
The Settlement
a. Michael Suss pay to the Applicants $1 in
respect of the Applicants' damages in
relation to issue (a), the Application be
otherwise dismissed with no order as to
costs; and
b. the Cross-Claim be dismissed with no order as
to costs.
We note that this settlement is conditional upon
Computer Edge Pty. Limited (in liquidation)
agreeing to identical terms for the resolution of
these proceedings as far as it is concerned. This
is not a settlement offer which our clients intend
to debate. It must be simply either accepted in
full or rejected in full. We look forward to your
advice in due course.
Yours faithfully,
ABBOTT TOUT RUSSELL KENNEDY
Per: James FitzSimons"

7. Mr. Whiting did not have an opportunity to discuss the matter fully with Mr. Suss until early in the evening of Monday, 10 July when Mr. Suss agreed to accept the terms of the offer contained in the letter of 5 July. At about 5.30 pm that day Mr. Whiting telephoned Mr. FitzSimons. Mr. Whiting said that Mr. Gyngell did not appear to be available and he presumed that Mr. FitzSimons was familiar with the contents of the letter of 5 July. Mr. FitzSimons said that he had signed the letter. Mr. Whiting said that he had good news. The offer was acceptable to Mr. Suss. Mr. Fitzsimons responded by saying that that was good news and that his firm would draw up the documentation. Mr. Whiting said that the liquidator of Computer Edge was merely waiting for this matter to be finalised so that he could complete the liquidation of Computer Edge and so he should be happy to accept the settlement. I do not accept that Mr. Whiting said to Mr. FitzSimons that he could draw up terms of settlement if he wished to, but that Mr. Suss was accepting the offer in the letter of 5 July.

8. On 11 July Mr. Whiting telephoned Mr. Marchesi, an accountant in the firm of Messrs. Bent & Cougle, Chartered Accountants of Melbourne. Mr. D. Cougle is a principal of that firm and the official liquidator of Computer Edge. Mr. Whiting asked Mr. Marchesi if Mr. Cougle would agree to the terms of the settlement and Mr. Marchesi assured him that Mr. Cougle would so agree.

9. On Wednesday, 19 July Mr. Gyngell sent a facsimile to Mr. Whiting in these terms:

"We refer to our letter dated 5 July, 1989 and to
your subsequent discussions with Jim FitzSimons.
We now enclose the following documents for your
perusal:-
a. Short Minutes of Order; and
b. Deed of Settlement.
Please confirm that both documents are acceptable
to your client or alternatively advise us of any
amendments required as soon as possible. Provided
that all is in order would you please return the
documents executed in the appropriate manner.
Yours faithfully
ABBOTT TOUT RUSSELL KENNEDY
Per: James FitzSimons"

10. The draft Deed of Settlement and Release which
accompanied the facsimile letter was between the applicants, Computer Edge and Mr. Suss. The draft provided as follows:

"WHEREAS:
A. The parties are parties to proceedings in
the Federal Court of Australia being number
G405 of 1983.
B. Apple Computer Inc and Apple Computer
Australia Pty Limited are the Appellants
("the Appellants") and Computer Edge Pty
Limited and Michael Suss are the Respondents
("the Respondents") in those proceedings.
C. On 25 July 1983 the Respondents filed a
Cross-Claim in the proceedings.
D. On 5 June 1984 the Federal Court of
Australia ordered that the matter be
referred to His Honour Mr. Justice Beaumont
to hear and determine all relevant questions
on the issue of damages in relation to the
contraventions of the Trade Practices Act,
1974 which have been found by the Court to
have been committed by the Respondents.
E. The parties have agreed to settle the two
outstanding issues referred to in C and D
above.
NOW THIS DEED WITNESSES as follows:
1. SETTLEMENT
1.1 In consideration of the Respondents paying
to the Applicants the sum of $1.00 receipt
of which is hereby acknowledged, the
Applicants hereby release the Respondents
from any further liability in relation to
the contraventions of the Trade Practices
Act, 1974 which have been found by the
Federal Court of Australia to have been
committed by the Respondents.
1.2 In consideration of the Applicants accepting
the payment of the said sum of $1.00, the
Respondents hereby agree to discontinue the
Cross-Claim filed on 23 July 1983.
1.3 In consideration of the settlement herein
the parties agree and undertake to keep
confidential the terms of this Deed and not
to disclose the terms of same without the
written consent of each other party.
2. RELEASE
2.1 The parties hereby release and forever
discharge each of the other parties from any
actions, claims, suits or demands whatsoever
now arising or hereafter to arise out of the
facts and circumstances which gave rise to
the proceedings referred to in Recital A and
each acknowledge that the settlement between
the parties herein shall be in full and
final settlement and satisfaction of any
matter arising out of the hereinbefore
recited circumstances.
2.2 This Deed may be pleaded by either of the
parties in bar to any action, claim, suit or
demand brought by any other party or any
person claiming through that party in
respect of any action, claim, suit or demand
whatsoever now arising or herafter to arise
out of the facts and circumstances which
gave rise to the proceedings referred to in
Recital A.
IN WITNESS WHEREOF the parties have hereunto set
their respective hands and seals the day and year
first above written."

11. There then appeared the usual provision for execution by the parties.

12. The proposed short minutes of order also accompanied the facsimile transmission and they read as follows:

" SHORT MINUTES OF ORDER
BY CONSENT:
1. Excepting Order 1 made on 5 June 1984 the
Application be otherwise dismissed.
2. The Respondents' Cross-Claim filed on 25 July
1983 be dismissed.
DATED: 24 July 1989"

13. A similar facsimile transmission was sent on 19 July by Mr. Gyngell to Mr. Marchesi.

14. On 19 July Mr. Whiting received a telephone call from Mr. Marchesi who said that he had received by facsimile a draft deed of settlement and release from Mr. Gyngell which was not in exactly the same terms as had been communicated to him by Mr. Whiting, the difference being a confidentiality requirement contained within the draft. Mr. Whiting had not received any information at that stage from Mr. Gyngell as to the contents of the proposed deed of settlement. Mr. Whiting said in evidence that this conversation occurred on 18 July; but I am satisfied that it must have taken place on 19 July. Nothing turns on this.

15. On 20 July 1989 Mr. Suss's solicitors wrote to Apple Computer's solicitors in these terms:

"We have yesterday's facsimile and have discussed
the comments with our client.
In relation to the Short Minutes of Order would
you please provide us with a copy of Order 1 made
on the 5th June, 1984 the terms of which we will
need to confirm before agreeing to the Short
Minutes of Order.
In relation to the Deed of Settlement and Release
we express a great deal more concern.
The settlements terms contained in your letter of
the 5th July, 1989 were clear and unambiguous.
On behalf of our client we accepted those terms
and are prepareed to agree to those terms and to
no other.
Accordingly, clause 1.3 must be deleted in its entirety.
In addition we are not in a position to agree with
the terms of clause 1.1.
In relation to clause 1.1 our clients do not admit
that there was ever any liability to your clients
for damages. Your clients may well have been
entitled to some declaratory relief but there is
no evidence that we have been which would indicate
your client was entitled to any level of monetary
damages.
The reference to 'further liability' would
therefore need to be deleted or modified.
Otherwise we are prepared to recommend that our
client sign this clause subject to our sighting
the terms of the Order made by the full Court on
the 5th June, 1984."

16. At approximately 11 a.m. that morning Mr. Gyngell telephoned Mr. Whiting in response to the facsimile of 20 July when the following conversation ensued:

"Gyngell: 'David, I'm calling in relation to
your letter of 20 July. Firstly, the
change to paragraph 1.1 of the Deed
will be made. However, our
instructions are not to settle without
an undertaking of non-disclosure by
your client. Otherwise we go ahead on
Monday. Can you please get
instructions. The non-disclosure
aspect is subsidiary to the substance
of the settlement although being a
term of settlement. Our offer in our
letter of 5 July related to the two
outstanding issues before the Court
which are clearly set out in our letter.'
Whiting: 'I'll get instructions.'
Gyngell: 'We also haven't had a reply to our
letters of 19 May and 5 July
concerning witnesses. I must assume
you do not want to cross-examine.'
Whiting: 'I guess that is correct. We will be
seeking to enforce the settlement
agreement next Monday.'"

17. Mr. Gyngell made a file note contemporaneously with that conversation.

18. The next step in this matter was the writing of a letter dated 20 July 1989 by the solicitors for Mr. Suss to the solicitors for Apple Computer in the following terms:

"We refer to your facsimile of the 5th July, 1989
and 19th July, 1989.
As advised to your Mr. FitzSimons we accept the
terms of the offer contained in your letter of the
5th July, 1989.
As confirm to your Mr. Gyngell we do not accept
that the Agreement which accompanied your letter
of the 19th July, 1989 truly reflects the
settlement proposal contained in the earlier
letter.
We should point out that in the terms of your
letter 'this is not a settlement offer which our
clients intend to debate. It must be simply
either accepted in full or rejected in full'.
Our client, Michael Suss, agreed to accept it in
full and this was what was conveyed. Nothing
more, nothing less.
We therefore, by this letter, confirm the
discussions between David Whiting of this office
and James FitzSimons of your office and confirm
acceptance of the terms of the offer contained in
the letter of the 5th July, 1989. Accordingly, we
enclose a $1.00 coin in full payment of our
client's obligations under the terms of that letter.
We understand and confirm that Mr. Marchesi of the
firm Bent & Cougle Chartered Accountants and Denis
Cougle as liquidator of Computer Edge Pty. Ltd.
(in liquidation) have agreed not only to the terms
of your letter of the 5th July, 1989 but also to
the terms of the Deed of Settlement which
accompanied your letter of the 19th July, 1989.
In our view therefore, an agreement has been
reached between all parties which complies with
the terms of your letter of the 5th July, 1989.
If you provide us with the settlement document
which embodies those terms and no other then our
client will sign it.
Otherwise we will proceed on Monday to argue
acceptance of the terms for settlement as embodied
in your letter. As we see it all of the issues
between our clients which were formerly
substantial are now irrelevant and the only
unresolved issue is the meaning of your letter of
the 5th July, 1989."

19. There was yet a third letter of 20 July and this letter was written by the solicitors for Apple Computer to the solicitors for Mr. Suss returning the $1 coin. That letter is in the following terms:

"We refer to your second letter dated 20 July, 1989.
We are not instructed to accept the $1.00 tendered
in your said letter and accordingly it is returned
herewith.
We also make the following observations:
1. The settlement of this action, consistent with
others of this magnitude, is and was at all times
subject to the execution of a formal written
document. We note that the penultimate paragraph
of your said letter itself expressly contemplates
a 'settlement document'. Indeed it would be
totally unrealistic to submit that a matter which
has now been in the courts for six years could be
finally disposed of in a two minute telephone
conversation.
2. Furthermore, we note that the undertaking set
out in clause 1.3 is a standard condition in
settlement documents and does not constitute any
departure from the substance of the terms of our
letter of 5 July 1989.
3. Consistent with the above points we note that
Mr. FitzSimons advised you on 10 July 1989 that
this firm would attend to drawing up the
appropriate settlement documents. In our opinion
this clearly demonstrates that any settlement was
subject to the execution of those documents.
4. It is also relevant that at no time have we
informed either the Court or our client's
witnesses that the matter had been 'settled' as a
true settlement could only be consummated by the
executiion of the documents.
In these circumstances we are instructed to
proceed on 24 July 1989."

20. On 21 July 1989 the solicitors for Mr. Suss wrote to the solicitors for Apple Computer. The letter need not be set out in full. It is sufficient to say that Mr. Whiting said in the letter that settlement was completed so far as his client was concerned and made various comments with respect to the matter.

21. The solicitors for Mr. Suss wrote a second letter dated 21 July 1989 to the solicitors for Apple Computer again restating that the matter was settled on 10 July 1989. That completes the narrative of relevant facts.

22. The question is whether on the whole of the evidence there is a binding agreement between Apple Computer and Mr. Suss. The relevant principles are set out in the judgment of the High Court in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353, especially in the well known passages at 360-364.

23. The aspects of the evidence which lend strongest support to Mr. Suss's argument that a settlement was reached on 10 July during the telephone conversation between Mr. Whiting and Mr. FitzSimons are the terms of the letter of 5 July itself, in particular its final paragraph, and the terms of a diary note made by Mr. FitzSimons during that conversation which records, so far as material: "Settled in accordance with our letter of last Wednesday, ATRK to draw up document". When the facts are examined as a whole, however, the terms of Mr. FitzSimons diary note are neutral on the question now to be decided.

24. Having carefully considered all the evidence, I am satisfied that no concluded agreement was reached that the proceeding be settled as between Apple Computer and Mr. Suss. The litigation has, as I mentioned earlier, a long and rather complicated history, proceeding from the trial in this Court to the judgment of the Full Bench of this Court, then to the hearing of the appeal before the High Court after the grant of special leave. I do not accept that the parties intended to finally dispose of this embroiled matter following the sending of the 5 July 1989 letter in a brief telephone conversation between the solicitors on 10 July. Nor do I accept that all that remained to be done after the conversation of 10 July between Mr. Whiting and Mr. FitzSimons was the drawing up of a document to give effect to the settlement which was said to have been reached. It was recognised in my view by the persons concerned that there would have to be a document executed by the parties to give effect to any settlement; that, unless and until such a document was executed, there would be no settlement; and that, although the solicitors regarded the matter as settled in principle, it was open to any party to bring forward terms of settlement other than those mentioned in the 5 July letter after 10 July to be embodied in the document to give effect to a settlement.

25. I note also that the letter of 5 July itself made clear that there would be no settlement between any parties unless both Computer Edge and Mr. Suss agreed to the terms of the settlement. Computer Edge was in liquidation and Mr. Cougle was its official liquidator.

26. By 10 July, when the telephone conversation occurred between Mr. Whiting and and Mr. FitzSimons, no agreement to the the terms of settlement proposed in the letter of 5 July had been reached (or even proposed) between Apple Computer and Mr. Cougle, as liquidator of Computer Edge. Hence, the fundamental condition on which the alleged settlement of 10 July was based, namely, the consent of all three parties (Apple Computer, Computer Edge and Mr. Suss) had not been fulfilled. There is very little evidence before the Court as to the circumstances of the settlement between Apple Computer and the liquidator of Computer Edge. When Mr. Cougle gave his consent to the settlement (assuming he did so; and on this point the authority of Mr. Marchesi to bind him is not clear) the solicitors for Apple Computer had already sent the facsimile letter of 19 July, which enclosed the draft terms of settlement and short minutes of order, to Mr. Whiting and Mr. Marchesi. It was after the receipt of that facsimile that the matter was settled as between Apple Computer and Computer Edge on terms different from those embodied in the letter of 5 July, namely, on the terms proposed in or substantially in the letter of 19 July and the accompanying draft deed and short minutes of order.

27. I am satisfied that no concluded bargain has been arrived at for the settlement of this proceeding between Apple Computer and Mr. Suss.

28. Although there was little conflict on the evidence between Mr. Whiting and Mr. FitzSimons, such conflict as exists is fairly sharp. I prefer the evidence of Mr. FitzSimons where the evidence of the two gentlemen conflicts; but in doing so I must say that I do not regard Mr. Whiting as having been in any way untruthful. I simply regard the evidence of Mr. FitzSimons as more reliable and in accord with the inherent probabilities. It is only in a very clear case, in the circumstances of litigation with the long history that this matter has, that I would be prepared to find that the parties intended to finally and irrevocably settle a long standing dispute during a brief telephone conversation between the solicitors, even after receipt by Mr. Whiting of a letter in the terms of the letter of 5 July which is the source of the present problem.

29. The motion shall be dismissed. As neither Apple Computer nor Mr. Suss seeks an order for costs in the event of the success of the other, there will be no order for the costs of either Apple Computer or Mr. Suss of the motion.

30. The matter shall be adjourned to a date to be fixed for the purpose of giving directions with a view to the determination of the question of damages.