Alan Glover v Green Flower Pty Ltd

Industrial Arbitration Act 1940 Industrial Relations Act 1996 LEGISLATION CITED: Industrial Relations Commission Rules

Crowe v UCS Developments Pty Ltd [2003] NSWIRComm 234 Donald F Hagans v UnitedGlobalCom, Inc. & Ors [2004] NSWIRComm 164 Hansen v Namoi Enterprises [2004] NSWSC 65 Minister for Youth & Community Services v Health and Research Employees of Australia, New South Wales Branch (1987) 22 IR 59 CASES CITED: Reich v Client Server Professionals of Australia Pty Limited (Administrator Appointed) (2000) 99 IR 69 Silberman v One Tel Ltd [2001] NSWSC 895 Visalli v Southwell (1988) 12 NSWLR 502 Youry Dawidar v One Steel Wire Pty Ltd and another [2004] NSWIRComm 372

APPLICANT: Mr M Gibian of Counsel SOLICITORS: Russell J Baxter LEGAL REPRESENTATIVES:

RESPONDENT: Mr C Magee of Counsel SOLICITORS Bateman Battersby

• 6 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION

ALAN GLOVER v GREEN FLOWER PTY LIMITED (IN LIQUIDATION) (formerly known as P&H PROPERTY SERVICES PTY LTD) Application under section 106 of the Industrial Relations Act 1996

1 This judgment deals with a motion brought by Mr Glover, seeking leave to join Mr George Popov and Ms Merriel Hares, as respondents to the proceedings. They are directors and shareholders of Green Flower Pty Ltd (in liquidation) (formerly known as P&H Property Services Pty Ltd), the current corporate respondent, to which I will refer as the company. 2 It is the case of Mr Glover, that Mr Popov and Ms Hares were each involved in the management of the company, and that they had sufficient connection with the contract here in question, that substantive relief might be granted against them. The company was put into administration in late 2004 and liquidation, on 25 January 2005. It did not appear at the joinder hearing. Mr Popov and Ms Hares appeared, but neither consented to, nor opposed the joinder application. A costs order sought against them by Mr Glover was opposed. 3 The proceedings are concerned with the fairness of a contract of employment between Mr Glover and the company, entered in May 1998 and which appears to have come to an end in July 2002. The proceedings were commenced in November 2002 and were unsuccessfully conciliated by Peterson J in September 2003. 4 There is no doubt that joinder of parties may be ordered by the Court, either on application of an applicant or respondent, pursuant to the provisions of the Industrial Relations Act 1996 ('the Act') and the Rules (see section 170 of the Act). There is also no doubt that in s106 proceedings, the Court has power to make orders against non-parties to a contract, such as directors and shareholders of a corporate respondent, if the necessary connection with the impugned contract be established on the evidence. 5 Section 108B now, however, requires that applications for orders under s106 be made not later than 12 months after the termination of the contract in question. 6 Here, the proceedings were commenced in November 2002, after the enactment of s108B in the preceding June. Like the joinder application before Haylen J in Donald F Hagans v UnitedGlobalCom, Inc. & Ors [2004] NSWIRComm 164, here an amended summons has been formulated, which indicates how the case against the proposed new respondents would be advanced. 7 It is relevant to the joinder sought, that with the enactment of s108B, Mr Glover would no longer have the right to initiate new proceedings against Mr Popov and Ms Hares, given the lapse of time since the termination of the employment. (See Youry Dawidar v One Steel Wire Pty Ltd and another [2004] NSWIRComm 372.) 8 What also must be considered, however, is that it has long been held that orders in proceedings such as this may be made against persons not party to the proceedings. In Visalli v Southwell (1988) 12 NSWLR 502, the Court of Appeal upheld the power of the then Industrial Commission to order the joinder of a party in unfair contract proceedings brought under s88F of the Industrial Arbitration Act 1940 (the predecessor to s106). Kirby P (with whom McHugh JA agreed) when dealing with 'Principles governing exercise of power to order joinder' said at p507: The jurisdiction of the Industrial Commission to make an order or award under s 88F of the Act does not depend, in the terms of that section, upon the presence before the Commission of particular parties. The Commission's jurisdiction attaches if it is shown that there is a "contract or arrangement or any condition or collateral arrangement relating thereto whereby a person performs work in any industry [...]". The power of the Commission to make an order or award for the payment of money is one expressed, by s88F(2), in wide terms. It is not limited, in the language of the subsection, to the parties before the Commission. All that is required is that the payment should be made "[...] in connection with any contract, arrangement, condition or collateral arrangement declared void [...]". That said, there are necessarily other restraints upon the making of orders against persons not parties. They include the requirement of natural justice that, before any such order should be made affecting or purporting to affect a person, such a person should have the opportunity to be heard: see Brown v Rezitis (1970) 127 CLR 157 at 164. They also include the consideration that to enforce the award effectively beyond the jurisdiction of New South Wales against a person who does not comply with it will require proof that that person has been lawfully made subject to the jurisdiction of the Commission.

9 Priestley JA said at p511 : Section 88F authorises the Commission to make a variety of orders or awards in regard to contracts of a defined kind, if any one of various grounds is found to exist. There is no restriction in the section limiting the persons who may be the subject of orders made under it. It is settled that the operation of the section is not limited to persons who are in law the parties to the contract all or part of which is in question in an application under the section. Any person who can reasonably be thought to have a real connection with the contract is within the Commission's jurisdiction under the section. Persons having no conceivable connection with the contract are not: see Brown v Rezitis (1970) 127 CLR 157 at 164-165.

For the Commission to see whether, in any application under s 88F, any person has a sufficient connection with the contract in question to be within the Commission's jurisdiction in regard to that contract, it needs to have that party before it when it deals with the application. This serves the necessary purposes (i) that the Commission may exercise jurisdiction properly, (ii) that the person who may be affected by any order made under the section will have had due opportunity to make any case that party wants to make in regard to the application and (iii) that the party may unarguably be bound by any decision of the Commission. 10 McHugh JA said in Minister for Youth & Community Services v Health and Research Employees of Australia, New South Wales Branch (1987) 22 IR 59 at p74: Who then can properly be a respondent to the proceedings? In my opinion any person whose rights or legitimate expectations will or may be affected by the exercise of the power conferred by s 88F is a necessary respondent. 11 The question in the present case, therefore, is whether the enactment of s108B has affected the Court's power to order joinder in circumstances such as this. The Full Court considered the operation of the section in Crowe v UCS Developments Pty [2003] NSWIRComm 234, albeit in different circumstances to those which here arise, because those proceedings were commenced before the enactment of 108B. Nevertheless, the judgment is of considerable assistance to what here requires consideration. 12 In Crowe, the proposed amendment sought to add two additional respondents. Both the original summons and the proposed amended summons sought a finding of unfairness in relation to a contract of employment between the applicant and one of the original respondents. The two additional respondents were sought to be joined because of their alleged participation in the circumstances which gave rise to the original application. That is, as was observed by the Court at [54]: "…the fourth respondent purchased the assets of an entity within which the applicant worked and which commenced paying Mr Glover's salary. It is further alleged that the applicant reported to the third respondent whilst employed by the second respondent. However it is not alleged in the summons that the applicant became employed by the fourth respondent. The summons proceeds on the basis that the applicant's employment continued with the second respondent and that the fourth respondent brought about the termination of his employment with the second respondent which occurred through the actions of the third respondent as a director of the fourth respondent. The proposed amended summons still has as a substantial focus the contract of employment between the applicant and the second respondent and his employment by the first and second respondents. 13 The Full Bench explained the basis upon which the joinder of the additional respondents was sought as being "their alleged participation in the circumstances which gave rise to the initial application for an order under s 106 constituted by the original summons". 14 The Court held at [39]: On its face, s 108B has the effect of imposing a time limitation on the filing of a summons seeking relief in respect of a particular or identifiable contract. That is, on and after 24 June 2002, a summons cannot be filed in the Court seeking relief under s 106 'in relation to a contract' terminated more than 12 months prior to the filing of the summons and there is no jurisdiction to extend the time so limited."

15 The Full Court then considered whether the proposed amended summons constituted an amendment to the application for an order already made or whether it was "a separate application". The question was also formulated in a different way at [52]: Does the amendment, in substance rather than in mere form, give rise to an application for an order declaring wholly or partly void or to vary the same contract or arrangement as that identified in the original application, or does it amount to an application for an order in respect of a different contract or arrangement? 16 The Full Court concluded that the proposed amended summons did not constitute a fresh application for an order, but was in substance an amendment to the application. It also observed at [56] that: There may be circumstances in which an amendment to an original application may be so substantial or its nature such as to warrant the conclusion that it could be characterised as an application for an order caught by s 108B. That is not the situation here.

17 The question in these proceedings is whether the proposed amended summons constitutes a fresh application for an order under s106. It was apparent from the case advanced, that the joinder was sought because the existing respondent has gone into liquidation. At this stage, the liquidator has not been approached to consent to the proceedings being pursued against that company, nor has the Supreme Court been approached for leave to proceed. Given the approach of Macready M in cases such as Silberman v One Tel Ltd [2001] NSWSC 895 and Hansen v Namoi Enterprises [2004] NSWSC 65, there must be doubt as to the necessity and/or utility of such an application, in circumstances where it is not intended to press orders against the company in liquidation, unless perhaps, an order varying the contract in question, of itself affects the rights of the company in some material way. 18 The view taken in Namoi, when such leave was sought, for example at [28] to [30] was that: 28 I do not doubt that proof of the contract is necessary to found jurisdiction. There is also no doubt that orders may be made in s 106 of the Industrial Relations Act proceedings against those who are not parties to the relevant contract. This was settled by the High Court in Brown v Rezitis (1970) 127 CLR 157. The principle has been consistently followed by full benches of the Commission over the years. For example, in Reich v Client Server Professionals of Australia Pty Limited (No 2) [2000] NSWIRComm 196, Hungerford J observed: "It is not unusual in s 106 applications, where a contract is challenged, for persons not strictly parties to the contract to be made respondents so that they may be heard as to claims against them for the payment of money on the avoidance or variation of the subject contract once the grounds of unfairness have been made out. So much is clear from the very many occasions occurring in this Court on a regular basis, and as dealt with by the High Court in Brown v Rezitis (1970) 127 CLR 157; that is effectively the position here: see also Ace Business Brokers Pty Ltd v Phillips-Treby [2000] NSWIR Comm 163." 29 The defendant rightly points out that s 108 of the Industrial Relations Act specifies who may be applicants to proceedings and relevantly restricts the right to an application to a party to a contract (as defined in s 105 of that Act to include an arrangement). No such qualification exists in the legislation as to who may be made a respondent to an application. Nor is there any requirement for them to be a party.

30 It seems to me that it is not necessary for the defendant to be a party to the proceedings before the Commission. The contract can be proved by the plaintiff. It seems plain from the material which I have quoted that the plaintiff itself sees its claim as against Challenge and does not seek to enforce any judgment in the winding up. Unfortunately unless the proceedings remain stayed against the defendant there will be difficulties and delays in the winding up and further expense may be caused. In these circumstances I refuse leave to proceed against the defendant. 19 Section 106 permits this Court to deal with contracts found to be unfair. Orders declaring such contracts void or varying them may then be made, as may money orders. There have certainly been other cases where an applicant has obtained leave of the Supreme Court to pursue s106 proceedings. 20 Reich v Client Server Professionals of Australia Pty Limited (Administrator Appointed) (2000) 99 IR 69, was one such case, where the appointment of an administrator led to an application for joinder of two directors of the company and the leave of the Supreme Court being granted for the proceedings against the company to continue. (See at [8]). 21 As explained by Mr Gibian of counsel for Mr Glover, it is likely that Mr Glover will not seek ultimately to proceed against the existing respondent, but only the proposed new respondents, given the company's liquidation and information which has recently come into Mr Glover's hands, which shows that the proposed respondents continue to operate the former business of the company, through a series of other corporations, of which they are the directors and ultimate shareholders. What Mr Glover ultimately decides to do cannot be known at this stage. Mr Gibian indicated that if necessary, the consent of the liquidator and/or leave of the Supreme Court will be sought. 22 The question which must presently be determined, however, is whether or not the proposed amended summons constitutes a fresh application for an order under s106, time barred by s108B. The answer lies in the provisions of the section and the proposed amended summons. Section 108B provides: 108B Time for making application

(1) An application for an order under this Division in relation to a contract that has been terminated must be made not later than 12 months after the termination of the contract. (2) The Commission does not have jurisdiction to extend the time for making any such application or to accept an application made after the time prescribed by subsection (1).

23 The proposed amended summons seeks to make Mr Popov and Ms Hares jointly and severally liable for the money orders sought in the original summons, including as to interest and costs; and to insert reference to factual matters concerning their interest in the company as directors and shareholders and their involvement in the negotiation and determination of Mr Glover's employment conditions. 24 In those circumstances, it must be concluded that s108B does not preclude the joinder sought being ordered. The amendment proposed to the orders sought in the original summons are not such that the view can properly be taken that either an entirely different contract to that already at issue in the proceedings is sought to be attacked, or that the amendments to the orders presently sought are so substantial, that it must be concluded that s108B is breached. A proper basis for the joinder has otherwise been established on the case advanced, given the connection alleged between Mr Popov and Ms Hares and the contract here claimed to be unfair, so as to warrant relief being granted under s106. On the approach of the Court of Appeal in Visalli, they should be brought before the Court. 25 It follows that the joinder sought must be granted. 26 Mr Glover also sought an order for costs against Mr Popov and Ms Hares, which they resisted. The usual order would be that the costs of the motion be costs in the cause. Mr Popov and Ms Hares neither consented to nor opposed the joinder sought. The existing respondent did not oppose the joinder, but nevertheless, what was proposed required the Court's leave. There was nothing advanced about these circumstances which could provide a proper basis for a costs order against Mr Popov and Ms Hares. It is accordingly refused. Orders

27 For the reasons given, the joinder sought is granted. Mr Glover has leave to proceed upon the basis of the amended summons. Costs of the motion are to be costs in the cause. I order accordingly. 28 These orders require that the matter now be referred for further conciliation, in accordance with s109 of the Act. The new respondents are directed to put on their replies to the amended summons, in accordance with the usual timetable fixed by the Rules. Mr Glover should file any response on the same basis.

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