Armidale Regional Council v O'Connor [2020] NSWLEC 56 | Case summary

Armidale Regional Council v O'Connor [2020] NSWLEC 56 | Case summary | Zoe

Monday 11 May 2020

Although I have recorded some of the history in the earlier judgments, I repeat that on Monday 11 May 2020 at approximately 2.20pm, the Court received a draft summons; draft notice of motion; and a draft affidavit of Matthew Dean Harker, the solicitor for Council, supporting an application for urgent interlocutory relief brought by Council and Susan Law ('applicants') against five councillors ('respondents'). Mr Harker's affidavit was lengthy and referred to detailed background documents accompanying his affidavit as exhibit MDH-1, which was not available to the Court at the time proceedings commenced.
The matter was convened in Court urgently, with the hearing commencing at 2.45pm and proceeding by audio visual link ('AVL'). Ms M Allars of senior counsel appeared for both applicants, instructed by Mr M Harker and Ms S Puckeridge of Lindsay Taylor Lawyers. Mr M Ball, solicitor from MBM Legal and Conveyancing, appeared for the five respondents. I indicated to the parties that I had read the draft affidavit of Mr Harker however the Court had not received the sworn version or the exhibit thereto at that time.
Ms Allars outlined the case on behalf of Council and Ms Law. In summary, she indicated that the urgency of the matter had arisen because there was an Extraordinary General Meeting of Council scheduled for 4.00pm that day (11 May 2020) and, despite requests, there had been a refusal by five councillors (being the five respondents) to disqualify themselves from participating in, or voting on, Item 7 at that meeting, which sought the removal of Ms Law from her position as General Manager and Chief Executive Officer ('CEO') of Council.
Ms Allars indicated that urgent interlocutory relief was required because the meeting would be infected by apprehended bias if it were to go ahead in circumstances in which Ms Allars outlined. Ms Allars referred the Court to the principle that an accuser cannot be a prosecutor, and further principles considered in well-known authorities in relation to the denial of procedural fairness and bias: Isbester v Knox City Council (2015) 255 CLR 135; [2015] HCA 20, Re Macquarie University, ex parte Ong (1989) 17 NSWLR 113, Stollery v Greyhound Racing Control Board (1972) 128 CLR 509; [1972] HCA 53. Ms Allars also referred to the comments of the Court of Appeal in McGovern v Ku-ring-gai Council (2008) 72 NSWLR 504; [2008] NSWCA 209.
In particular, Ms Allars submitted that each of the respondents was in the position of "accuser" in relation to Ms Law's performance as General Manager and her continued appointment as CEO by reason of a sustained series of serious allegations made against her. Further, the applicants alleged that each of the respondents had formed a concluded view as to the outcome of the motion for Ms Law's termination, such that it would constitute prejudgment.
A further aspect of the applicants' claim is that Ms Law had not been afforded a reasonable opportunity to present her case in relation to the motion for the termination of her contract. Ms Law had not been advised either as to what charge has been made against her or what the precise issues are in connection with her performance as General Manager. Ms Allars also submitted that the evidence indicates that a recent independent performance review had been undertaken in relation to Ms Law's conduct which categorised her conduct in the range of satisfactory to very satisfactory.
Ms Allars further submitted that, apart from the applicants' concerns being based upon breaches of both the hearing rule and the bias rule, there were further extenuating circumstances where serious allegations had been made against Ms Law's conduct, and that Ms Law had herself referred serious complaints to the Office of Local Government in relation to the conduct of a number of the respondents.
Mr Ball made submissions in response, however as I noted in Armidale Regional Council v O'Connor [2020] NSWLEC 53 at [3]-[4], he had not had the opportunity, given the urgency with which the matter had been brought before the Court, to consider closely the affidavit of Mr Harker. Despite this, it is clear his firm had been involved with the dispute between the parties for some time. Mr Ball submitted that Council should not be prevented from attending to its usual and proper duties and obligations and that Council had a right to terminate Ms Law under clear terms (cl 10.3.5) of her contract of employment. He further noted that there had been a serious breakdown in the relationship between Council and Ms Law and submitted that the "accuser" principle and prejudgment arguments made by Ms Allars should be seen in the light of the clear contractual relationship between Council and Ms Law.
The principles governing the grant of interlocutory relief are well-known. An applicant must demonstrate there is a serious question to be tried, such that there is a sufficient likelihood of success to justify the granting of an interlocutory injunction, and that the balance of convenience favours granting an injunction. These principles have been stated on many occasions: Tegra (NSW) Pty Ltd v Gundagai Shire Council [2007] NSWLEC 806; (2007) 160 LGERA 1 at [6].
In Shoalhaven City Council v Bridgewater Investments Pty Ltd [2010] NSWLEC 103, Biscoe J summarised the principles in a manner which I respectfully adopt as follows (at [4]-[5]): "[4] An applicant for an interlocutory injunction must establish that there is at least a serious question to be tried and that the balance of convenience favours the grant of the interlocutory injunction: Castlemaine Tooheys Ltd v South Australia [1986] HCA 58, 161 CLR 148 at 153-4; Inetstore Corporation Pty Ltd (in liq) v Southern Matrix International Pty Ltd [2005] NSWSC 883 at [13] (Campbell J); Tegra (NSW) Pty Ltd v Gundagai Shire Council [2007] NSWLEC 806, 160 LGERA 1 at [6] (Preston CJ). The Court must consider whether the harm which the applicant (or, in environmental cases, the environment) would be likely to suffer if an interlocutory injunction were refused outweighs or is outweighed by the harm or inconvenience which the respondent or a third party would be likely to suffer if the injunction were granted: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 623; Tegra at [18]-[19]. Thus, the balance of convenience is more weighty than mere convenience and involves balancing the risk of doing an injustice: Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 536 (McLelland J). Although normally the Court does not undertake an interlocutory trial and give or withhold interlocutory relief upon a forecast as to the ultimate result of the case (Beecham at 622), in some cases the strength of the applicant's case, above the threshold of a serious question, may be relevant to the risk of doing an injustice: Castlemaine at 154; Kolback at 536. [5] Usually, an applicant for an interlocutory injunction is required to give the Court an undertaking as to damages. This undertaking underwrites the risk, and responds to the court's anxiety, that the grant of the interlocutory injunction might later prove to be the wrong course of action and cause the respondent or a third party damage for which there is no redress except by an order for costs: European Bank Ltd v Evans [2010] HCA 6, 264 ALR 1 at [15]; Inetstore at [28]; Tegra at [28]-[31]..."
In considering the requirements in Beecham Group Limited v Bristol Laboratories Pty Limited (1968) 118 CLR 618; [1968] HCA 1 for a "prima facie" case, the following was stated in Meagher, Gummow & Lehane's Equity: Doctrines and Remedies (5th ed 2014, LexisNexis Butterworths) at [21-350]: "the plaintiff must prove a serious, not a speculative, case which has a real possibility of ultimate success and that property or other interests might be jeopardised if no interlocutory relief were granted." Put another way, an applicant must show a sufficient likelihood of success to justify the preservation of the status quo pending trial.
The executed copy of the affidavit of Mr Harker was made available to the Court during the hearing on the afternoon of 11 May 2020 along with further details of the scheduling of the Extraordinary General Meeting; a copy of the agenda; and the accompanying exhibit referred to by Mr Harker.
Given the limited time until the commencement of Council's meeting, the Court was unable to consider the detailed material in the exhibit to Mr Harker's affidavit, although it was apparent that some short notice had been given to the solicitor who then acted for the respondents and, as noted above, Mr Ball was in attendance at the interlocutory hearing.
Mr Harker's affidavit provided factual background to the Extraordinary General Meeting and, in particular, referred to a letter signed by seven councillors requesting an extraordinary meeting to consider a motion that Ms Law's employment as General Manager and CEO be terminated pursuant to cl 10.3.5 of her contract of employment. The affidavit also referred to complaints made on behalf of Ms Law (through her solicitor) to the Office of Local Government and the Minister for Local Government in relation to the conduct of a number of the respondents. Mr Harker's affidavit further dealt with matters regarding the discrete conduct of each of the respondents.
Considering the evidence and submissions made and noting that Ms Law proffered the usual undertaking for damages, I considered that the interlocutory relief sought was appropriate given that the Extraordinary General Meeting was to commence at a time shortly after the interlocutory hearing. Further, in circumstances where the matter was to be returnable before the Court at 10.00am the next morning (being Tuesday 12 May 2020) for further and more considered argument, on the basis of the evidence before me, and accepting the submissions of Ms Allars summarised above, I considered that there was a serious question to be tried and that the balance of convenience favoured the grant of the limited interlocutory relief sought by the applicants: Armidale Regional Council v O'Connor [2020] NSWLEC 53 at [8].

[3]

Tuesday 12 May 2020

In my ex tempore judgment delivered at 5.53pm on Tuesday 12 May 2020 (Armidale Regional Council v O'Connor [2020] NSWLEC 54), I repeated the background to the matter and made orders extending the limited injunctive relief granted on Monday 11 May 2020 and set the matter down for final hearing on 10 and 11 June 2020.
At the further hearing at 10.00am on 12 May 2020, the parties were unable to reach agreement in relation to further interlocutory orders and the ongoing conduct of the matter. I note that Ms Allars of senior counsel continued to represent Council, Ms Law was represented by Mr B Gottlieb of Sparke Helmore, and Mr M Ball continued to represent the first, third, fourth and fifth respondents. I received further submissions from both Ms Allars and Mr S Prince of senior counsel (instructed by Mr G Newhouse of Centennial Lawyers), who then appeared for the second respondent, and the matter was adjourned to 4.00pm that afternoon to allow for further discussions between the parties and I indicated at that time that the Court could accommodate a relatively expedited hearing (conducted by audio visual link) on 10 and 11 June 2020.
When the Court re-convened at 4.00pm on Tuesday 12 May 2020, Ms M Allars continued to appear for Council, with Ms Law then represented by Mr R Hassall of Sparke Helmore, and Mr S Prince then appearing for all five respondents. The Court was informed that the parties had been unable to reach agreement either in relation to further interlocutory orders or any undertaking on the behalf of the respondents to address the concerns of the applicants pending the final hearing of the matter on 10 and 11 June 2020. I thereafter heard further submissions, noting that, by that time, I had read more closely the affidavit of Mr Harker sworn 11 May 2020 and considered some of the material in the exhibit thereto. Again, apart from reference to correspondence in Mr Harker's evidence, there was no further evidence called by the respondents.
Ms Allars relied primarily on the submissions which she had made earlier, which are summarised at [4]-[8] above. She also submitted that an undertaking proffered by the respondents was not adequate to maintain a "holding pattern" until the final hearing on 10 and 11 June 2020.
Mr Prince made detailed submissions generally to the effect that the circumstances surrounding Council itself bringing these urgent proceedings were unusual and that the relief sought appeared to be aimed at protecting the private interests of Ms Law. He submitted that the primary subject of the dispute was, in effect, in relation to private employment and it would be extraordinary if Council (and indeed a number of elected councillors) were prevented from properly dealing with rights Council may have under a contract. Mr Prince further submitted that the effect of the interlocutory relief (and indeed final relief) was in effect a gerrymander which may result in an unfair advantage to other councillors.
Mr Prince opposed the continuation of the interlocutory orders. A limited form of undertaking was proffered on behalf of the respondents generally to the effect that the respondents would not move on the relevant item of the motion dated 28 April 2020 that sought the termination of the contract of employment of Ms Law and that the respondents would refrain from any such conduct until after 10 June 2020, at which time there was to be a further meeting of Council.
Mr Prince also submitted that the applicants were not entitled to any further interlocutory relief beyond what had been sought in the summons and no further undertaking was offered in relation to the respondents' participation in any motion that would revoke Ms Law's instrument of delegation from Council. Mr Prince placed emphasis upon the principle that a court would not grant specific performance of contracts of employment and referred to Council's right to terminate the specific contract of employment (in accordance with its terms). He submitted that the essential question was whether Council was entitled to act in accordance with its contractual rights. In the circumstances, if there was to be any interlocutory relief, Mr Prince submitted that there was little evidence to support any restraint in relation to the revocation of Ms Law's instrument of delegation.
Having heard the detailed submissions from both parties and, as noted above, having had the opportunity to further consider the evidence before the Court, noting that no discrete evidence had been marshalled on behalf of the respondents, I was satisfied that, again adopting the principles noted at [10]-[12] above, and accepting the submissions made on behalf of the applicants, that there was a prima facie serious question to be tried. Given the availability of a final hearing date within four weeks (which date was not inconvenient to the parties), and the fact that Ms Law continued to give the usual undertaking as to damages, I considered that the balance of convenience favoured the continuation of an interlocutory injunction albeit in a slightly different form to that which I had ordered the previous day such that a "holding pattern", as submitted by Ms Allars, could be maintained. Accordingly, I granted an extension to the interlocutory relief and made orders recorded in: Armidale Regional Council v O'Connor [2020] NSWLEC 54 at [10]-[11].
In reaching my conclusion and in making the orders on both 11 and 12 May 2020, I was concerned given the nature of the allegations in relation to both the conduct of Ms Law and the nature of the allegations apparently made by Ms Law against a number of the respondents and, particularly, the effect of this dispute upon the proper attendance by Council to its statutory duties and obligations. It is clear that, at this preliminary stage, on the material before the Court, there was a significant risk that had the meeting proceeded with the respondents in attendance, the meeting may have been infected by apprehended bias or raise other issues which Ms Allars submitted. In light of potential consequences that may ensue where a CEO is removed from their position in circumstances where the authority of a number of councillors to vote is unclear, I considered that the grant of limited interlocutory relief to allow time for those concerns to be resolved in an appropriate forum was appropriate and in the interests of justice.
I note that granting this relief is not without some practical consequence, which I took into account in deciding to grant interlocutory injunctive relief. The conduct of both Council and councillors are matters of significant public interest relating to the proper conduct of Council's activities that requires relatively urgent determination. As such, my decision to grant interlocutory relief was contingent upon the expedition of the final hearing, which was able to be set down on 10 and 11 June 2020, thus mitigating the impact to the ongoing operation of Council whilst ensuring that the serious issues raised are given an opportunity to be resolved in a proper fashion.
It is important to record that although the submissions made on behalf of the parties were limited, and although the evidence, particularly that comprising the exhibit to Mr Harker's affidavit, was extensive, the only question before the Court both on 11 and 12 May 2020 was whether or not the applicants were entitled to the interim interlocutory relief which they sought, and nothing in my earlier short judgments nor in these reasons should be taken as a final adjudication or prediction of the outcome in relation to the issues between the parties as they may ultimately be litigated.
Further, if the only issue raised related to Council's entitlement to terminate Ms Law's contract of employment (for example pursuant to cl 10.3.5 which provides that the contract may be terminated by way of Council giving 38 weeks' written notice to the employee or alternatively by termination payment under another clause), my view in relation to these proceedings generally, and the interlocutory relief specifically, may have been different, however, at least on the matters presently before the Court, and in accordance with Ms Allars' submissions, the issues clearly raise other matters in relation to the conduct of Council, Ms Law and certain councillors, in which there is a public interest in expeditious determination.

Armidale Regional Council v O'Connor

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Cases Cited (18)