NSWNSWIRComm

Boyd and Anor v Maxx Implementation Pty Limited and Ors

[2008] NSWIRComm 200

Industrial Relations Commission (NSW)|2008-07-01|Before: Schmidt J, Mr P

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At a glance

Source facts

Court

Industrial Relations Commission (NSW)

Decision date

2008-07-01

Before

Schmidt J, Mr P

Source

Original judgment source is linked above.

Judgment (35 paragraphs)

[1]

For the reasons given, I find the contracts here in question relevantly unfair. I propose to order their variation, in accordance with the terms of this judgment. The parties are directed to confer as to the terms of the orders to be made, to reflect this judgment. If they are unable to agree on such terms, they should each file the orders which they will submit that the Court should make and I will hear them on the terms of those orders. Such draft orders should be filed within 21 days of the date of this judgment. 13 I took the view that given the parties' relationships, the demonstrated unfairness of the various contracts was adequately remedied by variation of Mr Boyd's employment contracts. The variation of his contract with Maxx Implementation, gave Mr Boyd the right to access the financial records of the business; to be properly consulted on how profits were calculated and that the payments were to be fairly calculated, having regard to his interests, as well as those of Mr Ludwig. The contract with Maxx was also varied to give Mr Boyd a 25% share of the profits. No further variation was required given that no profits were, in fact, generated by the business when operated by Maxx. Given the variations made to the employment contracts, I took the view that it was unnecessary to also order the variation of the contract to which the second applicant was a party, especially given the conclusions reached as to what the evidence had demonstrated in relation to the outstanding profit share claim. 14 That approach reflects a view of the section long held by this Court and its predecessors, that the section is intended to protect 'one set of men from another set of men, the one from their situation and condition, being liable to be oppressed or imposed upon by the other' (See Agius v Arrow Freightways Pty Ltd [1965] AR 77 at 88 per Beattie J). In Davies & Anor v General Transport Development Pty Ltd & Ors [1967] AR 371, Sheldon J observed at p 374 that 'smart operators would do well to consider whether it may be cheaper in the long run to assume, with what equanimity they can summon, the burdens that fall on more orthodox employers' and at p 373, that 'destruction, dilution, renovation and patching are all weapons in the section's arsenal', but that therefore, 'such massive power' granted by the section 'should be exercised with proper restraint' at p 374. 15 In my view, only orders which will provide a practical answer to the unfairness identified in a particular case, need be made by the Court in proceedings such as this. In this case, it was sufficient to vary the employment contracts in order to address the unfairness found, in relation to both applicants' contractual entitlements to a profit share. That view was confirmed by the conclusion that no money order as to a profit share could flow. 16 That does not mean that the second applicant failed in the case which it advanced in these proceedings. To the contrary, it succeeded in the claims advanced as to the unfairness of the contract to which it was a party, resulting in the conclusion reached at [233], that the contract was relevantly unfair. That unfairness was addressed by the order of variation made to Mr Boyd's contract. Costs The second applicant 17 The second applicant is entitled to a costs order in its favour, reflective of the conclusions which I reached as to its success in the proceedings. The fourth respondent 18 The parties agreed that the proper order as to the fourth respondent was that the applicants' claim be dismissed, the application having been brought out of time. They did not agree on a costs order, with the fourth respondent seeking an order in its favour and the applicants arguing that there should be no order as to costs, because no costs additional to those incurred by the other respondents, had resulted. 19 I am unable to accept the applicants' submissions, given that the proceedings were brought against the fourth respondent by way of amended summons filed in September 2004, when the contract in question had been terminated in June 2003 and the proceedings had been commenced against the other respondents in March 2004 (see [116]). This gave rise to issues not relevant to the position of the other respondents, which the fourth respondent raised successfully, leading to the dismissal of the claims brought against it. Justice requires that costs must follow that event.

[9]

29 Despite the public interest in such offers being made and accepted, underpinned in these proceedings by the conciliation process which parties are afforded under s 109 of the Act, a Calderbank offer never results automatically in the Court making an indemnity costs order. Two questions must always be considered. Firstly, was the offer a genuine offer of compromise? (See, for example, Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 at [4].) The second, was there an appropriate opportunity to consider and accept the offer? (See the discussion in Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [99].) 30 The onus falls on the applicants to satisfy the Court as to both issues, in order to establish that it was unreasonable for the respondents to have refused the offer. 31 There is no doubt that the applicants achieved a result significantly greater than the offer which they made. Had the offer been accepted by these respondents, or any of them, they would have been better off. The offer of some $145,000 must be contrasted to the money orders made, totalling over $164,000, even despite the fact that the applicants failed to achieve any money order in respect of the claim for a 25% profit share. There can be no doubt in the circumstances that the offer was a genuine one. 32 As to the question of whether there was an appropriate opportunity to consider the offer, it must unquestionably be concluded that there was. That offer was made after the conciliation conducted by Boland J in September 2004 and was available to be accepted for 28 days. There was no response. On any view, the issues lying between the parties had been explored in the conciliation process, so that they each came to an understanding of the others' positions. 33 The cases also show that prospects of success is a relevant consideration in considering a Calderbank offer. While in proceedings such as this, what has first to be demonstrated by an applicant is the unfairness of the contract, the prospects which the applicants had given the matters on which they succeeded, were well within the knowledge of the respondents. The claims concerned outstanding statutory entitlements, as well as expenses incurred which had not been reimbursed. The contracts had been terminated without any notice and a notice claim was advanced. Clearly, the applicants' claims in these respects, had a good foundation. 34 The applicants succeeded in demonstrating unfairness of their contracts, also achieving money orders in connection with outstanding salary, superannuation entitlements, annual leave entitlements, unpaid expenses and notice of termination. The conclusions as to unfairness, in part, flowed from evidence given by Mr Ludwig himself, as well as from the respondents' business records and the evidence called from Ms Grove, a senior, long term employee in the business. That Mr Ludwig and Ms Grove were not prepared to be truthful in their evidence, must also be considered. In Blagojevch v Australian Industrial Relations Commission (2000) 98 FCR 45, a Full Bench of the Federal Court observed at [35] - [36]:

[10]

[35] The second alleged error gives rise to more difficult questions. The applicant, in submissions before the Senior Deputy President and the Full Bench, relied on aspects of the employer's conduct in the course of the proceeding; but it is fair to say that the precise basis on which that conduct was said to be relevant emerged only in the course of oral argument before us. Principally, the applicant relied on the conduct of the employer in resisting the applicant's claim for compensation, and rejecting the offer of settlement, in intended reliance on evidence which, ultimately, the Commission did not accept. That conduct was relevant and should have been taken into account, the argument proceeds, because although the Commission made no express finding of fraud or that evidence had been deliberately concocted, it nevertheless found, on the balance of probabilities, among other things, that a director of the employer both gave evidence, which was untrue, of the giving of warnings and made a series of entries in a diary, after the event, which did not reflect what had actually happened. The necessary consequence of those findings was that, at the time when the settlement offer was made and refused, the employer (by its director) knew that the applicant had not been given the warnings which it claimed had been given and knew also that the applicant had not arrived late for work on anything approaching the number of occasions which the employer alleged (an allegation which the employer then sought to corroborate by producing the diary entries). Thus, it was said, the findings as to the employer's conduct should not have been excluded as irrelevant to a consideration of the reasonableness of its conduct in refusing the offer of settlement: what it knew of the relative merits of claim and defence must be material to that consideration. It could hardly be said, after all, that a finding as to the knowledge of the employer at the date of the settlement offer required the application of a standard of proof different from that applied in determining the claim for compensation; nor could it be said that a finding of knowledge at the time of the settlement offer did not follow from the Commission's findings in deciding the claim for compensation, merely because the latter findings were made according to the civil standard. In those circumstances, to deny the relevance of the Commission's findings on the evidence would lead to a conclusion that could not possibly be right: the more confident an employer is of its ability to defeat a claim for compensation on the basis of evidence which it knows to be false, the more reasonable its conduct in rejecting an offer of settlement.

[12]

35 In this case, that the respondents sought to resist the claim on the basis of evidence which they knew to be false, must equally be taken into account. It is thus necessary to have regard to the conduct of Mr Ludwig and Ms Grove. They each gave evidence about the circumstances in which the business came to be transferred to Maxx as a going concern, which was found not to have been given, as it ought to have been. There were difficulties with other parts of Mr Ludwig's evidence, which could not be accepted as having been truthfully given. These were serious conclusions, rightly to be regarded as misconduct relating to the litigation. The respondents cannot distance themselves from Ms Grove's evidence as they sought to do. They called affidavit evidence from her, which she revealed to have been untruthful in her oral evidence. That evidence confirmed the true position in relation to the transfer of the business, a matter always within the respondents' knowledge. 36 I return then to the fact that the offer was made to all the respondents, including the fourth, who later successfully resisted the applicants' claim, establishing that it had been brought out of time. Can that result in the conclusion that the offer cannot fairly be relied upon by the applicants as they seek to do in relation to the other respondents? 37 In Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15, the Court of Appeal considered an offer made by three plaintiffs, only two of whom succeeded. An order was made in favour of the two successful plaintiffs, the Court taking the view that the offer was a statement to the defendant, that it did not need to concern itself with the plaintiffs' individual claims or how the plaintiffs would distribute the moneys amongst themselves. 38 This offer may be approached on a similar basis. The evidence showed that Mr Ludwig operated complex business arrangements through which he conducted the business in which Mr Boyd worked, involving the other respondents to his advantage by inextricably interlinking his affairs with those of various other entities. Three of those entities were respondents in the proceedings, in addition to Mr Ludwig. By their offer, the applicants were communicating to the respondents their preparedness to settle their claims on the payment of the specified sum, being content to leave it to the respondents, as to how, as between themselves, that amount was to be paid. 39 I am satisfied that this approach did not fatally flaw the offer, so that it could not be regarded as a Calderbank offer. To accept the submissions which the respondents made to that effect, would require the important policy underpinning Calderbank offers to be ignored, as well as the reality of the relationship between the respondents, operated by Mr Ludwig to his significant advantage and the applicants' disadvantage. This approach would not do justice between these parties and would be inconsistent with the policy underpinning s 146(2) of the Act, which expressly requires that the Court take account of the public interest in the exercise of its functions. It would be contrary to the public interest to permit Mr Ludwig and the other respondents to shield themselves in this way. 40 There can be no doubt that the applicants achieved an outcome which the evidence called by the respondents made unavoidable. They ought to have accepted what, on any view, was a reasonable offer of settlement. 41 In the result, I am satisfied that apart from costs orders already made in the proceedings, the applicants should have an indemnity costs order in their favour, but with two exceptions, to which I now turn, consistently with McHugh J's discussion in Oshlack v Richmond River Council (1998) 193 CLR 72 at [67] - [69]:

[17]

The costs of proceedings before Haylen J 46 These proceedings were listed for hearing before Staunton J in December 2006. As a result of the late service of Mr Gower's expert report, the hearing was adjourned. 47 Earlier, various financial records had been produced by the respondents, in answer to summonses for production served by the applicants, but no expert's advice had been obtained by the applicants in order to advance their claims as to outstanding profit share, until just before the hearing commenced. 48 Mr Gower had been instructed to prepare his report on certain assumptions he was instructed to make. Mr Gower advised that if he was himself to independently assess and quantify the second applicant's loss of profit share, he would need to be provided with access to other of the respondents' financial records which he identified in a schedule. Further summonses were subsequently issued for the production of such records, with Haylen J later resolving a disagreement between the parties raised by way of motion, as to the extent of the production required. Before his Honour, the applicants' case was that the documents were required so that Mr Gower could complete his report, the applicants claiming that without the documents they were 'hamstrung by not having the documents of the business to come up with a figure rounded in the reality of the figures, but he has worked on certain assumptions provided to him by our client. What we are trying to do is to get to the documents that will support the foundation of that claim'. 49 The respondents then produced some 3,500 pages of documents in response to the summonses. Despite this production, no further expert's report was commissioned from Mr Gower. There was no explanation given as to why this further evidence was not led from Mr Gower. There was no evidence that he was ever instructed to undertake the task of independently assessing and quantifying the loss, which had led to the production sought. On the evidence, he was not asked to look at the documents until the commencement of the hearing, but even then the foreshadowed further evidence was not sought to be called from him, understandably, given at that point, leave to lead such late evidence was unlikely to be granted. Given that approach, in their case, the applicants had to establish a foundation for the assumptions Mr Gower was instructed to make. They attempted this through cross examination of witnesses, including Mr Ludwig. 50 Some of the documents were, however, put to Mr Gower in cross examination, in order to demonstrate that assumptions he had been instructed by the applicants to make in his report, had no foundation. 51 I am entirely satisfied from this history that the respondents ought not to have to bear the costs incurred by the applicants in this expensive and ultimately unnecessary forensic foray, let alone indemnity costs. While it was argued that it could not be concluded that the documents produced had not been used at all in the applicants' case, for example, by being considered by the applicants' solicitors, no evidence was called to support the submission. The matter raised must be determined on the basis upon which the parties litigated. 52 Before Haylen J, the documents were sought by the applicants for a purpose for which they were not used. Nor did they otherwise form a part of the applicants' case. The 25% profit share claim in respect of which they were sought, failed to result in any money orders. The applicants had long since settled their claims in this respect by the agreement which they had reached with other creditors, in the administration of Maxx Implementation. It had long traded without generating profits. 53 All of the steps taken to pursue these documents must be considered against the background of Mr Gower's conclusion that it was some $1,800 profit share which had not been paid to the applicants. The other claims advanced in relation to profits, were supported by the assumptions Mr Gower had been instructed to make. Despite the records sought being produced, Mr Gower was never asked to consider whether there was a basis in the financial records for those assumptions. In so far as it was necessary to consider the evidence in relation to those assumptions, I came to the view that the assumptions were not proven. 54 In that context, on any view, what was incurred by the applicants in their pursuit of the summonses for production before Haylen J, was an amount which justice could not permit the respondents being called upon to bear.

[20]

57 That course is not appropriate in this case, not only given the rejection of the applicants' offer of settlement, but for the additional reason that while the respondents succeeded in resisting a money order in respect of the 25% profit claim, they did not succeed in resisting a finding that the applicants' contracts were unfair in this respect. 58 As the authorities have long established, a finding of unfairness is a precondition to the exercise of any discretion given by the section, firstly to order the variation of the contract, or to declare it void and secondly, to make consequential money orders in favour of an applicant. 59 The applicants succeeded on the first two aspects of this statutory triumvirate, but not the last. For their part, while the respondents successfully resisted the making of a money order, they failed to make out the other critical parts of their case. I am satisfied that the costs of this part of the proceedings should follow the event, in favour of the applicants, on an indemnity basis, for the reasons earlier given. That flows properly from the respondents' refusal of the applicants' offer. Superannuation 60 This issue was raised in passing. Given how it was dealt with I make no orders as to how outstanding superannuation is to be paid. If there are statutory obligations which fall on the parties in this respect, they will have to adhere to them. Interest 61 The applicants sought an order for interest in respect of the money orders, from the date of termination of the employment to the date of judgment. Section 181 of the Act gives the Court power to make such an order, which was not opposed, except as to the period from December 2006 when the hearing of the application was adjourned, given the applicants' belated service of Mr Gower's expert's report, to the date when the hearing commenced before me on 31 March 2008. 62 I accept the respondents' submission as reflecting a fair adjustment of the parties' position in the circumstances in which that adjournment was brought about by the applicants. It was their inadequate preparation of the case which brought about an unnecessary delay. The respondents should not bear the interest consequence. Orders 63 For the reasons given, I make the following orders:

Boyd and Anor v Maxx Implementation Pty Limited and Ors - [2008] NSWIRComm 200 - NSWIRComm 2008 case summary — Zoe

Boyd and Anor v Maxx Implementation Pty Limited and Ors

At a glance

Court

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Judgment (35 paragraphs)

(b) the costs incurred in relation to the challenge to the March 2007 summonses dealt with in the proceedings before Haylen J, at the hearing on 17 April 2007 and the hearing itself.

Parties

Cases Cited (13)

Cited By (4)