Byrnes v FRB Industries Pty Ltd and Anor

APPLICANT Mr A R Moses of counsel

SOLICITOR Teece Hodgson & Ward SYDNEY

LEGAL REPRESENTATIVES: RESPONDENTS Mr T D F Hughes of counsel

SOLICITOR (For the purposes of this Motion) G H Healey & Co - Sutherland SUTHERLAND.

JUDGMENT: - 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

IN COURT SESSION CORAM: PETERSON J

Matter No. IRC3806 of 2000 FRANK RICHARD BYRNES v FRB INDUSTRIES PTY LTD AND ANOR Application under s106 of the Industrial Relations Act 1996. JUDGMENT RE NOTICE OF MOTION

1 The applicant, Frank Richard Byrnes, has commenced proceedings under s106 of the Industrial Relations Act 1996 ('the Act') against FRB Industries Pty Ltd and FRB Industries (Vic) Pty Ltd.

2 By notice of motion the applicant sought leave to join an additional respondent, Landert-Motoren AG of Switzerland ("Landert-Motoren") and to file an amended summons for relief incorporating the additional respondent, together with appropriate alterations to the content of the summons for relief. The first and second respondents have opposed the motion. On 13 July 2001, after hearing argument on the motion, I indicated that I would accede to the motion to joining Landert-Motoren as a party to the proceedings. These are my reasons to so doing.

3 The initiating summons seeks to vary in whole or in part the contracts or arrangements between the applicant and the first and second respondents whereby the applicant performed work in an industry. It also seeks a declaration that they were unfair in the requisite sense; variations to the terms of the contracts and orders for the payment of moneys together with other associated relief.

4 The expression "the Contract" was defined in the summons to mean: (a) the Heads of Agreement between Aussie FRB and the First Respondent dated 31 August 1999;

(b) the Heads of Agreement between Aussie FRB (Vic) and the Second Respondent dated 30 August 1999;

(c) the Executive Service Agreement dated 16 December 1999;

(d) the Agreement to Acquire Business Assets dated 16 December 1999; and;

(e) the Agreement re: FRB Enterprises (Vic) Pty Ltd dated 16 December 1999.

5 The summons asserts that the applicant had been a shareholder, the Managing Director and an employee of Aussie FRB Enterprises Pty Ltd ("Aussie FRB") and also a shareholder and the Managing Director of Aussie FRB Enterprises (Vic) Pty Ltd ("Aussie FRB (Vic)").

6 The companies operated in the business of manufacturing, supplying, installing and servicing automatic doors and gates, principally in Sydney and Melbourne.

7 A major supplier of motors and controls to these businesses was Landert-Motoren. By late 1988 Landert-Motoren had acquired 10 percent of the issued capital of Aussie FRB (Vic) and was a creditor of Aussie FRB in an amount of approximately $1,200,000.

8 In late 1988 Landert-Motoren agreed to acquire 100 percent of Aussie FRB (Vic) and to acquire 33 percent of Aussie FRB by converting part of its debt to equity and also agreeing to extend and vary the terms of repayment of the remainder of its debt.

9 It was agreed that the applicant would remain as Managing Director and Chairman of Aussie FRB.

10 Before that agreement was implemented Landert-Motoren proposed to increase its acquisition of equity to 100 percent of the business of Aussie FRB.

11 The summons makes assertions about Landert-Motoren's conduct but ultimately the applicant alleges that he was required to sign two heads of agreement under duress, the effect of which was that the first and second respondents formally acquired all of the assets and undertakings of Aussie FRB and Aussie FRB (Vic). The summons also asserts that Landert-Motoren had effective control of the business of Aussie FRB (Vic) from July 1999 and owned all shares in that company from 1 October 1999. The applicant alleges that on or about 1 October 1999 he was required by the first and second respondent to execute: (a) an Executive Service Agreement;

(b) an Agreement to Acquire the Business Assets of Aussie FRB;

12 Suffice it to say, for present purposes, that the summons alleges a mistreatment, including demotion of, the applicant by the first and second respondents.

13 On 7 July 2000 the applicant gave notice to the first respondent that he regarded the actions of the first respondent as constituting a repudiatory breach of his contract of employment, leaving him with no option but to resign, which he did that day.

14 The motion is supported by an affidavit of Shah William John Rusiti, the solicitor for the applicant in these proceedings. The affidavit is one of information and belief based upon the information supplied to Mr Rusiti by the applicant. The affidavit includes the following: 7. On or about 1 October 1999, the applicant was required to execute certain documents by Landert-Motoren, the First and Second Respondents, pursuant to which, inter alia, the Applicant: (i) transferred the business of Aussie FRB to the First Respondent and the business of Aussie FRB (Vic) to the Second Respondent;

(iii) entered into a Shareholders' Agreement with Landert-Motoren in respect of the shareholding and management of the First Respondent. 8. From about July 1999 Landert-Motoren had effective control of the business of the Second Respondent and from 1 October 1999 Landert-Motoren owned all the shares in the Second Respondent.

9. Landert-Motoren has acted in breach of the Shareholders' Agreement by: (i) not transferring shares in the First Respondent to the Applicant; and

(ii) not complying with the terms of that Agreement in respect of the management of the First Respondent. 10. Landert-Motoren was materially involved and closely connected with the facts and circumstances involving the transfer of the businesses referred to in paragraph 7 above and the Applicant's employment by the First Respondent, as particularised in the Summons.

11. Landert-Motoren has demanded payment of $232,045.00 from the Applicant and that demand relates directly to the Contracts and issues in dispute in these proceedings.

15 The proposed amended form of summons would seek to add an additional instrument to the defined meaning of the expression "the contract" in the originating summons (see paragraph 4 above). The addition would be: (f) The Shareholders' Agreement between the Applicant, the Third Respondent and Mr Pender dated 16 December 1999.

16 The reply to the originating summons for relief filed on 4 December 2000 by the first and second respondents contained, as required, an outline of the contentions of fact and of law upon which the respondent will rely in defence of the summons. Landert-Motoren figures repeatedly in the contentions of fact although in development of the opposition of the respondents to the summons. Those references include the following: 9.3 Accordingly by October 1985 the share holders in Aussie FRB (Vic) were: (a) Mr Landert 10,000 shares

(d) Mr Doug Austin 20,000 shares. 10.1 The Respondents say that in October 1998 Mr H Landert of Landert Motoren attended a meetings (sic) with the Applicant and Mr Pender regarding the debt owed by Aussie FRB and Aussie FRB (Vic).

10.2 The Respondents admit that an offer was made to the Applicant and Mr Pender by Landert Motoren which included a "debt for equity" arrangement. The offer was never accepted.

14.1 The Respondents say that on 2 July 1999 a meeting took place between:

(b) Juerg Streckeisen, Financial Controller of Landert Motoren.

(g) Stephen Howard of Harrison Howard the FRB Chartered Accountant.

14.2 All parties reach (sic) an Agreement in principal as a result of that meeting and it was agreed that Landert Motoren would provide to the Applicant and to Mr Ben Pender draft Heads of Agreement.

17 I note that the respondents deny strongly the assertions made by the applicant. But for the purposes of the question of joinder involved in this judgment I confine myself to those matters in the reply which would appear to implicate Landert-Motoren in the contracts or arrangements to which the initiating summons has been directed or will be directed if leave be granted to amend. The respondents deny that Landert-Motoren had effective control of the business of Aussie FRB (Vic) from July 1999.

18 As to the matters of law provided in the respondents' reply to the Summons for Relief the following appears:

The Respondents contend that the definition of Contract contained in Section 105 and the reference by the Applicant in paragraph 9 of part A of his Summons, requires that the Court looks at not only the document headed Executive Service Agreement dated 19 December 1999 but further as to all documents executed on or about that time as constituting the "Contract or Arrangements, or any related condition or collateral arrangements". In particular the Respondent contents (sic) that the Contract encompasses the following documents:

(a) Heads of Agreement between Aussie FRB Enterprises (Vic) Pty Limited and FRB Industries (Vic) Pty Limited dated 31 August 1999.

(b) Heads of Agreement between Aussie FRB Industries Pty Limited, Rinlock Pty Limited and Benedict Michael Pender and Frank Richard Byrnes.

(c) Agreement to acquire business assets between Aussie FRB Enterprises Pty Limited, FRB Industries Pty Limited, Rinlock Pty Limited and Benedict Pender and Frank Brynes dated 16 December 1999.

(d) Agreement between Aussie FRB Enterprises (Vic) Pty Limited and FRB Industries (Vic) Pty Limited dated 16 December 1999.

(e) Shareholders Agreement, FRB Industries Pty Limited between Landert Motoren AG and Benedict Pender and Frank Brynes dated 16 December 1999.

(f) An Executive Service Agreement between FRB Industries Pty Limited and Frank Richard Byrnes dated 16 December 1999.

19 There is no issue that the Act (s.170) and the Rules made thereunder (r.83(c)) permit the joinder of parties. The primary question to be answered in that context is whether there appears, on the material before the Commission, a sufficient basis for considering that the party proposed to be joined may have a connection with the impugned contract or arrangement such that any substantive relief may be able to be ordered against that party. It is, of course, not necessary that such now appears in a final sense.

20 The breadth of the relief available under the section, in the context of persons who may be brought to account by it, was dealt with in Visalli v Southwell and Ors (1988) 12 NSWLR 502 at 511 where Priestley JA said (in relation to a predecessor to s106): 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 s88F, 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.

21 The reference by Priestley JA to Brown and Ors v Rezitis & Ors (1970) 127 CLR 157 was to the judgment of Barwick CJ who said: In my opinion, even if the proceedings for the variation or avoidance of the contract or arrangement must be initiated by one of the parties to the contract or arrangement, the parties to the proceedings are not necessarily limited to those parties. . . .

Also the power given to the Commission includes a power to declare the contractual arrangements void as from their making, not merely void as between the parties, but absolutely void. If there are other persons whose rights are known to depend on the continuance of the contract as a valid instrument according to its terms, then natural justice may in the circumstances require the Commission to afford such persons an opportunity to be heard. Again the avoidance of the contract or arrangement may be a step in uncovering the real transaction benefiting at the expense of the worker parties other than those in whose name the contract or arrangement was apparently made.

The five grounds on which the Commission may vary or avoid contractual arrangements are not homogenous. Only two of them refer to the avoidance of the award for the underpayment of a worker in industry. Consequently the nature of the orders which may be made under sub-s. (2) will of necessity cover a wide field. But underlying sub-s. (2) is I think a broad concept of a restitution of the parties to a situation which existed before the making of the contractual arrangement as well as in an appropriate case to make remedial provision for what has taken place or been done under the contract in the meantime. This, it seems to me, cannot of necessity and in all cases and with relation to an arrangement varied or avoided on each of the grounds in sub-s. (1) be confined to an order for payment of money by one of the parties. In some cases, as I have said, there will be persons who are not the parties to the contract but who have in fact participated in its making and there may be persons who have received money indirectly from one of the parties to the contract or who may be holding money derived therefrom for one of the parties. Consequently, I am of opinion that the power to order the payment of money is not limited to the making of an order for the payment of money by one of the parties to the contract or arrangement varied or avoided.

22 Taking into account the evidence of Mr Rusiti, the nature of the claims which are made and the principles to which I have referred in Visalli v Southwell and Brown v Rezitis, there is a real potential that the applicant may be able to establish the need for relief against Landert-Motoren, particularly if he succeeds on the effective control point, although that remains an issue yet to be heard and decided. Accordingly, there can be no basis for declining to join the additional respondent and not giving consequential leave to amend. Costs are reserved.

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