Carey & Ors v Industrial Relations Commission & Ors

COUNSEL : Mr A Moses for 2nd opponent on summons and applicant on motion Mr K G Bennett for 2nd & 3rd claimants on summons and opponents to the motion SOLICITORS : Baker & McKenzie - 2nd opponent on summons and applicant on motion Lyons & Lyons - claimants on summons CATCHWORDS : securty for costs DECISION : security for costs ordered as against the 2nd and 3rd claimants on the summons in the sum of $8,000 each - for full orders see paragraphs 25,26,27 and 28 of the judgment

Friday 11 June 1999 Luke Carey & ors v The Industrial Relations Commission of New South Wales in Court Session and anor

1. REGISTRAR: On 16 October 1998 a summons was filed in these proceedings seeking orders in the nature of prohibition, certiorari and mandamus in respect of proceedings in the Industrial Relations Commission of New South Wales. The 1st opponent, The Industrial Relations Commission of New South Wales in Court Session, has filed a submitting appearance. The 2nd opponent to the summons, Vision Publishing Pty Ltd, filed a motion on 4 February 1999 originally returnable on 22 February 1999 which challenged the summons as being without jurisdiction or in the alternative sought security for costs. By consent the challenges to the summons have been adjourned to be heard at the same time as the summons. An amended notice of motion was filed on 22 February 1999. This motion seeks security for costs from the 2nd and 3rd claimants, Paul Lane and P.K. Holdings Pty Limited, in a sum of $25,000. The motion was heard by me on 22 March 1999. Mr Moses appeared on behalf of the 2nd opponent, and Mr Bennett appeared for the 2nd and 3rd claimants. I was subsequently provided with written submissions.
2. The proceedings in the Industrial Relations Commission were commenced in 1994. A further amended summons was filed on 27 February 1996. The applicants were Luke Carey, Paul Lane and PK Lane Holding Pty Limited ('PK'). The respondent was Vision Publishing Pty Ltd ('Vision'). The summons sought relief pursuant to section 275 of the Industrial Relations Act 1991 alleging harsh, unfair or unconscionable conduct in relation to an employment like contract or agreement. Mr Carey and Mr Lane had been employees of Vision Publishing as salesmen. In early 1993 Vision decided that it would contract out its sales. A contract or arrangement was offered to Mr Carey and Mr Lane to act as agents of Vision. PK was set up as a vehicle for this agency agreement.
3. The proceedings were heard before Marks J over 10 days in 1996. On 19 December 1996 Marks J found that the agreement between PK Holdings and Vision was unfair and made orders varying the provisions of the agreement and ordered that a sum of money be paid to PK Holdings. Later this sum was determined to be $38,040. No orders were made in favour of Mr Carey or Mr Lane.
4. On 5 November 1997 Marks J delivered a separate judgment on costs. He ordered that Vision pay the applicants 90% of their costs on a party party basis to 2 September 1996 and thereafter 90% of their costs on an indemnity basis.
5. Vision filed an appeal from Marks J's orders to the Full Bench of the Industrial Relations Commission in Court Session. The Full Bench delivered their judgment on 16 October 1998. They upheld the appeal and set aside Mark J's orders, substituting orders dismissing the summons with costs. The summons in the Court of Appeal relates to that decision.
6. The claimants claim that the Full Bench of the Industrial Commission failed to afford the claimants procedural fairness. The basis of this argument is that a finding by the Full Bench that Marks J had been excessively interventionist was not a matter that had been raised on the appeal.
7. The motion for security for costs only seeks security from the 2nd and 3rd claimants. The motion does not state the basis on which security is sought. As this is not an appeal to the Court of Appeal Part 51 rule 16 does not apply. Mr Moses in his submissions has noted that the Court has an inherent authority to order security in appropriate cases. In this respect he has noted the Judgments of Holland J and the Court of Appeal in Rajski v Computer Manufacture and Design Pty Limited (1982) 2 NSWLR 443 and (1983) 2 NSWLR 122. Without relying on the inherent jurisdiction there is provision under Part 53 of the Rules for security to be ordered in certain circumstances. It is to be noted that in either event the determination of whether security for costs should be ordered is a matter of discretion, which must be exercised having regard to the circumstances of each case. The exercise of that discretion must be exercised judicially.
8. Part 53 rule 2 of the Supreme Court Rules states: 2 (1) Where, in any proceedings, it appears to the Court on the application of a defendant - (a) that a plaintiff is ordinarily resident outside the State; (b) that a plaintiff is suing, not for his own benefit, but for the benefit of some other person and there is reason to believe that that plaintiff will be unable to pay the costs of the defendant if ordered to do so; (c) subject to subrule (2), that the address of a plaintiff is not stated or is mis-stated in his originating process; (d) that a plaintiff has changed his address after the commencement of the proceedings with a view to avoiding the consequences of the proceedings; or (e) that there is reason to believe that a plaintiff being a body corporate will be unable to pay the costs of the defendant if ordered to do so, the Court may order that plaintiff to give such security as the Court thinks fit for the costs of the defendant of and incidental to the proceedings and that the proceedings be stayed until the security is given. (2) The Court shall not order a plaintiff to give security by reason only of subrule (1)(c) if it appears to the Court that the failure to state his address or the misstatement of his address was made without intention to deceive.
9. In respect of the 3rd claimant, PK Holdings, there is no dispute that this claimant is a shelf company. The last return for this company in 1994 showed a loss. It appears on the evidence that the 3rd claimant would be unable to pay its costs if it were to be ordered to do so. This has been conceded. As such the 3rd claimant would appear to fall under rule 2 (1)(e) and be potentially the subject of an order for security.
10. The 2nd opponent has submitted that the 2nd claimant, Paul Lane, is not a resident of New South Wales, and that he should be liable for an order for security pursuant to rule 2 (1)(a). It is not disputed that at the time this motion was heard that Mr Lane was not in New South Wales, however there has been no admission by the claimants that Mr Lane is not a resident of New South Wales. In an affidavit sworn by Mr Lane on 1 March 1999 he gives his address as 39 Foxberry Road, Brocolli, England. His affidavit and an affidavit of Shaun Scott of 3 March 1999 indicate that the intention of Mr Lane was that he would reside at an address at 168 Day Street, Sydney, when he returned to Sydney. The evidence is however that he has never actually resided at that address. It also appears from evidence given by Mr Scott on cross-examination, that there is no clear date by which he is expected to return to Australia. Mr Scott's evidence also indicated that Mr Lane had been and may still be employed in England. I have drawn an inference from this evidence that, at least when the motion was heard and subject to any evidence to the contrary, up till this time, Mr Lane does not reside in New South Wales. As such he may be the subject of an order for security pursuant to rules 2(1)(a). I do not find that there was an intention to deceive or mislead by failing to include a residential address for Mr Lane on the Summons.
11. There are further grounds which the 2nd opponent argues justify an order for security for costs against the 2nd and 3rd claimants. I will go into some of these later. However the basic grounds are that the 2nd claimant is not a resident of New South Wales and that the 3rd claimant is a corporation which would apparently be unable to pay an order for costs against it.
12. The primary defence to these arguments by the claimants is that security for costs is not sought against the 1st claimant, Mr Carey, and that, as a general principle, an order for security for costs should not be ordered against some co-plaintiffs if security for costs would not be ordered against one of them. It would appear that an order for security for costs was not sought against Mr Carey because he resides in New South Wales. This "co-plaintiff principle" was a matter that I raised initially, hoping that it may short-cut the application. This issue was not specifically addressed in the 2nd opponents written submissions in chief, although it was addressed in the submissions in reply. The 2nd and 3rd claimants have raised several objections to the submissions in reply, including an objection that the submissions addressing this issue were never raised in the submissions in Chief, although it was clearly an issue when the motion was heard. I agree with this assertion that many of the submissions in reply are not in fact submissions in reply. I have attempted to discount those submissions accordingly.
13. The 2nd and 3rd claimants have drawn my attention to several cases which establish a general principle that security for costs will not be awarded against some co-plaintiffs where an order for security would not be made against one of them. In particular Harpur v Ariadne Australia Ltd (1984) 2 QR, 523, but also Life Airbag Company of Australia v Life Airbag (New Zealand) Ltd (unreported, Branson J 4 May 1998 NG3141 of 1997, Uptown Sydney Development Corporation Pty Ltd v Bank of New Zealand No 1 11 ACSR 300 and Fernandez v Ilamary Holdings Pty Ltd (unreported decision of Master Gressier 3778/86 26 August 1987). The general principle that can be extracted from these cases is that while a defendant may be entitled to security for costs in respect of an impecunious corporate plaintiff or a natural person residing outside the jurisdiction, where there is a natural person within the jurisdiction who is subject to any costs orders that may be made, and where the relief sought in the proceedings is sought jointly, an order for security will not normally be made. I accept the submissions by Mr Moses that this is not a rule and that in appropriate cases the Court may nevertheless order security.
14. In submitting that this general principle should not apply in this case, Mr Moses has argued that the claimants do not have exactly the same interest. He has noted that although PK was awarded a sum of money for damages, the only direct interest of Mr Lane and Mr Carey in the proceedings is in restoring a costs order in their favour. Whilst I accept that the standing of Mr Carey and Mr Lane as individuals may not be the same as for PK, I accept Mr Bennett's submissions that they are properly joined as co-claimants. I do not find that they have been joined as claimants to the proceedings with the intent of preventing an order for security for costs being awarded against their company. The real question is whether there is a real prospect that the Court may not make the claimants jointly and severally liable for a costs order against them. I think that if the summons is dismissed in this case, it will be simply dismissed with costs. By bringing these proceedings in their own names as well as their company, Mr Lane and Mr Carey have also made themselves liable for any costs orders the Court may make if the proceedings are dismissed. I have to note that there has no been real evidence as to Mr Carey's capacity to meet a costs order. In general the question of whether Mr Carey would be able to meet a costs order against him would be irrelevant provided he is a natural person living within the jurisdiction. If there had been evidence establishing that Mr Carey was a "man of substance", this would have to an extent negated some of Mr Moses further arguments, and I would have probably refused the motion.
15. One other Part 53 factor which Mr Moses raised as applicable in this case was Rule 2(1)(b) - that the plaintiff is suing not for his own benefit, but for the benefit of some other persons (and that the plaintiff will be unable to pay the costs of the defendant if ordered to do so). The basis of this argument is that the proceedings in the Court of Appeal are for the benefit of the claimants' solicitors rather than for the claimants.
16. During the course of the evidence 2 costs agreements were tendered. Exhibit A was a costs agreement dated 10 November 1994 between the claimants and their solicitors, Lyons & Lyons. This agreement provided that the solicitor agreed to fund the litigation and indemnified the claimants from any adverse costs orders. Costs were only to be recoverable from the claimants if they were successful in the Industrial Court. Mr Moses has argued that this costs agreement remains in force. If this costs agreement was in force it would certainly justify an order for security. Mr Moses argues that the claimants did not receive new consideration when a later, less advantageous costs agreement was entered into. Mr Moses has argued that consideration set out in the later agreement is illusory. The indemnity in the 1st costs agreement was subject to the claimants accepting the solicitors advice and recommendations as to the reasonableness, fairness or propriety of any offer of settlement. An offer of settlement was made and the recommendation given by the solicitors was that it be accepted. The offer of settlement was rejected by the claimants. I accept Mr Bennetts's argument that there was proper consideration, and that the 1994 agreement was superseded by the later costs agreement. My reading of the 1994 agreement is that the claimants were required to accept the settlement offer if that was recommended by their solicitors. If they did not accept the advice given by the solicitors then the solicitors could give notice terminating the agreement.
17. Exhibit B is a costs agreement dated 28 August 1996. This agreement released Lyons & Lyons from any liability for Visions costs under the 1994 agreement. Lyons & Lyons still agreed to fund the proceedings and would only claim their costs if monies were received from Vision. The agreement also stated that the claimants would receive at least 20% of any monies received from Vision.
18. Mr Bennett has argued that, as a matter of construction, neither the 1994 nor the 1996 agreement are applicable to the proceedings in the Court of Appeal. He states that both agreements only contemplated proceedings in the Industrial Court. It seems to me however that the 1996 agreement would remains in effect till it is replaced by some other agreement, or at least expressly terminated. As no other costs agreements were provided in response to the 2nd opponents subpoena to Lyons & Lyons, and as Mr Jenkins, the solicitor with day to day conduct of this case was not able to advise the Court what the alternative current agreement might be, it appears to me that it is more likely that the 1996 agreement remains in force.
19. Mr Moses has argued that both of the costs agreements may be illegal pursuant to section 127(3) of the Legal Profession Act (1987) in that they might not constitute conditional costs agreements under Part 11 of that Act. I do not feel that I have to determine the legality of these costs agreements to determine this motion. I do note however that I am uneasy about the practical consequences of these costs agreements. It does appear that the principle motivation in bringing the proceedings in the Court of Appeal is to get a reversal of the costs orders. The actual amount of money involved in the orders made by Marks J is overwhelmed by the costs of the proceedings. It seems even if they are successful in the Court of Appeal and then successful on a further appeal in the Industrial Court, that Mr Carey and Mr Lane will only ever get $7,608. My understanding of the costs agreement is that Lyons & Lyons will be entitled to a 25% premium on their chargeable costs if they are successful. This would not be recoverable from the 2nd opponent and would have to be paid by the claimants. Under the circumstances it appears that the solicitors for the claimants may have more interest in maintaining these proceedings than the claimants themselves. This would appear to be a relevant consideration in determining whether security for costs should be ordered.
20. Another matter that must be considered are the prospects of the proceedings. Mr Moses has argued that the proceedings are manifestly groundless, while Mr Bennett has submitted that the claimants have a reasonable cause of action. On the face of the relevant legislation, namely the Industrial Relations Act (1996) there would appear to be no jurisdiction for the Court of Appeal to review a decision of the Industrial Relations Commission in Court Session. Section 179 of that Act states: (1) Subject to the exercise of a right of appeal to a Full Bench of the Commission conferred by this or any other Act or law, a decision or purported decision of the Commission (however constituted):

(b) may not be appealed against, reviewed, quashed or called in question by any court or tribunal (whether on an issue of fact, law, jurisdiction or otherwise).

(2) A judgment or order that, but for this section, might be given or made in order to grant a relief or remedy (whether by order in the nature of prohibition, certiorari or mandamus, by injunction or declaration or otherwise) may not be given or made in relation to a decision or purported decision of the Commission , however constituted.

(3) To avoid doubt, this section extends to any decision or purported decision of the Commission , including an award or order of the Commission . 21. The Court of Appeal acknowledged the restrictions placed on its jurisdiction to review decisions of the Commission in Woolworths Limited v Hawke & Ors (Court of Appeal CA40599/98 - 29 October 1998). The claimants appear to hang their hopes on a comment made by Priestley JA in his judgment (at page 8): "I do not think it is necessary for this Court to decide in these proceedings whether the contractors' very wide ranging submissions about the effect of s.179 should be accepted. For myself, I doubt whether it is possible for any tribunal to be established by the New South Wales Parliament whose orders, or purported orders, if made beyond any power to make them, would not be subject to the power of the Supreme Court of the State to declare them of no legal effect and to authorise steps to be taken to prevent any legal use of them."

I accept that there remains a question as to whether the Court of Appeal will accept that it has some jurisdiction to review a decision of the Commission in some particular circumstances. However, these proceedings do not appear to me to be a case where the Court of Appeal will feel the need to intervene. 22. The basis of the claimants argument that the Court of Appeal should intervene is an alleged procedural unfairness. The procedural unfairness alleged arises from the finding that Marks J was excessively interventionist, and that this was not a matter raised during the course of the appeal. I have considered the Judgement of the Full Bench and this does not appear to me to be a case which requires the Court of Appeal to intervene for justice to be done. The conclusions of the Commission in Court Session do not appear to rely upon the finding that Marks J was excessively interventionist. They did not allow the appeal because they found that Marks J had been excessively interventionist, but rather because they found that he had made errors of fact and of law. The finding of excessive intervention appears to have been an explanation for the errors which the Full Bench found had been made. If my reading of the Judgment is correct then, any argument that the claimants would liked to have put to the Full Bench that Marks J had not been excessively interventionist are unlikely to have had any impact on the outcome of the appeal. In my opinion, even if the Court of Appeal can be persuaded that it has jurisdiction in this case, it is unlikely that any relief would be granted. 23. Another matter that I must consider is whether an order for security for costs would prevent the proceedings continuing. Although Mr Jenkins, in his affidavit, asserted this, there is no real evidence that this would necessarily be the case. It has been noted that if security is ordered against the 2nd and 3 rd claimants the 1st claimant is still entitled to continue with the proceedings in his own name. The proceedings seek prerogative relief. At best, if the summons is successful, the matter will be remitted to the Industrial Commission for further hearing. If the 2nd and 3rd claimants are struck-out as claimants because they cannot provide the security or seek leave to be removed as claimants and are then added as opponents, and file submitting appearances, they would be entitled to be heard on any re-hearing of the appeal in the Industrial Commission. Of course the fact that the proceedings are brought only in the name of one of the applicants in the Commissions and that applicant is not the corporate applicant which would appear to have the greater standing to bring these proceedings, may have some impact on the prospects of the summons being successful. That is something that the parties may want to consider. 24. There was no real evidence as to the financial status of Mr Lane and Mr Carey. I do not assume that they are unemployed or unemployable. If the amount of security was for a reasonable amount which could be saved over a period of time and/or financed by a loan, I cannot see why the proceedings would necessarily be prevented. It may be that the claimants' solicitors are prepared to loan the claimants the amount of the security. 25. In all the circumstances this appears to be a case where security for costs should be ordered. In the affidavit of Michael Michalandos, the 2nd opponent's solicitor, the likely costs of the proceedings were assessed at between $25,000 and $30,000, excluding the costs of this motion. For the purposes of this motion I regard that assessment as being slightly excessive. I have assessed those probable costs to be $24,000, including some provision for the costs of this motion. I note again, that no order is sought against the 1st claimant, and that the 2nd opponent will be entitled to pursue him for any costs order they obtain in the proceedings. I therefore order that the 2nd and 3rd claimants each provide security for costs in the sum of $8,000. The form of the security is to be as agreed by the particular claimant and the 2nd opponent, and if it cannot be agreed, as settled by me. I stay the proceedings in so far as they have been brought by each of the 2nd and 3rd claimants until security has been provided on behalf of that claimant. 26. I am not at this stage directing that the security be provided by a specific date. I will list these proceedings for mention at 9.45am on Monday 20 September 1999. At that time if the matter is ready and security for costs has been provided the matter will be fixed for hearing. If security for costs has not been provided by either of the 2nd or 3rd claimants I will be seeking advice as to whether those claimants intend to provide the security or not. If there is an intention to provide security, but additional time is required I will be seeking some proposed timetable for the provision of the security. If there is no intention to provide the security I would be proposing that the relevant claimant(s) be stuck-out as claimants from the proceedings. 27. The 2nd opponent may already returned to live in New South Wales or may return in the near future. If the 2nd opponent can establish that he is a resident of New South Wales I am prepared to consider vacating the order that he provide security for costs, and I grant liberty to the 2nd opponent to apply in that respect. 28. So far as costs are concerned, it appears to me that the costs of the motion should abide the costs of the summons in so far as that summons is brought by each of the 2nd and 3rd claimants. I order that the costs of the motion to date be part of the 2nd opponents costs in the summons, but only in so far as those costs are recoverable against the 2nd and 3rd claimants. If the summons is struck-out or discontinued in so far as it is brought by the 2nd or 3rd claimants, then that or those claimants will be liable for the costs of this motion. If the 2nd and 3rd claimants remain as claimants and the summons is heard, their respective liabilities for the costs of this motion are to be in accordance with their liability for costs on the summons. I want to make it clear that the 1st claimant is not to be liable for any of the costs of this motion. If the 2nd opponent applies pursuant to the leave in the preceding paragraph the costs of that application will have to be considered at that time.

Certified Correct Steve Jupp, Registrar Court of Appeal Date: 11 June 1999

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