Carter v Orix Australia Corporation Ltd

The interlocutory application 12 On 5 April 2022, Mr Carter filed an interlocutory application seeking orders that: (1) leave be granted pursuant to s 59(2B) of the FCA Act and rr 8.21 and 16.53 of the Federal Court Rules 2011 (Cth) to file an amended originating application (the amendment application); (2) there be summary judgment in relation to Mr Carter's claim for long service leave in the sum of $338,027.48 pursuant to section 31A of the FCA Act and/or r 26.01 of the FCRs (the summary judgment application); and (3) OACL's defence that it is entitled to a set-off be struck out (the strike out application). 13 In support of his interlocutory application, Mr Carter filed two affidavits sworn by his solicitor, Michael Zwar, neither of which was read at the hearing of that application. OACL filed an affidavit affirmed by its solicitor, Andrew Geoffrey Moore, on 6 May 2022 which was read and received into evidence to the extent that it was relevant to the application. 14 For the following reasons, leave should be granted to Mr Carter to file his amended originating application but the interlocutory application should otherwise be dismissed.

The amendment application 15 Mr Carter seeks to amend his originating application to identify the relevant sections of the FW Act, Annual Holidays Act and Workplace Relations Act 1996 (Cth) under which he claims to have been entitled to annual leave. The proposed changes reflect amendments already made to the amended statement of claim filed on 20 October 2022. 16 At the time he filed the amended statement of claim, Mr Carter neglected to file an amended originating application. He now seeks to do so presumably because OACL, in its amended defence, pleaded that Mr Carter was prevented from making a claim under the relevant legislation both because the proceedings as constituted did not include a claim under those provisions and because any such claims were statute-barred by reason of s 13(1) of the Annual Holidays Act and s 720 of the Workplace Relations Act.In his reply, Mr Carter disputed that the claims were statute-barred. He pleaded that the "relevant limitation period" was fixed by s 544 of the FW Act, which provides for a limitation period of six years from the date of the contravention for any claims alleging a breach of a civil remedy provision or safety net contractual entitlement. He also pleaded that the failure to pay the accrued annual leave took place on 22 June 2015 - the date his employment was terminated - and as the claim was filed on 11 June 2021 it was filed within time. 17 Rule 8.21(1) relevantly provides that: An applicant may apply to the Court for leave to amend an originating application for any reason, including: … (g) to add or substitute a new claim for relief, or a new foundation in law for a claim for relief, that arises: (i) out of the same facts or substantially the same facts as those already pleaded to support an existing claim for relief by the applicant[.] 18 The Court's power to make such an order is expressly conferred by r 1.41. 19 The proposed amendments plainly arise out of the same or substantially the same facts as were pleaded in the statement of claim filed on 11 June 2021, namely that, on termination, Mr Carter was not paid unpaid annual leave that had accrued throughout his employment. There was no dispute that the proposed amendments simply add new foundations in law for that claim, a basis for amendment expressly contemplated by r 8.21(1)(g)(i). It does not therefore matter if the amendments relate to claims made outside of the limitation period. Rule 8.21(2) entitles an applicant to apply to the Court for leave to amend an originating application on this basis even if the application is made after the end of any relevant period of limitation. 20 In McGraw-Hill Financial, Inc v Clurname Pty Ltd [2017] FCAFC 211; 123 ACSR 467 at [25] Allsop CJ, Jagot and Yates JJ observed that "if there is a reasonable argument the claim is not statute-barred, there is no reason in principle that an amendment should not be permitted". Without delving into the merits of the limitation defence, I am satisfied that Mr Carter has a reasonably arguable case that his claim is not statute-barred. On the face of things, the riposte in his reply is a sound one. 21 Of course, the power to grant leave should be exercised in accordance with the "overarching purpose" of the applicable civil practice and procedure provisions: FCA Act, s 37M(3). The overarching purpose is to facilitate the just resolution of disputes according to law, as quickly, inexpensively and efficiently as possible: FCA Act, s 37M(1). OACL does not oppose the filing of the amended originating application. Furthermore, OACL is not prejudiced by the amendment, nor does it claim to be. It was put on notice of the amendments by the amended statement of claim and has responded to them in its defence. 22 In proposed orders handed to the Court on the day of the hearing of the interlocutory application Mr Carter also sought an order that the amended originating application and the amended statement of claim, filed on 20 October 2021, take effect from the commencement of the proceedings on 11 June 2021. Objection was taken on the basis that no such order had been sought in the interlocutory application. By an amended interlocutory application filed four days after the hearing, Mr Carter rectified the omission and I was notified that, if leave were granted to file the amended originating application, OACL did not oppose an order to the effect of that which Mr Carter proposed. 23 In all these circumstances I will make both of the proposed orders.

The strike out application 24 OACL admitted that it failed to pay Mr Carter long service leave and, any question of set-off aside, he was entitled to be paid accrued untaken long service leave when his employment came to an end. Consequently the success of the summary judgment application depends on the success of the strike out application. For this reason it is logical to deal with the strike-out application first. 25 The application is to strike out paras 30(b), 31(a), 33(b), 34, and 35-38 of OACL's defence to the amended statement of claim. These paragraphs were pleaded in answer to Mr Carter's claims that OACL had contravened ss 44(1) and 90(2) of the FW Act by failing to pay him the amount he contended he should have been paid on termination for untaken accrued annual leave (paras 30-31) and s 4 of the LSL Act by failing to pay him his long service leave entitlement (para 33). In para 34 of the amended statement of claim Mr Carter alleged that, by reason of the breaches pleaded in paras 30, 31 and 33, OACL "continues to be required to pay [him] the amount of $1,038,963.40", providing particulars of the calculation. 26 In para 33 of the amended statement of claim, for example, which concerned the long service leave claim, Mr Carter pleaded: In breach of section 4 of Long Service Leave Act 1955 (NSW), from 22 June 2015 [OACL] failed to pay [him] the amount of $338,027.48. 27 In para 33 of its amended defence OACL admitted that it had not paid Mr Carter any amount under s 4 of the LSL Act but claimed that it was entitled to set off any amount it owed him against his liability to OACL, as pleaded in paras 35-38. The substance of the set-off claim is contained those paragraphs: 35. The Respondent repeats, mutatis mutandis, Parts D and E and paragraphs 156 to 158 and 161 to 163 of the Respondent's Amended Statement of Claim dated 21 January 2021 filed in Supreme Court of New South Wales Proceedings No. 2020/00174863 reproduced at Schedule A of this defence. 36. By reason of the matters alleged in paragraph 35, the Respondent: (a) was entitled to summarily dismiss the Applicant; and (b) suffered loss and damage as a result of the Applicant's conduct for which the Applicant is liable to compensate the Respondent pursuant to s 1317H of the Corporations Act, in equity, or at law for breach of contract. 37. The results of the proceeding referred to in paragraph 35 above will, when determined, provide an issue estoppel in connection with the claim in this proceeding. 38. By reason of the matters alleged in paragraphs 35 and 36, in the event that the Court finds that the Respondent is liable to pay the Applicant any amount as alleged in paragraphs 30, 31, 33 and 34 of the Statement of Claim (which is denied), the Respondent was entitled to set-off any such sum against the Applicant's liability to compensate the Respondent for the loss and damage it has suffered as pleaded in paragraph 36(b) above. 28 Mr Carter contends that OACL's set-off claim should be struck out under r 16.21(1)(e) because it fails to disclose a reasonable defence. 29 He submits that OACL has no present entitlement to a set-off either at law or in equity, relying on Walker v Secretary, Department of Social Security (1995) 56 FCR 354 (FC); Kernaghan v Neffray Pty Ltd [2020] FCCA 1141 at [38] and Resolute Corporate Services Pty Ltd (formerly Goudhurst Pty Ltd) v Wearing [2020] WADC 132. The latter two cases are of no assistance and can be put to one side. Shortly put, Mr Carter's argument was twofold: first, statutory entitlements cannot be set off and second, no equitable set-off is available in any event because "it is an indispensable requirement of equitable set-off that the set-off actually go to the root of, be essentially bound up with, 'impeach' the title of the plaintiff" (Meagher RP, Gummow WM and Lehane JRF, Equity: Doctrines and Remedies (3rd ed, Butterworths, 1992) at [3709(h)], p 818 (Meagher, Gummow and Lehane), cited in Walker at 363D; see now Heydon JD, Leeming MJ and Turner PJ, Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (5th ed, LexisNexis Butterworths, 2014) at p 1108). 30 Mr Carter argued that the judgment of the majority in Walker is binding on this Court and it is a complete answer to the set-off claim in OACL's defence. Nevertheless, he conceded that, if OACL is ultimately successful in the OACL proceeding and the statutory entitlements remained unpaid, this Court could set off the statutory entitlements against any award of damages in order to avoid the parties having to make two payments when only one payment was necessary to give effect to the Court's judgment, citing Joseph v Parnell Corporate Services Pty Ltd (2021) 284 FCR 546 at [221] (Logan, Katzmann and Snaden JJ). 31 Section 4(1) of the LSL Act relevantly provides that, except as otherwise provided by the Act, every worker shall be entitled to long service leave on ordinary pay in respect of the worker's service with an employer. In particular, s 4(5)(a) provides that: Where the services of a worker are terminated otherwise than by the worker's death and any long service leave - (i) to which the worker was entitled has not been taken, or (ii) accrues to the worker upon such termination and has not been taken, the worker shall, subject to subsection (13), be deemed to have entered upon the leave from the date of such termination and the employer shall forthwith pay to the worker in full the worker's ordinary pay for the leave less any amount already paid to the worker in respect of that leave. 32 Section 12(1) provides the mechanism for recovery of unpaid payments. It reads: Recovery of long service leave pay Any worker may apply to the Local Court, or to the Supreme Court, for an order directing the employer to pay to the worker the full amount of any payment which has become due to the worker under this Act at any time during the period of 6 years immediately preceding the date of the application but not earlier than 2 years before the date of assent to the Long Service Leave (Amendment) Act 1980. The Local Court or Supreme Court may make any order it thinks just in the matter and may award costs to either party, and assess the amount of such costs. 33 The right to be paid untaken annual leave when employment comes to an end is one of the National Employment Standards contained in the FW Act and, as such, "cannot be displaced": FW Act, s 61(1). Similarly, the provisions of the LSL Act "shall have effect notwithstanding any stipulation to the contrary" and contracting out is prohibited: LSL Act, s 7. 34 The relevant legal principles were not in dispute. 35 Normally the power to strike out a pleading is discretionary and should be employed sparingly and only in a clear case: Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (1994) 217 ALR 226 at 236 (Beaumont J); Polar Aviation Pty Ltd v Civil Aviation Safety Authority (2012) 203 FCR 325 at [43(4)] (Perram, Dodds-Streeton and Griffiths JJ). Nevertheless, where a point of law arises, which can appropriately be decided at an interlocutory stage, avoiding the need for a trial, the point may be determined: Allstate at 236; Polar Aviation Pty Ltd v Civil Aviation Safety Authority (No 4) (2011) 203 FCR 293 at [12] (Kenny J); Polar Aviation at [43(5)]-[44]. 36 It is uncontroversial that "equitable set-off is available where the party seeking it can show a recognised equitable ground for being, to the relevant extent, protected from his adversary's demand and the mere existence of cross demands is not sufficient": James v Commonwealth Bank of Australia (1992) 37 FCR 445 at 458 (Gummow J). Equally, it is well accepted that an equitable set-off must go to the root of, or impeach, the "title to the legal demand" or the title of the plaintiff's claim. 37 In James at 458 Gummow J observed that the authorities indicate that neither the longstanding requirement of "impeachment" nor the phrase "title to the legal demand", both of which derive from the speech of Lord Cottenham LC in Rawson v Samuel (1841) Cr & Ph 161; 41 ER 451, has been narrowly construed. Giles J made a similar observation in AWA Ltd v Exicom Australia Pty Ltd (1990) 19 NSWLR 705 at 711C. 38 In D Galambos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10 at 18 Woodward J concluded from the language used in Rawson v Samuel and the cases referred to there that the Lord Chancellor regarded the prerequisites of an equitable set-off to be "clear cross-claims for debts or damages" which were "so closely related as to subject-matter that the claim sought to be set off impeached the other in the sense that it made it positively unjust that there should be recovery without deduction". After an extensive examination of the authorities his Honour relevantly remarked that "[t]he general conduct of the respective parties will, as always, be relevant to the granting of such equitable relief" and that "[e]ven where one of the claims is not in terms based upon the contract, but it flows out of and is directly connected with it, a court may be prepared to recognise an equitable set-off". While he acknowledged that the statements of principle he drew from the authorities cannot universally apply, his Honour said that they "clearly apply to contracts for work and labour". 39 In Australian Mutual Provident Society v Specialist Funding Consultants Pty Ltd (1991) 24 NSWLR 326 at 328-9 Rogers CJ Comm D concluded that "the ultimate test is whether it would be unjust, or inequitable, that a plaintiff should be allowed to proceed with its claim without regard to the claim of the defendant" and that, in turn, primarily raises for consideration the relationship between the parties and the closeness of the connection between the two claims, agreeing with Woodward J that the general conduct of the parties will always be relevant. 40 Further, in their discussion of equitable set-off the learned authors of the most recent edition of Meagher, Gummow & Lehane identify four kinds of equitable set-off, the fourth of which is described as "the kind which equity recognised wherever 'the party seeking the benefit of it can show some equitable ground for being protected against his adversary's demand", citing Rawson v Samuel (at [39-050] at p 1104). They observed that this is "the true equitable set-off, the most interesting, and the most distinctively equitable of all branches of the doctrine". 41 Walker was concerned with a decision by the Department of Social Security to reduce an overpayment of sickness benefits (acquired by the appellant through false claims made in the name of his deceased brother) by deducting a much smaller sum to which the Administrative Appeals Tribunal found the appellant was entitled. Cooper J, with whom Spender J agreed, said (at 372) that a right to receive a sickness benefit was a statutory entitlement (conferred by the Social Security Act 1947 (Cth)) to receive payments from consolidated revenue, not based on an antecedent proprietary right recognised by the common law, and that the Secretary of the Department was under a corresponding duty, enforceable by a public law remedy (mandamus or a mandatory order under the Administrative Decisions (Judicial Review) Act 1977 (Cth)). His Honour went on to hold that: Because the right conferred by s 117 of the 1947 Act to a sickness benefit is to be discharged by the statutory performance of a duty to administer a scheme to pay benefits in the manner prescribed by the 1947 Act, that Act does not create a debt enforceable by action in any court of competent jurisdiction. 42 Cooper J observed at 375 that it was not sufficient merely to point to cross-demands. Consistent with the authorities, his Honour noted that it was necessary to show a recognised equitable ground of protection from the adversary's demand such as to impeach the adversary's title to demand payment but the Department "had not sought to point to any relevant equity of the type necessary to sustain a defence of equitable set-off". 43 Additionally, Cooper J held at 375 (Spender J agreeing at 355) that Ch 5 of the Social Security Act 1991 (Cth) was a code for the recovery of overpayments as debts due to the Commonwealth and that if the Department wanted to reduce Mr Walker's indebtedness by recourse to the sickness benefits payable under the 1947 Act, it could only do so by complying with s 1233 of the Act, which it did not do. 44 None of these circumstances obtains in the present case. 45 OACL contends, in substance, that if the breaches of duty it alleges against Mr Carter and which caused it to suffer loss and damage had been discovered earlier, his employment would have been terminated earlier. In this way, the claim to accrued annual leave and long service leave is directly impeached. OACL does not administer a statutory scheme. The right to payment for accrued annual leave or long service leave is not enforceable by a public law remedy. Furthermore, an employer is entitled make a deduction from leave payments owing under the FW Act if the deduction is authorised by a court order: FW Act, s 324(1). Section 12 of the LSL Act gives the court a broad discretion to make any order it thinks just with respect to outstanding long service leave payments. 46 In Walker Drummond J said in dissent at 367-8: All that is necessary before an equitable set-off can be raised is that the claim and the set-off each be in respect of sum of money. There is in my opinion no reason to deny that a statutory claim to benefit payable in money, such as a pension under the [Social Security Act 1991 (Cth)], can be the subject of an equitable set-off or can be a claim against which an equitable set-off can be raised. 47 It is not enough that payment for accrued leave is a statutory right. As Gummow J observed in James at 459 and upon which Drummond J relied: It is not, of itself, an objection to the availability of equitable set-off that either or both of the legal demands is made pursuant to a statute which creates new obligations and rights which give rise to debts or liabilities in unliquidated damages. The issue will be whether, expressly or by necessary implication, the statute excludes what otherwise would be the operation of equitable set-off upon those statutory debts and liabilities: see McPherson v Minister for Natural Resources (1991) 22 NSWLR 671 at 682-683; affd Minister for Lands and Forests v McPherson (1991) 22 NSWLR 687. 48 I was not taken to any authority which disputed the correctness of these remarks. While the majority in Walker did not expressly refer to them, neither Cooper J nor Spender J expressed doubt as to their correctness. Rather, their Honours concluded, in substance, that the Social Security Act 1991 (Cth) excluded what otherwise would be the operation of equitable set-off upon the relevant statutory debt. It is at least an open question, unsuitable for determination on an application either to strike out a pleading or for summary judgment whether either the FW Act and/or the LSL Act have the same effect. 49 The remarks made by Flick J in Joseph v Parnell Corporate Services Pty Ltd [2020] FCA 426; 295 IR 49 at [130], upon which Mr Carter relied in his submissions, are not authority for the proposition that s 324(1) of the FW Act would prevent the Court from making an order setting off statutory entitlements against an award of damages if the facts justified it. Besides, his Honour's remarks were obiter, as I might add, were those made by Collier J to similar effect in Whelan v Cigarette & Gift Warehouse Pty Ltd [2017] FCA 1534 at [159]-[160] to which neither party referred. 50 In any event, given Mr Carter's concession that, if OACL succeeds in its proceeding against Mr Carter, the Court could apply a set-off against any unpaid statutory entitlements, it seems to me that it would be inappropriate to strike out the set-off claim. 51 For these reasons I decline the application.

The summary judgment application 52 Mr Carter applies for summary judgment on his long service leave claim pursuant to s 31A of the FCA Act and/or r 26.01. 53 Section 31A relevantly provides: (1) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: (a) the first party is prosecuting the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding. 54 Rule 26.01(1) allows a party to apply to the Court for an order that judgment be given against another party because, amongst other things, the respondent has no reasonable prospect of successfully defending the proceeding or part of the proceeding. 55 The same principles apply, regardless of which power is exercised. 56 First, the party seeking the order bears the burden of persuading the court that the power should be exercised: Krajniw v Newman (No 2) [2015] FCA 673 at [12] (Reeves J). 57 Second, it is necessary to proceed with caution: Spencer v The Commonwealth (2010) 241 CLR 118 at [24] (French CJ and Gummow J); [60] (Hayne, Crennan, Kiefel and Bell JJ). 58 Third, the development of the law should not be stultified by the exercise of the power: Spencer at [25] (French CJ and Gummow J); Western Australia v Fazeldean (No 2) (2013) 211 FCR 150 at [35] (Allsop CJ, Marshall and Mansfield JJ). In Spencer at [25], French CJ and Gummow J observed that: Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this Court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success. 59 For the reasons given above in connection with the strike-out application, I am not persuaded that this is a proper case in which to grant summary judgment. Whether an equitable set-off is available will largely turn on the facts. As OACL submitted, the inquiry into whether OACL's claim against Mr Carter impeaches his title to demand payment of his statutory entitlements is factually intense. The factual inquiry spans a period of more than a decade. OACL submitted, without demur, that the determination of its claim involves many contested matters and will require consideration of both lay and expert evidence. As I have already observed, s 12 of the LSL Act gives the Court a very broad discretion to make any order it thinks just. Walker is not binding, not least because it is concerned with a different statutory scheme. In any case, there was a powerful dissent. If, contrary to my conclusion, Walker is not distinguishable, while a judge at first instance would be bound by the majority's view if it were indistinguishable, an appellate court might be persuaded that Drummond J was correct. Should it come to that, I do not consider that OACL should be shut out from putting the argument, formally at first instance and fully on appeal. 60 For completeness, I should indicate that, even if I had been of the view that summary judgment should be granted, I would have been minded to stay the execution of the judgment until the determination of the OACL proceeding. I would have done so in order to be able to reach an informed opinion as to where the interests of justice lie (see Yeo v Australian Securities and Investments Commission, in the matter of Ji Woo International Education Centre Pty Ltd (No 4) [2019] FCA 1119 at [24] per Gleeson J; Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd (2007) 69 NSWLR 364 at [140], [143] per Beazley JA). Moreover, if the order he seeks were made, there appears to be a real risk that Mr Carter will dissipate the proceeds. Mr Moore's evidence, which would unquestionably be relevant and admissible on a stay application, indicates that after Mr Carter was arrested he has divested himself of his assets. Consequently, if OACL obtains judgment in its favour in the OACL proceeding, it may not be able to enforce the judgment. It follows that, absent a stay, OACL would likely suffer significant prejudice. It will be recalled that Mr Carter did not institute any proceeding for the recovery of his unpaid long service leave until more than five years after his employment had been terminated and no evidence was adduced to indicate that Mr Carter is in imminent need of the money. 61 I accept unequivocally Mr Carter's submission that there is a public interest in ensuring that employers comply with their statutory obligations and pay employees their entitlements as and when they fall due. On the other hand, here there are countervailing considerations which persuade me that this is a case in which any order for payment should be deferred.

Costs 62 That leaves the question of costs. In his submissions Mr Carter applied for costs but in his interlocutory application and his amended interlocutory application, Mr Carter asked that costs be costs in the cause. OACL submitted that, on the amendment application, Mr Carter should pay the costs thrown away by reason of the application. I decline to make any such an order. In fact, I propose to make no order at this point. Rather, I shall reserve the question of costs. That is because it is tolerably clear that s 570 of the FW Act applies (see, for example, Stanley v Service to Youth Council Inc (No 3) (2014) 225 FCR 357 at [28] per White J; Melbourne Stadiums Ltd v Sautner (2015) 229 FCR 221 per Tracey, Gilmour, Jagot, White and Beach JJ; and Joseph at [86]-[115] per Logan, Katzmann and Snaden JJ). Section 570 only allows the Court to make an order requiring a party to pay another party's costs in certain defined circumstances and neither party made submissions on whether the limited power conferred by that section is enlivened. My provisional view is that it is not. I certify that the preceding sixty-two (62) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Katzmann.