Charlotte Brown & Anor v Image Clothing Pty Ltd & Ors

SECOND RESPONDENT: Image Clothing Pty Limited

THIRD RESPONDENT: Ecroblack Pty Limited FILE NUMBER: CT1166 of 1995 CORAM: Schmidt J CATCHWORDS : Unfair contract - restitution - indemnity order - too late to challenge jurisdiction - too late to raise arguments not relied on during the hearing - calculation of interest - offers of compromise - claim for indemnity costs refused LEGISLATION CITED : Industrial Relations Act 1991 Abboud v State of New South Wales (Department of School Education) (No2) [2000] NSWIRComm 110 Brown v Rezitis (1970) 127 CLR 157 CASES CITED : Charlotte Brown & Anor v Image Clothing Pty Ltd & Ors [2000] NSWIRComm 93 Dr Payne v University of Sydney & Anor [2000] NSWIRComm 158 Thomas Nationwide Transport Limited (T/as "Altrans Bulk") v Thomas & Anor (1990) 34 IR 378 HEARING DATES: 08/02/2000 DATE OF JUDGMENT: 09/01/2000

APPLICANTS: Mr FG Lever of counsel SOLICITORS: Charles G Roth & Co Solicitors LEGAL REPRESENTATIVES: RESPONDENTS: Mr AR Moses of counsel SOLICITORS: Henry Davis York Lawyers

• 9 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION

DATE: 1 September 2000 Matter Number CT 1166 of 1995 CHARLOTTE BROWN AND ANOTHER -v- IMAGE CLOTHING PTY LIMITED AND ANOTHER Application under section 275 of the Industrial Relations Act 1991 JUDGMENT

1 Judgment was given in this matter on 7 June. The applicants were directed to file and serve orders reflecting the judgment within 28 days, it having been concluded at paragraph 202: 'For all of these reasons, I intend to make orders to the effect of those advanced for the applicants, subject to the areas of departure I have outlined in this judgment. As to monetary orders, I note that they should reflect the elements of Ms Brown's package for a period of 12 months' notice, as proposed in the applicants' draft orders. As to the partnership, the orders will reflect Mr Elliott's approach to the valuation, calculated as at the termination of the partnership, together with an income stream for a period of 12 months thereafter. The orders will also reflect the other money claims, such as the outstanding annual leave entitlements, the costs in the various Supreme Court proceedings, the indemnities sought, together with a component for interest, to the date of judgment.'

2 The parties later reported that agreement had been reached as to some of the orders, but that in a number of important respects they remained apart. These differences related in the main to those aspects of the orders which went to the partnership agreement. 3 A programme for the filing of written submissions was fixed. The respondents first put their submissions, indicating that they wished to rely on various documents not in evidence as yet and would seek the consent of the applicants to that course. No such documents were filed. The submissions for the applicants indicated that there had been further agreements reached between the parties, which included the matter sought to be raised by reference to those documents. 4 The respondents advanced various general principles. It was submitted that compensation under s275(3) of the Industrial Relations Act 1991 ('the Act') was ancillary relief directed towards correcting economic disadvantage imposed by the existence or operation of the terms of the contract avoided or varied, having regard also to questions of timing. The broad concept of restitution was also referred to, (Brown v Rezitis (1970) 127 CLR 157), and submissions made as to the consequences of partly ordering the avoidance or variation of a contract. 5 The orders proposed in relation to the consultancy agreement were accepted, as were orders B1 and 2 in relation to the partnership. 6 As to order B3, which went to the costs incurred in the Supreme Court proceedings, it was submitted that the Commission had no jurisdiction to make such orders, the result being to disturb the costs order already made by the Supreme Court, whose orders should not be ignored by this Court. 7 I reject that submission for a number of reasons. Firstly, as put for the applicants, the orders sought were not opposed on any jurisdictional basis during the proceedings, nor was reliance then placed on the matters now raised. This question has been decided against the respondents, on the basis of the positions which the parties advanced during the hearing. Jurisdiction was not challenged and, in my view, it is simply too late to do so now, when all which is before the Court is the question of the form of the orders which should be made, so as to reflect the judgment given, particularly at paragraphs 197 and 198. I there found: 'Given the view which I have formed as to the conduct of the respondents in this case and the unfairness of the contracts and arrangement this conduct exposed, I take the view that the claim for legal costs incurred in the Supreme Court proceedings between these parties and those pursued against Mr Frumar by the applicants, should also be awarded in favour of the applicants, as well as the indemnities sought in relation to the costs incurred in those proceedings by Mr Green, Image, Ecroblack and Mr Frumar, which the applicants are obliged to meet. These costs cannot in my view simply be dismissed as having been incurred because the applicants did not diligently pursue these proceedings, as the respondents submitted. In Mr Frumar's case, for example, there was even evidence of an attempt by Mr Green, not persisted with, to prevent Mr Frumar giving evidence of his instructions.

Having in mind the evidence and my findings, I take the view that it must be concluded that these proceedings all resulted from the conduct of the respondents as permitted by the contracts and arrangement in question. Had the agreements here in question not been unfair in the way in which I have found and had the respondents not conducted themselves thereunder in the unfair manner I have described, these other proceedings and the costs incurred in them would have been unnecessary. I take the view that it would be just in the circumstances of this case, for these conclusions to be reflected in the monetary orders which I make.' 8 Furthermore, I take the view that the orders as to these costs are plainly within jurisdiction. They do not ignore the orders made by the Supreme Court or interfere with them, but are made precisely because of those orders, having in mind the issues raised in the proceedings as to the unfairness of the partnership provision on which the respondents relied and pursued in the Supreme Court and which gave rise to the proceedings against Mr Frumar. These matters have been decided against the respondents and, in my view, very plainly involve an element of proper restitution as between the parties. 9 I also reject the argument advanced in reply for the respondents that it was not necessary for them to raise the arguments now advanced during the hearing, because the position then adopted was that no order should be made in favour of the applicants. Having so argued the case and having put nothing by way of alternative, in the event that their primary position was rejected, the case has been decided against them. The respondents are not now entitled to a further hearing as to matters which could have been put before the judgment was given. 10 I note that there is no issue as to the sum referred to in this aspect of the order. 11 Similar conclusions must flow in respect of the submissions advanced in relation to orders B4 and 5, which provide for an indemnity in respect of costs awarded in favour of the respondents and Mr Frumar in the Supreme Court proceedings. As the respondents conceded the orders proposed reflect the conclusions reached in the judgment, yet again jurisdiction was raised. No jurisdictional arguments were advanced as to those claims during the hearings. They cannot be raised at this stage. 12 The alternative submission was that the orders should not be made, as not amounting to an order for the payment of money in accordance with s275(3). I reject all of those submissions. The orders are precisely concerned with the payment of money sums in order to do justice as between the parties having regard to the unfairness which has been found and having in mind notions of restitution. 13 That these orders are concerned with costs incurred in other litigation is not to the point. It is undoubted that there is a public interest in the way in which awards of costs are made in litigation. Nevertheless, that interest cannot subsume the jurisdiction granted by s275 of the Act. In an appropriate case, as here, I am satisfied that an indemnity order as to costs may be made. 14 It was also argued that there were difficulties with the form of the orders sought, as they were uncertain, did not specify a money sum and would not bring the litigation to an end. There is more force in this submission. However, order B4 is an indemnity as to costs as between these parties. It gives rise to no uncertainty at all. Order B5 is concerned with the costs in the Frumar litigation. On analysis, the problem is not one of uncertainty as to amount, but rather one of timing. The amount of the costs will be determined in the ordinary way by the Supreme Court. The order takes effect when that has occurred and will then bring this litigation to an end. There is nothing unusual about orders which take effect over time, rather than immediately upon the conclusion of a hearing. Accordingly, those arguments are also rejected. 15 Order B6 concerning the money orders flowing as to the partnership business was said not to arise from the partnership agreement as varied by the Commission. It was submitted that the orders in these proceedings only took effect from the date made and that the judgment of McLelland J in the Supreme Court of 14 July must thus be taken into account. I agree entirely. Indeed, that judgment was one of the factors which here led to the conclusion that relevant unfairness had been demonstrated. Particularly at paragraphs 178 and 179, it was found: 'The outcome of these proceedings in the Supreme Court have been earlier outlined. The applicants' understanding of the proper construction of the Partnership Deed was not accepted and the partnership business was wound up, with Image purchasing the business for a valuation determined by the Receiver. The parties each expended considerable costs in pursuing these matters.

Ms Brown also took proceedings against Mr Frumar. In both proceedings, the drafting of the partnership agreement was criticised. In this case, it has become evident that the drafting reflected Mr Green's desire to disadvantage Ms Brown, in the ways I have earlier noted. The agreement plainly did not reflect her understanding that in the event that either party wished to terminate the partnership, that they would have the opportunity to acquire the partnership business for a fair price. I also accept her evidence that she did not fully understand the partnership agreement, hardly surprising in the circumstances.' 16 The submissions now sought to be advanced by the respondents were not advanced during the hearing and again I take the view that it is too late to raise them now. 17 As to the suggestion that Ms Brown was entitled only to 30% of the value of the partnership, such an order would not reflect the conclusion reached in the judgment and yet again seeks to re-argue on a different basis matters already decided against the respondent. As to this aspect, the claim granted was that Ms Brown was entitled to a payment reflecting the value of the partnership business less the amount she would have had to pay under clause 13 of the partnership agreement and the amount she had already received from the receiver. The figures advanced for the applicants as to this matter must therefore be accepted. 18 For similar reasons, the respondents' arguments in relation to income stream for 12 months after the winding up must be rejected and the applicants figures accepted. 19 As to order B7, concerning income during the notice period, I note that it was concluded in the earlier judgment at paragraph 195: 'The notice of dissolution was given by Ecroblack on 27 September 1994. I take the view that the monetary order should therefore encompass an income stream, calculated on the basis adopted by Mr Elliott, to the end of September 1995, less any profits paid to Ms Brown prior to that date. I have also taken into account as relevant to this approach that during some of this period at least, Howard Showers' clothes available for sale were in fact designed by Ms Brown before the termination of her employment.'

20 It is again too late to advance a claim that this income stream should be restricted to 30% of the net profits. I reject the arguments advanced by the respondents. 21 Order B8 deals with interest. The respondents rely on the judgments in Abboud v State of New South Wales (Department of School Education) (No2) [2000] NSWIRComm 110 on 30 June 2000 and Thomas Nationwide Transport Limited (T/as "Altrans Bulk") v Thomas & Anor (1990) 34 IR 378, but misstate what was there decided. The earliest time that an award of interest is available is not the date of commencement of the proceedings. 22 Subject to what I say as to the period during which these proceedings were stayed, I take the view that the proper course here is for interest to be calculated from the date of termination of the consultancy agreement, in respect of that aspect; otherwise from the date of commencement of the proceedings except in the case of the orders dealing with costs incurred in the Supreme Court proceedings, when interest should run from the date of payment of such costs. 23 As to the arguments advanced by the respondents that no order as to interest should be made during the period when these proceedings were stayed, I have concluded that they have some force. That stay flowed from the applicants' conduct of the Supreme Court proceedings and should, in my view, be reflected in the orders made as to interest. Accordingly, no interest will accrue in respect of the period of the stay. 24 As to costs, the applicants sought indemnity costs from 22 November 1999. This was advanced on the basis of offers made and rejected. Those offers were apparently made in conversations between the parties' respective solicitors, but were never more formally communicated, whether by way of Calderbank letter or by way of formal notices as to Offers of Compromise, as contemplated by Part 23 of the Court's rules. 25 The respondents submitted that the material advanced did not provide a proper basis for an indemnity costs order to be made. No sworn affidavit having been served upon them and they having had no opportunity to respond with evidence of their own. 26 The Court's Rules, like those made by the Supreme Court, encourage the making of offers of settlement so as to lead to the early conclusion of litigation. As Part 22A of the Supreme Court rules make plain, parties who make such offers may receive the benefit of a more favourable costs order than will otherwise be the case. 27 Had the offer here in question been put on some formal basis, I would not have hesitated to make the order sought by the applicants. I am not here satisfied that I should do so however, given the material put on for the applicants as to the circumstances in which the offer was made. 28 The circumstances in which indemnity costs orders are otherwise to be made was generally discussed in a recent judgment given in Dr Payne v University of Sydney & Anor [2000] NSWIRComm 158. In this case, I have concluded that the usual order as to costs should not be departed from. 29 Accordingly, the respondents are to bear the applicants' costs as agreed or assessed. 30 The applicants are to file short minutes of orders reflecting this judgment.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.