Domanko v Business Catalyst International Pty Ltd and anor [2008] NSWIRComm 120 | Case summary

1 These are proceedings brought under s 106 of the Industrial Relations Act 1996 ("the Act"). The applicant is Robert Domanko. The first respondent is Business Catalyst International Pty Limited, a company in liquidation, and the second respondent is Zia Qureshi. The applicant seeks by motion to add two additional respondents, namely Business Catalyst Consulting Pty Ltd ("Consulting") and Business Catalyst (Hong Kong) Limited ("Hong Kong"), as third and fourth respondents respectively. Hong Kong is a company incorporated in Hong Kong. 2 The proceedings in their current form seek a finding of unfairness with respect to a contract of employment between the applicant and the first respondent, the company now in liquidation. The second respondent, Zia Qureshi, is alleged to have been the chief executive officer of the first respondent and its controlling mind. He is joined in the proceedings under the well-known Brown v Rezitis principle (Brown v Rezitis (1970) 127 CLR 157). The applicant's contract of employment with the first respondent is alleged to have commenced in about July 2002 and terminated in May 2004. The summons for relief in its original form was filed on 4 February 2005. 3 The proposed amended summons asserts that on 7 February 2005, the first respondent, presumably through the liquidator, sold "the business, plant and equipment and intellectual property of the first respondent" to the fourth respondent. It is alleged that "from this time the fourth respondent became a beneficiary of, the making or operation of the said unfair contract." The second respondent is alleged to be a director of the fourth respondent which, as I have said, is a Hong Kong corporation. The proposed amended summons also alleges that "the third respondent carries on the business known as and holds itself out to be the business of 'Business Catalyst International'. The third respondent trades on the goodwill and reputation of the first respondent and accordingly became a beneficiary of the making or operation of the said unfair contract." 4 It was asserted, without proof, during the course of the hearing of these interlocutory proceedings that the fourth respondent had in turn sold the business to an Australian corporation based in Queensland with whom the second respondent had no relationship and that that company had in turn licensed the operation of the business to the third respondent of which the second respondent is the chief executive officer. 5 In seeking to justify the addition of the third and fourth respondents, the applicant said that he was merely endeavouring to trace the assets of the first respondent which in fairness he should be entitled to do, based on the development of the Brown v Rezitis principles. 6 In support of the motion to amend, the applicant relied on the judgment of Hodgson JA in the New South Wales Court of Appeal in Unitedglobalcom v Industrial Relations Commission of New South Wales (2005) 142 IR 204. Hodgson JA (with whose reasons Handley JA and Brownie AJA agreed), after discussing Brown v Rezitis said, "[24] In my opinion, if an applicant obtains an order under s.106 against a respondent for whom the applicant worked in an industry, and it is shown that the assets of that respondent have since passed, by reason of some corporate reorganisation within a group of companies, to another company in that group, there may be jurisdiction under s.106(2) to make an order against the entity to which those assets have passed. If it be the case that the assets that have so passed have been augmented by the work done by the applicant, and if it be the case that the re-structuring has left the original entity for which work was done without sufficient funds to make an appropriate payment, it may be that such a payment is properly regarded as a payment of money in connection with a contract declared wholly or partly void or varied, as those expressions are used in s.106(5). I think that is supported by what Barwick CJ says in Brown , particularly his reference to persons who have received money indirectly from one of the parties to the contract. It is also consistent with the reference in his judgment to subterfuges: the re-structuring of a group of companies so as to transfer the business of one company in the group to another company in the group may not be undertaken as a subterfuge to defeat an applicant, but it could possibly have that effect, and in my opinion it may not be beyond the power of the IRC to make orders under s.106(5) to avoid that effect." 7 The applicant emphasised the involvement of the second respondent, Mr Qureshi, in each of the proposed third and fourth respondents and the fact that they were either the purchaser of or a successor to the business of the first respondent in order to support the joinder of these two further respondents. 8 Although in Unitedglobalcom the Court of Appeal was concerned with an application to restrain the Industrial Relations Commission of New South Wales from dealing with the matter, the principles that apply to a consideration of these proceedings are not relevantly dissimilar in effect to those being considered by the Court of Appeal, albeit that different language is used. 9 The approach which governs a determination to reject the application to amend is that which is encapsulated in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125. At [8] and [9], Barwick CJ said, "[8] The plaintiff rightly points out that the jurisdiction summarily to terminate an action is to be sparingly employed and is not to be used except in a clear case where the Court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion. I have examined the case law on the subject, to some of which I was referred in argument and to which I append a list of references. There is no need for me to discuss in any detail the various decisions, some of which were given in cases in which the inherent jurisdiction of a court was invoked and others in cases in which counterpart rules to Order 26, r. 18, were the suggested source of authority to deal summarily with the claim in question. It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action - if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; 'so obviously untenable that it cannot possibly succeed'; 'manifestly groundless'; 'so manifestly faulty that it does not admit of argument'; 'discloses a case which the Court is satisfied cannot succeed'; 'under no possibility can there be a good cause of action'; 'be manifest that to allow them' (the pleadings) 'to stand would involve useless expense'. (at p129) [9] At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or 'so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument'; 'so to speak apparent at a glance'. (at p129)" 10 Accordingly, a refusal to allow the proceedings to be amended in the manner sought by the applicant would necessarily involve the same consideration as the exercise of jurisdiction and power to summarily terminate the proceedings against them (in the absence of any suggestion that the amended proceedings would constitute an abuse of process, of which there is none). 11 As is well known, a determination to summarily terminate proceedings can only be considered at the appropriate time, namely when all of the evidence is available to the Court to allow such a determination to be made. Whether and to what extent the applicant is able to maintain proceedings against the proposed third and fourth respondents is not a matter that, on the state of the material currently before the Court, can safely or appropriately be determined. The applicant having sought to bring himself within the Brown v Rezitis principles in the circumstances outlined in a general way by Hodgson JA, it cannot be said that such an assertion as against the third and fourth respondents is so obviously untenable that it cannot possibly succeed or is manifestly groundless etc. 12 The second respondent and the proposed third and fourth respondents were represented by counsel on a direct brief basis. Although it was submitted on their behalf that the factual circumstances which apply in these proceedings are distinguishable from those which applied in Unitedglobalcom, that is a matter that can only be determined, as I have said, at an appropriate stage when all of the relevant evidence has been adduced. It is not a matter that is required to be considered at this stage. 13 Accordingly, I can see no basis for denying the applicant the ability to amend applying the General Steel principles. 14 The respondent parties also submitted that there was no utility in allowing the third and fourth respondents to be joined as additional respondents, particularly as the second respondent Mr Qureshi, who is associated with both of those corporations, is before the Court, albeit by reason of his association with the first respondent. Whether, pragmatically, and taking into account the cost effective prosecution of this matter, this submission is soundly based, it is not sufficient in my opinion, based upon the principles which apply to proceedings of this kind, to deny the applicant the ability to amend the proceedings as sought. 15 The respondent parties also complained that the proceedings having commenced some years ago, that it would be inappropriate for the Court to allow them to be amended at this late stage to join in additional respondents. This would further delay the proceedings and would arguably involve a further mandatory conciliation. However, nothing has been put to the Court that would point to any particular prejudice suffered by the existing respondents or the two putative additional respondents if the proceedings were allowed to be amended, albeit at a considerably late stage. There was debate between counsel as to why the proceedings had been delayed; suffice to say on the brief analysis of the state of the proceedings it appears that there may be fault on both sides. In the absence of any particular prejudice accruing to the existing or the proposed additional respondents, I am not persuaded to deny the applicant the entitlement to amend the proceedings on this basis. 16 There was also controversy between the parties as to the appropriate costs order. There is no reason why, in my opinion, the applicant being successful on the motion should not pay the respondents' costs thrown away by reason of the amendment and I will proceed on this basis. With respect to the respondents' opposition to the amendment itself, I shall in all the circumstances order that these be costs in the cause. This is because the case that the applicant seeks to make out against each of the additional respondents is based solely on the Brown v Rezitis principles and therefore the costs of the motion should reflect the ultimate outcome of the proceedings against those two additional respondents. 17 I make the following orders 1. The applicant is granted leave to file and serve on the existing respondents within 14 days a further amended summons in the form annexed to the applicant's notice of motion filed 10 April 2008. 2. The applicant is to pay the costs of the first and second respondents thrown away by reason of the amendment. 3. Otherwise the costs of the motion are to be costs in the cause. 4. Within 21 days the parties are to forward to my associate consent orders for the further preparation of the proceedings in accordance with the provisions of Practice Direction 14, including any further conciliation process. If agreement cannot be reached within 21 days, the applicant's solicitor is directed to exercise the liberty to apply which continues with respect to these proceedings.

Domanko v Business Catalyst International Pty Ltd and anor

At a glance

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Before

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Judgment (12 paragraphs)

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Cases Cited (3)

Cited By (2)