Gabbitass v Richard Leal Pty Ltd t-a MLD Smash Repairs and ors

CATCHWORDS: Interlocutory application to set aside order of discontinuance against corporate respondent - application based on breach of s500(2) of Corporations Act 2001 - discontinuance did not breach provisions of s500(2) - nothing has been done to advance the position of either party in the proceedings - application based on "slip rule" - discontinuance was deliberately sought - circumstances gave Court no alternative than to bring proceedings against corporate respondent to an end - no room for application of "slip rule" - notice of motion dismissed

Corporations Act 2001 s500(2) LEGISLATION CITED: Industrial Relations Act 1996 s106 Industrial Relations Commission Rules 1996 Rule 89(5) Uniform Civil Procedure Rules 2005 Rule 36.17

Brown v Rezitis (1970) 127 CLR 157 CASES CITED: Doran Constructions Pty Ltd (in liquidation) v Beresfield Aluminium Pty Ltd [2002] NSWCA 95 Newmont Yandal Operations Pty Limited v The J. Aron Corporation & The Goldman Sachs Group, Inc & 3 Ors [2007] NSWCA 195 (10 August 2007) Ove Arup Pty Ltd v WorkCover Authority (NSW) (2005) 141 IR 78

APPLICANT: Dr J Berwick of counsel Solicitors: G H Healey & Co Mr G Healey LEGAL REPRESENTATIVES: FIRST RESPONDENT Unrepresented

SECOND & THIRD RESPONDENTS: In person

Harry Gabbitass v Richard Leal Pty Ltd t/a MLD Smash Repairs and ors

Application under s 106 of the Industrial Relations Act 1996

INTERLOCUTORY JUDGMENT ON APPLICATION TO SET ASIDE ORDER OF DISCONTINUANCE

1 These are proceedings brought by the applicant, Harry Gabbitass, under s 106 of the Industrial Relations Act 1996. A summons filed on 20 November 2001 sought to impugn as unfair a contract between the applicant and the respondent Richard Leal Pty Ltd. The summons was amended on 23 September 2005 by adding Richard Fernandez Leal, a director of the respondent, as a second respondent. The proceedings were further amended on 14 November 2005 by adding an additional third respondent, Mercedes Leal, a director of the first respondent. Neither the second or third respondent was alleged to be a party to the contract. They were joined into the proceedings on the basis of the principles established in Brown v Rezitis (1970) 127 CLR 157 2 The hearing of the proceedings has been much delayed for reasons that have occupied a number of judges of this Court as part of the case management process. 3 When the hearing of the substantive proceedings commenced on 19 March 2007, Dr J Berwick of counsel appeared for the applicant. Mr Richard Leal and his mother Mrs Mercedes Leal represented their own interests. There was no appearance for the corporation, the first respondent. A few days previously, solicitors who had represented all of the respondents had filed a notice of ceasing to act. 4 At the commencement of the hearing, Dr Berwick announced that the first respondent had been placed under administration and indicated that it was not possible to proceed against it without leave of the Supreme Court. Dr Berwick said, "We haven't had time to get the permission of the administrator nor do I have any instructions to seek leave from the Supreme Court." He said, in effect, that the applicant wished to proceed only against Mr Leal and Mrs Leal, being the second and third respondents. Dr Berwick handed up a proposed second further amended summons, which sought to have the corporate respondent deleted from the proceedings. 5 There were further amendments to the proceedings sought in the proposed second further amended summons. One raised an allegation that the contract between the applicant and the corporation, Richard Leal Pty Ltd, was unfair because it did not contain a term requiring the corporation to afford procedural fairness to the applicant when dealing with the termination of his employment. This was the first occasion on which any such allegation had been made. 6 During the course of discussions with Mr Leal and Mrs Leal, it emerged that neither of them had had an opportunity of perusing the affidavit material filed in the proceedings because the file had until recently been with the solicitor who had acted for them. They requested an adjournment for that purpose and on this basis the further hearing was adjourned until 20 March 2007. 7 However, during the course of dialogue with Dr Berwick concerning the proposed further amendment to the summons, the following exchange occurred. "BERWICK: The first purpose of the amendment is to remove the company, what was originally the first respondent, from the proceedings.

HIS HONOUR: Then you will need to seek to discontinue the proceedings against the respondent.

BERWICK: That's right, against that company." 8 Later that morning, I dealt specifically with the request to discontinue the proceedings against the company. 9 I reproduce hereunder a further part of the transcript of the proceedings that day. "HIS HONOUR: Yes. And does the applicant then seek to discontinue the proceedings as against the company?

HIS HONOUR: The company being in administration and given all the circumstances to the extent that leave is necessary, I grant leave to the applicant to discontinue the proceedings against the first respondent and those proceedings are discontinued accordingly. The proceedings will then go forward on the basis of the further amended summons filed 14 November 2005." 10 The matter proceeded on 20 March 2007. On that day, the applicant gave evidence and was cross-examined by the third respondent. The second respondent then sought an adjournment to enable him to obtain some legal advice. After considering the history of the matter, I granted that adjournment. The proceedings were stood over for further hearing on 25, 26 and 27 June 2007. 11 On 25 June 2007, Mr Leal and Mrs Leal appeared for themselves indicating that they were not to be legally represented. At that stage, I raised with Dr Berwick the consequences of the impact of the discontinuance against the corporate respondent from the proceedings with respect to orders, which were then to be sought against the individual respondents. I set out hereunder an extract of the transcript on that day. "HIS HONOUR: Before we proceed. Dr Berwick, on the last occasion you applied for leave to amend the proceedings by having the corporate respondent dismissed from the proceedings?

HIS HONOUR: Which I acceded to and you took that view rather than apply or rather than your client apply to the Supreme Court for leave to continue against the corporate respondent.

HIS HONOUR: Since then I have come across a decision of the Court of Appeal of Yim and Kim , which is in 2007 NSWCA 77.

In that Justice Handley says at paragraph 101, 'If the Commission has jurisdiction over a particular contract et cetera and the parties to that contract are parties to the proceedings an order avoiding or varying that contract will have its intended effect.

If the other party to the contract is not a party to the proceedings it will not be bound by any order of the Commission and a purported order avoiding or varying the contract will be ineffective. The other party will not be bound by the order and the contract in its original form will remain in force.'

Now, what Justice Handley is saying is, that unless the contracting party is before the Court then this Court is deprived of jurisdiction and power to vary or avoid the contract which is, of course, a precondition to making any monetary order in favour of an applicant.

So, it may well be that your client, having applied to have the proceedings varied by dismissing from them the corporate respondent, who is the party to the contract, and that having been acceded to by the Court, then this results in the proceedings being constituted in a way where the Court has no power to make any order, that is an order of a practical kind because your client seeks some relief and therefore no power to make any orders against the remaining respondents.

Now, that is a matter about which presumably you might like to consider.

BERWICK: Yes, I was aware of your Honour's remark. I had done some research but I hadn't come across that decision." 12 The applicant was then granted an adjournment. 13 Subsequently, the applicant filed a notice of motion on 5 September 2007 seeking an order that the order "removing the first respondent be set aside." 14 A number of grounds were advanced by Dr Berwick on behalf of the applicant in support of this interlocutory application. 15 The first ground was that the order that I had made granting leave to the applicant to discontinue against the first respondent and discontinuing those proceedings accordingly was made in breach of s 500(2) of the Corporations Act 2001. That subsection provides as follows. " 500 Execution and civil proceedings (2) After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes." 16 The interlocutory proceedings were conducted on the basis that s 500(2) applied to the former first respondent. There is no evidence before the Court as to its status. However, given that the submissions by the applicant are made on the basis that s 500(2) applies, I shall proceed accordingly. 17 It was submitted by Dr Berwick that in discontinuing the proceedings against the corporate respondent I had "proceeded with" an action or other civil proceeding against that company. Dr Berwick did not refer to any authority in aid of this submission and indicated that he had not conducted any research to ascertain whether there was any relevant authority that would assist the Court in determining this matter. 18 The Macquarie Dictionary defines "proceed" relevantly as "to go on with or carry on any action or process." I understand that this would accommodate and include the taking of any step in or in connection with the processing or progressing of the proceedings. Such a meaning would represent the antithesis of a discontinuance or cessation of the proceedings. A discontinuance of proceedings cannot involve any action constituting "proceeding with" the matter. 19 Applying the plain English meaning of the words used in s 500(2) as exemplified by the Macquarie Dictionary, it is readily apparent, in my opinion, that the discontinuance of the proceedings and the circumstances in which they were effected did not breach the provisions of s 500(2) of the Corporations Act. 20 The provisions of s 500(2) of the Corporations Act were considered by Santow JA in the New South Wales Court of Appeal in Doran Constructions Pty Ltd (in liquidation) v Beresfield Aluminuim Pty Ltd [2002] NSWCA 95. The Court consisted of Mason P, Santow JA and Ipp AJA. All members of the Court held that it was not relevant to consider the provisions of s 500(2) for the purpose of those appeal proceedings. However, Santow JA made some comment concerning the application of those provisions. The factual circumstances that applied in Doran were significantly different to those that apply in these proceedings. Doran involved arbitration proceedings. The arbitrator gave notice of an interim award. The effect of so doing was to cause time for an appeal to commence to run. The question for determination was whether in handing down the interim award, the arbitrator had "proceeded with" against the company, it then being in liquidation. It was accepted that the arbitration proceedings were civil proceedings within s 500(2). In discussing the provisions of s 500(2), Santow JA said, "4 The question which s500(2) would have posed was whether the giving by the Arbitrator of the notice of the interim award would amount to any 'action or other civil proceeding' being 'proceeded with' against the company being the Appellant in liquidation.

5 To answer this question, it is necessary to characterise the action of the Arbitrator in giving notice of the interim award and its legal consequences in relation to any civil proceedings. It may be accepted that an arbitration proceeding is included within a 'civil proceeding'; see Re Vassal Pty Ltd (in liq) (1984) 2 ACLC 53; Mowbray College v Exhibition Design and Construction Pty Ltd (in liq) (1987) 5 ACLC 478.

(i) lodging an appeal ( Humber & Co v John Griffiths Cycle Co (1901) LT 141 (HL)),

(ii) applying for security for costs against the company ( Pasdale Pty Limited v Concrete Constructions (1996) 14 ACLC 554; BPM Pty Ltd v HPM Pty Ltd (1996) 14 ACLC 857); or

(iii) 'defensive proceedings' against the company in liquidation; Skinner v Jeogla Pty Ltd [2001] NSWCA 15 at paras [13] and [15].

7 'Proceeding' is itself an expression taking its meaning from its context. In the present context it is apt to include 'a step in an action, cause or matter'; see 'McPherson, The Law of Company Liquidation' (LBC, 1999) by Andrew Keay at 246. While, conceptually, an arbitrator as agent for the parties may take a step in the action, it would not be a step so characterised if it did not advance that action from the point of view of either of the parties. A mere anterior, preliminary, step by the Arbitrator, though prerequisite to a step by either party, does not meet that description." ……………………………………………………………………………………... "13 To sum up.

(1) Giving notice of his award by the Arbitrator is not a step in the proceedings, being an anterior preliminary step prerequisite to either party seeking to challenge the Arbitrator's award but not of itself advancing either party's case.

(a) neutral, being preparatory to and prerequisite for, a defensive step (challenging the Arbitrator's award); or

(b) it is a defensive step itself, in setting time running for any challenge, but taking its defensive character from the step (challenge) that may follow.

Either way, it falls outside s500(2) of the Corporations Act ." 21 The observations of Santow JA are consistent with the approach that I have earlier taken to the construction of s 500(2) and its application to these proceedings. Nothing has been done to advance the position of either party in connection with the processing or progressing of the proceedings. What has been done is to bring about a cessation of the proceedings as against the company. Whilst, obviously, this is to the benefit of the company it is not an advancement of the interests of the company of a kind referred to by Santow JA and of a kind that might conceivably be caught by s 500(2). 22 Dr Berwick made no submissions at all about the effect of the order that I made which discontinued the proceedings brought by the applicant as against the then first respondent. As is clear from the transcript, they were pronounced orally during the court process. In that he made no submissions about the effect of such a pronouncement, I assume that Dr Berwick has proceeded on the basis that the order pronounced by me was sufficient to have effected a discontinuance of the proceedings. Such an approach would appear to be consistent with observations of a Full Bench of this Court in Ove Arup Pty Ltd v WorkCover Authority (NSW) (2005) 141 IR 78 at 87, and I shall proceed on this basis. 23 Dr Berwick next submitted that it was appropriate to apply what is known as "the slip rule" or to exercise the inherent jurisdiction of this Court to correct an error so as to set aside the order of discontinuance. In applying the "slip rule" Dr Berwick submitted that I should have regard to the practice, procedure or usage of the Supreme Court of New South Wales by reference to the provisions of Rule 89(5) of the Rules of this Court. That sub-rule is in the following terms: " 89 Supplementary practice before Commission (5) Where: (a) there are no relevant provisions, and (b) there is no established practice, procedure or usage, and (c) there is no Rule, order, direction or Practice Direction in force, the practice, procedure or usage for the time being of the Supreme Court or, in the case of appeals, the practice, procedure or usage for the time being of the Court of Appeal or the Court of Criminal Appeal, as may be appropriate, is, as far as practicable, to regulate the practice, procedure or usage of the tribunal." 24 The "slip rule" is now embodied in Rule 36.17 of the Uniform Civil Procedure Rules 2005 which is in the following terms "If there is a clerical mistake, or an error arising from an accidental slip or omission, in a judgment or order, or in a certificate, the court, on the application of any party or of its own motion, may, at any time correct the mistake or error." 25 There can be no doubt that this Court as a superior court of record albeit of limited jurisdiction has an inherent jurisdiction or power to ensure that its processes are utilised in connection with the proper and appropriate administration of justice. There can be no doubt also that this Court is empowered to apply the "slip rule" in appropriate circumstances whether formulated in accordance with principles established at common law or whether formulated in accordance with the provisions of the Uniform Civil Procedure Rules 2005. 26 In support of his submissions in connection with these matters, Dr Berwick relied on a recent decision of the New South Wales Court of Appeal in Newmont Yandal Operations Pty Limited v The J. Aron Corporation & The Goldman Sachs Group, Inc & 3 Ors [2007] NSWCA 195 (10 August 2007). Those proceedings involved a consideration of orders made by a judge in the course of determining one set of proceedings, which arguably impacted upon a consideration of concurrent proceedings brought between the same parties with respect to the same subject matter. The consequences of the order as they impacted upon the concurrent proceedings were unintended and to that extent the orders were made inadvertently. 27 The New South Wales Court of Appeal upheld a judgment at first instance applying both the inherent jurisdiction of the Court to protect its own processes and the provisions of the "slip rule" in determining to correct the error constituted by the making of the orders. 28 The substantive judgment of the Court of Appeal was that of the Chief Justice. It traverses in a comprehensive manner the relevant authorities in this area. 29 Because the factual circumstances that applied in Newmont were so different to those that apply in the circumstances of these proceedings, it is unnecessary that I need refer to the judgment of Spigelman CJ in any detail. However, there are a number of observations made by the Chief Justice that are of assistance in determining these proceedings. 30 As the Chief Justice noted, there will in many cases be some overlap between a court applying the "slip rule" (whether as now formulated in the Uniform Civil Procedure Rules 2005 or whether as developed and recognised at common law) and the exercise by a court of its inherent jurisdiction to ensure that its processes are consistent with the proper and appropriate administration of justice. In the context of both matters, the Chief Justice focussed in Newmont on whether the order, which was the subject of examination, reflected the true intention of the court with respect to its scope and effect. 31 As the reasons for judgment of the Chief Justice make clear, it is necessary to consider in an objective sense the intention of the judge in making the order so as to determine whether the order in turn reflected that intention. The focus, therefore, is always on the intention of the judicial officer who made the order. In the same way, in applying the "slip rule" the focus of attention is whether the order "was an 'error' based on an 'accidental slip or omission' by (the judicial officer)." At [153]. (The same point is made in greater detail at [163] and [164]). 32 As I have already said, the circumstances in Newmont were entirely different to those that apply to these proceedings. In these proceedings, the applicant's counsel deliberately and specifically sought a discontinuance of the applicant's case against the then first respondent company. There was an expressed intention not to proceed further against that company because of its then announced status. There was a professed intention not to seek leave of a duly empowered court for the proceedings in this Court to continue against that company. In these circumstances, and having regard to the representations made by Dr Berwick concerning the application of the provisions of s 500(2) of the Corporations Act, 2001, this Court had no alternative other than to bring the proceedings against the company to an end. It was always the intention of this Court, in acceding to the applicant's request, to bring about a discontinuance of the proceedings against the then first respondent. 33 In these circumstances there is no room for the application of the "slip rule" and it would be inappropriate to resort to the inherent jurisdiction of the Court. Any "slip" or unintended consequence was arguably that of the applicant or his legal representatives. 34 For these reasons the applicant's notice of motion is dismissed. I shall reserve costs.

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