Heath v Hanning

Supreme Court of NSW|1999-05-10|Before: Austin J

New South Wales Supreme Court CITATION : Heath v Hanning [1999] NSWSC 719 CURRENT JURISDICTION : Equity FILE NUMBER(S) : 1806/99 HEARING DATE(S) : 10 May 1999 JUDGMENT DATE : 19 July 1999

Heath Group Australasia Pty Ltd & Anor (P) PARTIES : v Leonard Henry Hanning & Anor (D) JUDGMENT OF : Austin J

COUNSEL : P Kite SC & M Thangaraj (P) W R Haylen QC & R Reitano (D) SOLICITORS : Norton Smith & Co (P) R L Whyburn & Associates (D) CATCHWORDS : Courts - jurisdiction - cross-vesting of jurisdiction - application for removal of proceedings before Industrial Relations Commission to Supreme Court - jurisdiction of Supreme Court in those proceedings - factors relevant to Supreme Court's discretion to remove proceedings ACTS CITED : Industrial Relations Act 1996 (NSW), ss 106, 109 Jurisdiction of Courts (Cross-vesting) Acts, 1987 (NSW & Cth), ss 4, 5, 8, 9 Adamson v NSW Rugby League Ltd (1991) 27 FCR 535 Bankinvest AG v Seabrook (1988) 14 NSWLR 711 Blair v Curran (1939) 62 CLR 464 Bruning v Kingsmill (Australia) Pty Ltd (1998) 44 NSWLR 180 David Jones Ltd v Cukeric (1997) 78 IR 430 Dawson v Baker (1994) 120 ACTR 11 Gallagher v Pioneer Concrete (NSW) Pty Ltd (1993) 113 ALR 159 Gaza Grazing Pty Ltd v Ampol Exploration Ltd [1990] 1 Qld R 202 Harry M Miller Attractions Pty Ltd v Actors' & Announcers' Equity Association of Australia [1970] 1 NSWLR 614 Johnston v Becker [1999] NSWSC 310 Minister for Youth & Community Services v Health & Research Employees' Association of Australia (1987) 10 NSWLR 543 Minproc Ltd v Killinger [1999] NSWSC 564 CASES CITED : Murray v Transport Workers' Federation of Australia [1969] 1 NSWR 351 National Parks & Wildlife Service v Stables Perisher Pty Ltd (1990) 20 NSWLR 573 Nisbet v Kilfoyle (Industrial Relations Commission of New South Wales, Commission in Court Session, Full Bench, No.CT1120/96, 18 December 1996, unreported) Nordby v Barclays Australia Investment Services Ltd (1994) 53 IR 319 Queensland v Commonwealth (1977) 139 CLR 585 Re Dingjan; ex parte Wagner (1995) 183 CLR 323 Re Wakim; ex parte McNally [1999] HCA 27 Rothmans v Industrial Court of New South Wales (1994) 53 IR 157 Stevenson v Barham (1997) 136 CLR 190 The Rochester Communications Group Pty Ltd v Adler (1996) 65 FCR 572 Walker v Industrial Court of New South Wales (1994) 53 IR 121 Wiest v DPP (1988) 23 FCR 472 Winron Pty Ltd v Shell Company of Australia Ltd (1996) 66 IR 64 Wood v Boral Resources (NSW) Pty Ltd (No.4980/92, 28 October 1993, unreported) DECISION : Orders for removal of proceedings as sought by plaintiff

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1806/99 - HEATH GROUP AUSTRALASIA PTY LTD & ANOR v LEONARD HENRY HANNING & ANOR

JUDGMENT 1 HIS HONOUR: By a summons filed on 24 March 1999 the plaintiffs seek orders which would bring into this Court some proceedings in the Industrial Relations Commission of New South Wales and the Chief Industrial Magistrate's Court of New South Wales. If I make the orders which the plaintiffs seek, they will apply the Federal Court of Australia for orders transferring proceedings there into this Court, so that all of the proceedings can be heard together by the Supreme Court. 2 At the present time there are five proceedings, all of which relate to the dismissal of the defendants, Mr Hanning and Mr Anderson, from their respective positions as managing director and executive director of the first plaintiff. The two proceedings in the Industrial Relations Commission have been brought respectively by Mr Hanning and Mr Anderson, seeking relief under s 106 of the Industrial Relations Act 1996 (NSW) (matters 5856 and 5857 of 1998). The respondents before the Commission are the two plaintiffs before me. In those proceedings Mr Hanning and Mr Anderson contend that they are entitled to three years' remuneration on termination of employment, and that they are entitled to benefit from the first plaintiff's executive share plan. The second plaintiff, which is incorporated in the United Kingdom, is joined in those proceedings because it is the trustee of the executive share plan. Mr Hanning seeks a total of $3.9m plus costs while Mr Anderson seeks $2,786,395 plus costs. In their defence to those proceedings, the present plaintiffs contend that Mr Hanning and Mr Anderson were dismissed for serious misconduct, and claim breaches of provisions of the Corporations Law, the Trade Practices Act 1974 (Cth), the Fair Trading Act 1987 (NSW) and fiduciary and contractual duties. 3 The present plaintiffs have filed and served four lengthy affidavits in the Commission proceedings. Two of the deponents are directors of the British parent company of the first plaintiff, the third is the managing director of the first plaintiff and the fourth is a chartered accountant from Sydney who has made a forensic investigation into the accounts of the first plaintiff in relation to the present defendants. 4 The two Federal Court proceedings have been brought by the plaintiffs against Mr Hanning and Mr Anderson respectively and are based on the same material as the defence in the Commission proceedings. The plaintiffs say that the evidence to be filed in the Federal Court proceedings will be identical, or virtually identical, with that filed in the Commission. 5 Mr Hanning has also instituted proceedings in the Chief Industrial Magistrate's Court of New South Wales against the first plaintiff (matter 98/2500) claiming payment for annual leave. The first plaintiff denies that claim, and asserts in the Federal Court proceedings that Mr Hanning took excessive annual leave and seeks the return of money on that basis. The first plaintiff says that the Chief Industrial Magistrate's Court has no jurisdiction to entertain its claim. 6 In this Court the plaintiffs seek orders under s 8 of the Jurisdiction of Courts (Cross-vesting) Act 1997 (NSW) removing the proceedings before the Industrial Relations Commission and the Chief Industrial Magistrate to this Court, where they would be treated as a continuation of the present proceedings and be heard together. This is on the basis that the Federal Court proceedings would later be transferred to this Court by order of the Federal Court under s 5(4) of the Jurisdiction of Courts (Cross-vesting) Act 1997 (Cth), upon the application of the plaintiffs as applicants in the Federal Court proceedings. 7 The plaintiffs say that there are strong reasons of convenience for achieving this outcome. First, folding five proceedings into one will save substantial time and expense. All five proceedings arise out of the same facts, and the evidence will overlap very substantially, particularly as between the Industrial Relations Commission and Federal Court proceedings. The plaintiffs estimate, after discussion with senior counsel, that the length of separate Commission proceedings would be five to seven days, with seven days estimated for the Federal Court proceedings and two days estimated for the proceeding in the Chief Industrial Magistrate's Court. Further, two of the witnesses for the plaintiff are directors of the parent company in London, and the plaintiff says that if the proceedings are not joined then those witnesses will have to leave their jobs in London on at least two occasions at great inconvenience and expense, or alternatively they will have to give their evidence by video link, a procedure which is also expensive. Additionally, if the proceedings are not joined there is the prospect of two appeals in separate jurisdictions. 8 The defendants oppose the orders which the plaintiffs seek. They submit that this Court has no jurisdiction to make the orders or to hear the Commission proceedings if they are removed to it. They also raise some matters going the Court's discretion, submitting that the Commission is a specialist tribunal which exercises non-judicial, arbitral powers and is therefore the most appropriate body to determine the proceedings which are presently before it, and also that the plaintiffs are engaging in forum shopping. 9 I propose, first, to deal with questions relating to the jurisdiction of this Court, then to indicate the Court's general approach to the exercise of discretions under the cross-vesting legislation, and then to turn to the particular discretionary considerations in this case. I shall deal with them under five headings, namely: expense and convenience; overlapping and issue estoppel; relevant limits of the jurisdiction of the Commission, the Chief Industrial Magistrate's Court and the Federal Court of Australia; the Commission as a specialist tribunal; and forum shopping.

Jurisdiction of the Supreme Court 10 The plaintiffs seek orders under the cross-vesting legislation as enacted in New South Wales. The preamble to the Commonwealth and State legislation recites that inconvenience and expense have occasionally been caused to litigants by jurisdictional limitations in federal, State and Territory courts, and that it is therefore desirable to establish a system of cross-vesting of jurisdictions between those courts, without detracting from the existing jurisdiction of any court. Since the word 'court' in the preamble is capable of referring to any court in a State, it could be contended that one of the purposes of the cross-vesting legislation is to permit the transfer of proceedings from one court in a State to another court in the same State, where inconvenience and expense can be avoided by doing so. However, an examination of the history of the legislation suggests that the principal legislative concern was with limitations upon the jurisdiction of each State system of courts and the Commonwealth system of courts, rather than limitations of jurisdiction within the system of courts of a single State: see K Mason and J Crawford, 'The Cross-vesting Scheme', (1988) 62 ALJ 328. Purely intra-State jurisdictional problems can be cured by legislation of the State without the necessity for a national co-operative scheme. 11 The federal-State focus is confirmed in the Explanatory Note to the New South Wales Bill. The Note explains that clause 8 would enable the Supreme Court to remove a proceeding from another court of the State into the Supreme Court 'so that it can then be transferred to the Federal Court or other relevant court, or so that it may be determined in the Supreme Court itself together with proceedings transferred to it from the Federal Court or other relevant court.' This implies a legislative intention to authorise the Supreme Court to determine the combined proceedings. 12 However, ss 8 and 9 of the cross-vesting legislation of New South Wales are cast in language which is wide enough to confer on the Supreme Court the jurisdiction to hear and determine a proceeding removed to it from another court of the same State. They state: 'Orders by Supreme Court 8.(1) Where: (a) a proceeding (in this subsection referred to as the 'relevant proceeding') is pending in: (i) a court, other than the Supreme Court, of the State; or (ii) a tribunal established by or under an Act; and (b) it appears to the Supreme Court that: (i) the relevant proceeding arises out of, or is related to, another proceeding pending in the Federal Court, the Family Court or the Supreme Court of another State or of a Territory and, if an order is made under this subsection in relation to the relevant proceeding, there would be grounds on which that other proceeding could be transferred to the Supreme Court; or (ii) an order should be made under this subsection in relation to the relevant proceeding so that consideration can be given to whether the relevant proceeding should be transferred to another court, the Supreme Court may, on the application of a party to the relevant proceeding or of its own motion, make an order removing the relevant proceeding to the Supreme Court. (2) Where an order is made under subsection (1) in relation to a proceeding, this Act applies in relation to the proceeding as if it were a proceeding pending in the Supreme Court. (3) Where a proceeding is removed to the Supreme Court in accordance with an order made under subsection (1), the Supreme Court may, if the Supreme Court considers it appropriate to do so, remit the proceeding to the court or tribunal from which the proceeding was removed. Exercise of jurisdiction pursuant to cross-vesting laws 9. The Supreme Court: (a) may exercise jurisdiction (whether original or appellate) conferred on that court by a provision of this Act or of a law of the Commonwealth or a State relating to cross-vesting of jurisdiction; and (b) may hear and determine a proceeding transferred to that court under such a provision.' 13 Section 5(1) authorises the Supreme Court to transfer a proceeding which is pending in the Supreme Court to the Federal Court. Thus, by acting under ss 8(1) and 5(1) the Supreme Court may remove a proceeding from another court of the State so that it becomes a proceeding of the Supreme Court, in order to transfer the proceeding to the Federal Court. A matter removed to the Supreme Court under s 8 falls within the definition of 'State matter' in s 3(1), and s 4(1) invests the Federal Court with jurisdiction with respect to State matters. Subject to constitutional issues such as those which the High Court examined in Re Wakim; ex parte McNally [1999] HCA 27, the effect of the Supreme Court's order under s 8 is to render the matter a State matter and therefore generate Federal Court jurisdiction, and the effect of the Supreme Court's order s 5(1) is to enable the Federal Court to exercise that jurisdiction. The same analysis applies where the transfer is to the Family Court or the Supreme Court of another State or Territory. 14 It appears that the accrued jurisdiction of the Federal Court may not extend to the making of orders under s 106 of the IR Act in proceedings commenced in the Federal Court (The Rochester Communications Group Pty Ltd v Adler (1996) 65 FCR 572, a case on s 275 of the Industrial Relations Act 1991 (NSW)), but there is jurisdiction (subject to Wakim's case and other possible constitutional arguments as to the non-judicial or arbitral nature of the power) when the s 106 matter comes to the Federal Court by orders of the Supreme Court under s 8 of the cross-vesting legislation: Adamson v NSW Rugby League Ltd (1991) 27 FCR 535; 31 FCR 242; Gallagher v Pioneer Concrete (NSW) Pty Ltd (1993) 113 ALR 159. 15 The question which arises in the present case is whether, when the Supreme Court makes an order under s 8, it thereby confers upon itself jurisdiction to deal with the removed proceeding, if it does not otherwise have jurisdiction to do so. 16 Chapter 2 Part 9 of the Industrial Relations Act 1996 (NSW) ('IR Act'), which includes s 106, creates a special statutory regime under which the Commission may declare void or vary a contract whereby a person performs work in an industry, if the Commission finds that the contract is an unfair contract. Chapter 4 of the IR Act distinguishes between the Commission and the Commission in Court Session. A person appointed as a member of the Commission in Court Session is referred to as a judicial member of the Commission: s 149(3). The Commission in Court Session is constituted by a judicial member or members (s 151(1)), and the Commission in Court Session is established as a superior court of record: (s152(1)). Certain functions of the Commission are to be exercised only by the Commission in Court Session. These include the hearing and determination of proceedings with respect to unfair contracts under Chapter 2 Part 9: s 153(1)(c). 17 While these provisions contemplate that only the Commission in Court Session will exercise the statutory jurisdiction which they create, in my opinion they do not exhibit a legislative intention to vest the statutory jurisdiction exclusively in the Commission. To put my conclusion another way, an enactment of the New South Wales Parliament authorising the Supreme Court to exercise the statutory jurisdiction vested by the IR Act in the Commission would add to but not be inconsistent with the IR Act. There is a difference between vesting a new statutory jurisdiction in a single body, and vesting the statutory jurisdiction in that body exclusively, and in my opinion the IR Act does the former but not the latter. This distinguishes the present case from Gaza Grazing Pty Ltd v Ampol Exploration Ltd [1990] 1 Qld R 202, where the relevant mining legislation conferred exclusive jurisdiction on the Warden's Court. 18 The defendant submitted that a conferral of exclusive jurisdiction on the Commission in Court Session arises from s 153(1), which states that 'the following functions of the Commission are to be exercised only by the Commission in Court Session' and then sets out a list which includes proceedings under Part 9. I reject this submission. On its proper construction, s 153(1) deals with the allocation of functions between the Commission generally and the Commission in Court Session, excluding the Commission generally from any function in respect of Part 9 proceedings, but it does not deal with the allocation of functions as between the Commission (or the Commission in Court Session) and other tribunals such as the Supreme Court. 19 Thus, if s 106 proceedings are removed from the Commission to the Supreme Court under s 8, there is nothing in the IR Act to prevent the Supreme Court from exercising the functions and powers of the Commission in the removed proceedings. But since the functions and powers of the Commission under Part 9 of the IR Act are special statutory functions and powers, the Supreme Court cannot exercise them unless the New South Wales legislature has conferred jurisdiction upon it to do so. Section 4 of the cross-vesting legislation of New South Wales does not assist, because it vests additional jurisdiction only in federal courts and courts of States other than New South Wales. However, in my opinion both ss 8(1) and 9(b), on their proper construction, confer jurisdiction on the Supreme Court with respect to the removed matter, provided that s 8(1)(b) is satisfied. 20 Section 8(1) applies where a proceeding is pending in a court other than the Supreme Court of this State. The Industrial Relations Commission in Court Session is a court for the purposes of this provision: IR Act, ss 151, 152; Bruning v Kingsmill (Australia) Pty Ltd (1998) 44 NSWLR 180. The subsection authorises the Supreme Court to make an order removing that proceeding to the Supreme Court, where it appears to the Supreme Court that either of two conditions is satisfied. Those conditions supply the federal-State focus which underlies the cross-vesting legislation, because they have the effect that the Supreme Court cannot remove Commission proceedings to itself except in anticipation of either receiving other proceedings from a federal court or a court of another State or Territory, or of transferring the Commission proceedings to another such court. 21 One of the two conditions (in s 8(1)(b)(i)) is that the proceeding is related to another proceeding pending in (relevantly) the Federal Court and, if the Supreme Court makes an order for the removal of the proceeding under s 8, there would be grounds on which the Federal Court proceeding could be transferred to the Supreme Court. While this provision does not expressly confer on the Supreme Court the jurisdiction to deal with the removed proceeding, such jurisdiction is conferred by clear implication. In particular, paragraph 8(1)(b)(i) would be nonsensical if the Supreme Court lacked the jurisdiction to deal together with the proceeding removed from another New South Wales court and the proceeding transferred to it by the Federal Court. In my opinion s 8 has the effect that if the Supreme Court makes an order removing a s 106 proceeding from the Commission to the Supreme Court, the Supreme Court has all of the statutory jurisdiction of the Commission in Court Session to deal with the removed matter. 22 Section 9(a) authorises the Supreme Court to exercise original or appellate jurisdiction conferred on it by a provision of the cross-vesting legislation of New South Wales or of the Commonwealth or any other State. In my view this provision confirms that the Supreme Court may exercise the jurisdiction impliedly conferred upon it by s 8 of the cross-vesting legislation of New South Wales. Section 9(b) authorises the Supreme Court to hear and determine a proceeding transferred to it under a provision of the cross-vesting legislation of New South Wales, the Commonwealth or another State. The word 'transferred' is used in s 9(b), whereas s 8(1) speaks of an order 'removing' a proceeding to the Supreme Court. In my opinion, however, an order removing a proceeding from another State court to the Supreme Court is an order for the transfer of the proceeding for the purposes of s 9(b). Section 9(b) refers to a transfer under the provisions of the NSW legislation as well as the legislation of the Commonwealth and other States, and the only order under the NSW legislation which could be described as the transfer of a proceeding is an order under s 8. 23 Bruning v Kingsmill (Australia) Pty Ltd is authority for the view that s 9(b) confers jurisdiction on the Supreme Court of New South Wales in respect of matters removed to that Court under s 8, and that the Supreme Court consequently has all of the Commission's powers to hear and determine a proceeding under s 106 of the IR Act. In Minproc Ltd v Killinger [1999] NSWSC 564 Young J followed Bruning's case, observing (in effect) that the profession should assume that the Equity Division will follow Bruning unless the Court of Appeal determines otherwise. Some earlier observations by McLelland CJ in Eq in Wood v Boral Resources (NSW) Pty Ltd (No.4980/92, 28 October 1993, unreported) and by Young J in Winron Pty Ltd v Shell Company of Australia Ltd (1996) 66 IR 64, which suggest some doubt as to whether the Supreme Court had jurisdiction to deal with a proceeding under s 275 of the former Industrial Relations Act 1991 after an order for removal under s 8, do not fully explore the question and in my opinion, to the extent that those doubts are inconsistent with the reasoning in Bruning's case, Bruning's case is to be preferred.

General approach to the exercise of discretions under the cross-vesting legislation 24 The approach which I should take is indicated by the judgment of Rogers AJA in Bankinvest AG v Seabrook (1988) 14 NSWLR 711. In Johnston v Becker [1999] NSWSC 310 Bryson J described that judgment as 'definitive of the law and practice on this topic in New South Wales'. As Bryson J said, the central questions are to determine which court is the most appropriate forum for the case and where the interests of justice lie. First instance decisions in cross-vesting applications are dominated by their facts and by the authoritative expedition in the Bankinvest case, and tend not to carry the issue any further. In the Bankinvest case, Rogers AJA observed that it was inappropriate to talk of an 'onus' in relation to applications of this kind, but it is nevertheless true that the court will not make an order for transfer or removal of a proceeding unless it is persuaded that the interests of justice require it: Dawson v Baker (1994) 120 ACTR 11, 18. 25 After carefully reviewing the authorities, Higgins J in Dawson v Baker (at 22) concluded that it was not possible to limit the range of matters which are relevant, or defined the weight which any such matter will be afforded in the circumstances of a particular case. Clearly the five factors which I was invited to consider in this case are all relevant matters for assessment. 26 In some of the reported cases the application was made by consent. The consent of the parties was regarded as a relevant and influential factor in Winrod Pty Ltd v Shell Oil Company of Australia Ltd and Bruning v Kingsmill (Australia) Pty Ltd, and the absence of consent influenced the outcome in Wood v Boral Resources (NSW) Pty Ltd. It may be easier to transfer or remove proceedings where the applicant is the plaintiff in all relevant proceedings, than where the plaintiff in one is the defendant in the other and the application is contested. Nonetheless, as Miles CJ remarked in Dawson v Baker (at 13), the interests of justice are not governed by the attitude or wishes of a party or even all the parties.

Expense and convenience 27 The evidence is that instead of three hearings taking up 14 to 16 sitting days, a single hearing would be achieved if orders were made by this Court and the Federal Court. Since the evidence in the Federal Court proceedings would be virtually identical with the defendant's evidence before the Commission, one infers that if the Commission and Federal Court proceedings were heard together, especially if they were consolidated so that one came to be regarded as a cross-claim in the other, there would be a saving of up to half of the estimated total hearing time. Avoidance of the prospect of two appeals in separate jurisdictions would also be an advantage. 28 At this stage it is not clear whether Mr Hanning or Mr Anderson will require the two United Kingdom witnesses to attend for cross-examination. However, having reviewed the affidavits in the Commission proceedings, which are in evidence before me, I have formed the view that it is sufficiently likely that the UK deponents will be required for cross-examination that I should assess the present application on the assumption that they will be. On that basis it is obvious that it will be considerably more convenient and less expensive for the plaintiffs to have their witnesses give oral evidence once in this Court than to give it at least twice at different times in different courts if the orders are not made. 29 The defendants are not able to point to much in the way of inconvenience or expense to them if the orders are made, their case resting rather on the other considerations which I set out below. They say, however, that making the orders will lead to delay, which is clearly a relevant consideration: see Dawson v Baker at 25 per Higgins J. While the process of making application to this Court and the Federal Court for orders for removal and transfer of proceedings necessarily involves an element of delay, I am not in a position to conclude that making the orders will produce such a substantial delay as to outweigh the considerations of expense and convenience which favour the making of the orders. No evidence was led to compare delays in the Commission, the Chief Industrial Magistrate's Court, the Federal Court and this Court. In considering the question of delay, the proper comparison is between final resolution of a consolidated proceeding in this Court and the resolution of all of the existing proceedings in other courts, rather than between the delay in hearing in this Court and the delay in the first hearing in the various proceedings if they remain unconsolidated. For reasons which I shall explain, I cannot assume that a hearing in the Commission would create estoppels which would extinguish the Federal Court proceedings if they had not been heard, nor that determination in the Federal Court would extinguish the Commission proceedings. Overall my conclusion is that considerations of convenience and expense distinctly favour the plaintiffs.

Overlapping and issue estoppel 30 To understand the significance of this factor one must look in more detail at the factual allegations which underlie the various proceedings. It appears from Mr Hanning's affidavit in the Commission proceedings that the problems which led to his dismissal on 3 July 1998 had a substantial history. He was a founder of Fielding & Partners (Australia) Pty Ltd, 45% of the shares of which were held by Fielding & Partners (UK), with Mr Hanning's interests holding 27.5%. In 1986 Fielding & Partners (UK) was purchased by C E Heath plc. Subsequently Fielding & Partners (Australia) Pty Ltd was merged with the Heath subsidiary in Australia, Mr Hanning becoming the Managing Director and a substantial shareholder of the merged entity. Later his shareholding interest was bought out by Heath but 21% of the shares of the Australian company were issued to executives including Mr Hanning under an executive share plan. Mr Anderson was hired by the merged entity and eventually became a director. 31 In 1997 there was a management buy-out of the parent company C E Heath plc led by Mr MacKenzie-Green, one of the present plaintiffs' deponents. In his affidavit he alleges that financiers to the management buy-out discovered that some key employees of the Australian company had long-term service contracts under which they were entitled to their full salary for the remainder of the contract term in the event of a change of control of the employer. This discovery led to intense negotiations and an agreement whereby the affected employees agreed not to enforce these rights and entered into new service contracts in return for shares and a cash bonus of $A600,000. Half of the bonus was paid immediately and according to Mr MacKenzie-Green, payment of the other half was subject to the attainment of stated profit targets which were never attained. 32 Mr MacKenzie-Green says that in April 1998 he and Hamish Mackay, another deponent who is deputy chairman of the UK parent, visited Australia and discovered considerable differences within the Australian board in relation to the allocation of resources, working practices and management. He subsequently received a note from two Australian directors making serious allegations against Messrs Hanning and Anderson. He returned to Australia in June and had many confidential discussions, concluding that there were divisions amongst the Australian directors which ran so deep that fundamental changes needed to be made. He suggested to Mr Hanning that he be replaced as managing director and that he become chairman. Mr Hanning refused. They discussed sale of the UK interest in the company and a possible split of the company, and Mr MacKenzie-Green says that although Mr Hanning initially expressed an interest in acquiring the UK shareholding pursuant to rights of first refusal which he had, he later urged the UK shareholder not to sell and endeavoured to persuade the UK directors that differences in the Australian board could be resolved. Meanwhile investigations were undertaken with respect to the allegations which had been made against Mr Hanning and Mr Anderson. In his affidavit Mr Mackay deposes to investigations carried out by Arthur Andersen during a financial audit of the Australian company. He says that Arthur Andersen discovered certain irregularities relating to Mr Hanning and Mr Anderson. He convened a board meeting of the directors of the Australian company for 3 July 1998. 33 The minutes of that meeting indicate that though Mr Anderson was present, Mr Hanning was absent due to illness. In fact he had suffered a severe heart attack and had undergone major by-pass surgery on the previous day. Mr Mackay informed the meeting of Arthur Andersen's financial review and of legal advice received by the company. The minutes then set out a catalogue of allegations against Mr Hanning and Mr Anderson, namely that:

(a) Mr Hanning purported to determine that Mr Anderson was not liable to repay a substantial loan which he had received from the company, and misled the company by allowing the loan to remain as such in financial statements;

(b) Mr Hanning made various decisions with respect to a loan to a company known as Chip Application Technologies Ltd, without legal advice, which had the effect of altering the terms of the loan to the disadvantage of the company;

(c) Mr Hanning authorised payment of part of the second tranche of $300,000 even though the company had not achieved the profit targets upon which payment of that amount was conditional;

(d) Mr Hanning directed the company not to pay fringe benefits tax on part of his 'notional salary' under an arrangement which was not disclosed to the board. 34 The minutes record that 'in light of all the foregoing circumstances' the UK shareholder had decided to remove Mr Hanning and Mr Anderson as directors. The board then resolved to dismiss them summarily as employees of the company. 35 In the Federal Court proceeding against Mr Hanning, the plaintiffs rely on the allegations in paragraphs (a) to (d) above, asserting an entitlement to relief for breach of the Corporations Law, the Trade Practices Act and the Fair Trading Act, and on the grounds of breach of fiduciary duty, breach of contract, fraud and deceit. In their Federal Court proceeding against Mr Anderson, the plaintiffs rely on the allegations in paragraphs (a) and (d) and seek relief on equivalent grounds. The Federal Court proceeding against Mr Hanning raises two additional matters. One is an assertion that Mr Hanning took at least 89 days in excess of his annual leave entitlements, and failed to complete and lodge annual leave forms so as to create the appearance that he was entitled to additional leave which he had not taken. These allegations are related to the proceedings in the Chief Industrial Magistrate's Court, in which Mr Hanning seeks to recover in respect of his alleged entitlement to annual leave. In effect, the Federal Court proceeding seeks to make out that because he failed to account properly for annual leave in fact taken, Mr Hanning is not entitled to the payment for annual leave which he claims, but has in fact taken excess annual leave for which he should reimburse the company. The other matter is an allegation that Mr Hanning arranged with the company to take leases of motor vehicles used by his three sons, without the proper authority of the company. The Federal Court proceeding against Mr Anderson makes an additional allegation against him, namely that he failed to report information relevant to the acquisition of the Johnson & Higgins Queensland Aviation Business by the company. 36 The Commission proceedings seek the avoidance or substantial variation of the employment and executive share plan contracts, as well as the contracts which were entered into at the time of the management buy-out to replace the 'change of control' rights with entitlements to shares and bonuses. The applicants in the Commission proceedings allege that these contractual arrangements were unfair, harsh and unconscionable and contrary to the public interest in many ways, which are specified. While the Commission's determination on some of the aspects of alleged unfairness will depend principally on the documentation rather than extrinsic evidence, and some of the extrinsic evidence of unfairness may go beyond the basic allegations made in the minutes of the meeting of 3 July 1998, it is clear that the events of 3 July 1998 and the circumstances leading up to them, including negotiations at the time of the management buy-out, will be of central relevance in the Commission proceedings. 37 The grounds set out in the summons in the Commission proceedings refer not only to the terms of the contracts which are challenged, but also to the employer's conduct in and about termination of the employment, implying an allegation under s 106(2) that even if the contracts were fair at the time they were entered into, they subsequently became unfair because of the employer's conduct. To the extent that such an allegation is made the Commission will be required to review the history of the employment relationships and the circumstances leading up to the terminations, as well as the conduct involved in the terminations themselves, and make a determination of fairness in all the circumstances. 38 It is equally clear that those matters are of central relevance to the Federal Court proceedings, although the Federal Court proceedings raise some additional issues. One of the additional issues raised in the Federal Court proceedings against Mr Hanning is the question of entitlement to payment for annual leave, which is the very issue raised in the proceedings in the Chief Industrial Magistrate's Court. It is plain, therefore, that there will be very substantial overlap between the proceedings in the Commission, the Federal Court and the Chief Industrial Magistrate's Court. 39 Apart from the inconvenience and expense which this overlapping produces, it is likely in my opinion to raise some awkward questions of issue estoppel, unless the proceedings are heard together. 40 If the Commission proceedings are dealt with first, the Commission will make determinations with respect to the fairness of the conduct of the plaintiffs, which are likely to deal with the grounds for dismissal set out in the minutes of the meeting of 3 July 1998. The Federal Court proceedings make allegations which were intended to ground causes of action under statute and under the general law, some of the factual ingredients of which are likely to go beyond the facts which the Commission would determine in the exercise of its jurisdiction under s 106. To take an obvious example, the causes of action in the Federal Court proceedings involve proof that a benefit was gained or a loss or detriment suffered. The result is that if the proceedings in the Commission are determined first, there are likely to be some complex arguments about estoppel in the Federal Court proceedings: generally, see Blair v Curran (1939) 62 CLR 464, 531-2 per Dixon J; Queensland v Commonwealth (1977) 139 CLR 585; and note Wiest v DPP (1988) 23 FCR 472, 522 per Gummow J. 41 Much the same problems will arise if the Federal Court proceedings are heard and determined first. The Federal Court will make findings which will be relevant to but not necessarily determinative of the issues which are raised in the Commission proceedings. This is because the investigation of unfairness under Part 9 requires the Commission to consider whether the contract is against the public interest, and also because the factual matters relevant to deciding whether the contract or conduct under it is unfair, harsh or unconscionable are broader than the factual matters relevant to deciding whether conduct is misleading or deceptive, fraudulent or deceitful, or in breach of the Corporations Law or contract or fiduciary duty. 42 While a prior determination of the Federal Court proceedings against Mr Hanning could estop him from asserting the facts necessary to establish entitlement in the Chief Industrial Magistrate's Court, the benefit of that estoppel is not sufficiently strong to outweigh the disadvantage which would arise through the uncertain application of estoppel documents in other respects.

Relevant limitations of the jurisdiction of the Commission, Chief Industrial Magistrate and Federal Court of Australia 43 A significant factor in favour of making the orders which the plaintiff seeks is that the Supreme Court is the only tribunal which has the jurisdiction to deal comprehensively with all aspects of the dispute between the parties. Clearly the jurisdiction of the Chief Industrial Magistrate is limited having regard to s 382 of the IR Act. While I have not been taken to all of the legislation which confers jurisdiction on the Chief Industrial Magistrate, the evidence before me asserts that the Chief Industrial Magistrate's Court has no jurisdiction to entertain the first plaintiff's claim that excessive annual leave was taken and that money should be repaid on that basis. 44 The Commission has a wide jurisdiction under Part 9, but there are nevertheless limits. The Commission's power under s 106(1) is to make an order declaring the contract wholly or partly void, or varying it, if the Commission finds that the contract is an unfair contract. Section 106(5) authorises the Commission to make such order as to the payment of money as it considers just in the circumstances, but the power to make an order of this kind is limited by the wording of the subsection. An order for the payment of money can be made 'in making an order under this section… in connection with any contract declared wholly or partly void, or varied'. In other words, it is only when the Commission finds that the contract is unfair and decides to make an order affecting the contract that its power to make a money order arises. The additional power to make certain prohibitory orders, conferred by s 107, is not relevant in the present circumstances. The Commission can also make orders under other parts of the IR Act including Ch 2 Pt 6 with respect to unfair dismissals, in properly constituted proceedings.

However, none of this goes so far as to authorise the Commission, where it decides that a contract is not unfair, to order that the applicant in proceedings before it must pay money to the respondent employer. At least to that extent, the Commission may not have the power to deal comprehensively with all the claims of the parties. While the Commission in Court Session has the power to make declaratory orders (s 154), the present plaintiffs seek substantially more than merely declaratory relief in the Federal Court proceedings. Here the relief sought in the Federal Court is by the employer on basically the same grounds as it seeks to defend the s 106 proceedings. This may be contrasted with Wood v Boral Resources (NSW) Pty Ltd (cited above), where the lorry-owner drivers were the applicants for relief in each proceeding, and McLelland CJ in Eq took the view that the Commission's power to give them relief was at least as wide as the Federal Court's. 45 Additionally, while the Commission may be guided by analogy with the law of contract, fiduciary duty and deceit, and by the statutory duties under the Corporations Law and trade practices legislation, in making its determination whether a contract is unfair, the Commission is not a 'Court' as defined for the purposes of the Corporations Law and cannot therefore exercise the statutory powers of a Court with respect to such matters as orders for compensation under Pt 9.4B of the Corporations Law. 46 On the other hand the Federal Court's jurisdiction is also limited. While that court's accrued jurisdiction may permit it to deal with the claims under the Corporations Law and the general law which are combined with claims under the Trade Practices Act in the proceedings currently before it (see Re Wakim; ex parte McNally, cited above), it cannot in the proceedings presently before it make orders avoiding or varying contracts on the broad ground of unfairness defined in ss 105 and 106 of the IR Act. I need not give further consideration to the question whether the Federal Court could exercise the jurisdiction of the Commission if I were both to remove the Commission proceedings to this Court and then transfer them to the Federal Court, since there is no application for me to do so. 47 I conclude, therefore, that the most convenient and expeditious way of resolving all aspects of the dispute between the parties is to take such steps as I am able to take in order to have the proceedings determined by the only court with plenary jurisdiction, namely this Court.

The Industrial Relations Commission as a specialist tribunal 48 Counsel for the defendants submitted that the Commission is the most appropriate tribunal to determine the s 106 proceedings, because those proceedings raise non-judicial issues and require the exercise of arbitral power, and the Commission has acquired a form of specialisation and characteristic jurisprudence which give rise to forensic advantages which should not be taken away. He referred to Walker v Industrial Court of New South Wales (1994) 53 IR 121 and Rothmans v Industrial Court of New South Wales (1994) 53 IR 157 as illustrations of the special characteristics of this jurisdiction. I should note that the specific issue considered in Walker's case, namely whether it was appropriate for the Industrial Court of the time to consider the employer's conduct in respect of the termination of employment in determining whether the contract was fair, has been addressed by s 106(2), a provision which was not present in s 275 of the 1991 Act. Counsel for the defendant submits that this Court ought not make an order where it can be seen that there is another tribunal with the requisite power which is particularly suited to deal with the matter in issue (Harry M Miller Attractions Pty Ltd v Actors' & Announcers' Equity Association of Australia [1970] 1 NSWLR 614); and that the Court should leave the applicants in the Commission to pursue their remedy before that tribunal because the Commission has been set up by the legislature to entertain disputes of this kind (Murray v Transport Workers' Federation of Australia [1969] 1 NSWR 351).

Judicial or non-judicial power? 49 The Commission in Court Session is a superior court of record (IR Act, s 152), and has been described as a superior court of limited jurisdiction: Nisbet v Kilfoyle (Industrial Relations Commission of New South Wales, Commission in Court Session, Full Bench, No.CT1120/96, 18 December 1996, unreported). The source of the jurisdiction of such a court is statutory; it does not have any inherent jurisdiction to deal with common law claims, and it appears unlikely that it has any pendent or accrued jurisdiction (National Parks & Wildlife Service v Stables Perisher Pty Ltd (1990) 20 NSWLR 573), though this point was not fully argued before me. 50 The Commission in Court Session is empowered by Ch 2 Pt 9 to make orders avoiding or varying certain contracts where the Commission finds that the contract is 'unfair contract'. The words an 'unfair contract' are defined in s 105 to mean (relevantly) a contract that is unfair, harsh or unconscionable, or that is against the public interest. The Commission may find that the contract was unfair at the time it was entered into, that it subsequently became an unfair contract because of conduct of the parties, a variation or other reason, s 106(2). In considering whether a contract is unfair because it is against the public interest, the Commission must have regard to a number of matters specified in s 106(4), including the effect of the contract on any system of apprenticeship or other methods of providing a sufficient and trained labour force. The considerations to which s 106 refers are not limited to matters of an essentially industrial character: Stevenson v Barham (1997) 136 CLR 190, 199. 51 While these provisions are very broad, especially as they permit the Commission to vary a contract, they are not so widely expressed as to be necessarily powers of a non-judicial nature. It is not uncommon for the legislature to confer a very broad statutory jurisdiction on this Court - for example, the jurisdiction to determine that a contract is unjust, and hence to make an order varying it, under the Contracts Review Act 1980 (NSW); and the jurisdiction to make orders which have the effect of superseding the testator's intention under the Family Provision Act 1982 (NSW). The fact that the Commission's jurisdiction extends to conduct after the making of the contract does not render its discretion any less a judicial discretion. The evaluation of a course of conduct by reference to broad standards occurs, for example, in cases which seek to invoke equitable doctrines with respect to unconscionable conduct, or statutory jurisdiction for misleading or deceptive conduct. Nor, in my opinion, does the statutory reference to the public interest render the Commission's power non-judicial. By analogy, this Court must apply the criterion of public benefit in order to assess whether a trust is a valid charitable trust. In summary, in my view there is nothing in the statutory provisions which confer jurisdiction on the Commission in Court Session under Pt 9 of the IR Act which identifies the Commission's power as a non-judicial power which ought not to be exercised by a court such as the Supreme Court pursuant to an order for removal under s 8 of the cross-vesting legislation. 52 I was referred to cases dealing with the question whether similar powers conferred on tribunals were part of the judicial power of the Commonwealth, to be exercised only by a court constituted pursuant to ss 71 and 72 of the Constitution. That question is rather different from the question before me, which is whether I ought to decline to remove the proceedings from the Commission on the ground that those proceedings raise non-judicial questions inappropriate for determination by the Supreme Court. Nevertheless I note that in Re Dingjan; ex parte Wagner (1995) 183 CLR 323, 360, Gaudron J observed that it was relevant to the question before her that the power of the Australian Industrial Relations Commission with respect to unfair contracts had been vested in a tribunal which is not a court, and that policy considerations had a part to play in the tribunal's determination. In the case of IR Act, the relevant power is vested in a court, namely the Commission in Court Session. That reinforces my view that there is nothing in Pt 9 which makes the exercise of power under those provisions inappropriate for this Court, either generally or in the specific circumstances of this case.

Arbitral power? 53 In Minister for Youth & Community Services v Health & Research Employees' Association of Australia (1987) 10 NSWLR 543, 559-560, McHugh JA observed that the power conferred by the Industrial Arbitration Act 1940 (NSW), s 88F (an ancestor of s 106) was an arbitral rather than a judicial power (see also Minproc Ltd v Killinger [1999] NSWSC 564). In addition to the breadth of the grounds for making orders, his Honour was influenced by the fact that under the industrial relations legislation of the time, the power was vested in the Commission rather than a judicial body, and the Commission could at that time apply s 88F of its own motion. Now the power conferred by s 106 is vested in the Commission in Court Session, and s 108 states that an order may be made on the application of listed persons (the list not including the Commission itself) and not otherwise. McHugh JA was also influenced by the facts that an application for an order could be made by a stranger to the contract (such as an industrial organisation) and that the Commission could exercise its power although the contract was not unfair when made but became unfair by virtue of subsequent events. The former is no longer an unusual occurrence - for example, in an application to a court under s 1324 of the Corporations Law. I have already commented on the latter point. 54 The question before the Court of Appeal in that case was different from the issue which I must determine, in the exercise of my discretion under s 8 of the cross-vesting legislation. Even if the Commission's power under s 106 is, like its power under s 88F, an arbitral rather than a judicial power, it may nevertheless be appropriate to make an order which has the effect that the arbitral power is exercised by this Court. However, the combination of changes to the industrial relations legislation and expansion of the functions required to be performed by a court may well mean that what was an arbitral rather than a judicial power in 1987 is now better classified, at least for present purposes, as a judicial power.

Specialist jurisprudence 55 It is true that the Commission in Court Session and its predecessors have built up a formidable jurisprudence with respect to the 'unfair contracts' jurisdiction: apart from the cases just cited, see David Jones Ltd v Cukeric (1997) 78 IR 430; Nordby v Barclays Australia Investment Services Ltd (1994) 53 IR 319 and 1996 CCH Australia Limited Australian Industrial Law Review, para 5-072; and generally JJ Macken, P O'Grady and C Sappideen, The Law of Employment (1997) p.532ff. But the Commission's jurisprudence is not secret, and can be brought to the attention of the Court by competent counsel. 56 It may be that in certain kinds of case the Commission's expertise is such that a removal order should not be made - for example, where the issue for determination is closely bound up with the interpretation and effect of an industrial award or enterprise agreement. As Young J remarked in Minproc Ltd v Killinger, the Commission's expedience in such matters gives it a yardstick against which to measure the instant application. This consideration appears to have carried some weight with the McLelland CJ in Eq in Wood v Boral Resources (NSW) Pty Ltd (cited above). The dispute in that case was clearly an industrial dispute on any view, involving a grievance by lorry-owner drivers which arose when Boral implemented a policy of giving preference to trucks owned by it and driven by its employees. 57 In the present case, the protagonists are not merely employer and employees. Mr Hanning was a founder of one of the businesses which merged to form the employer company. He has at all times had a significant shareholding, and in recent times has been interested in buying out the majority shareholder of the employer or splitting the company because of boardroom divisions. The disagreements between the parties which led to his dismissal are to a large degree not matters to do with employment or terms of service. Mr Anderson was an ally of Mr Hanning on the board and his dismissal is referrable to the same considerations. The dispute also extends to aspects of the negotiated settlement of the 'change of control' provisions at the time of the management buy-out, and to the fairness of the operation of the executive share plan. Overall, the dispute is better characterised as a commercial or corporate dispute than as in any sense an industrial dispute. 58 This characterisation of the proceedings receives some support from the amendments to the IR Act which commenced on 1 December 1998, although clearly those amendments do not apply to the present facts. The 1998 amendments introduced s 109A, which excludes from Division 2 of Part 9 a contract of employment that is alleged to be an unfair contract for any reason for which an application could have been made by the employee under Part 6 (unfair dismissals), or could have been so made but for the provisions of s 83 which exclude the employee from making an application under that Part. Section 83 says, inter alia, that Part 6 does not apply to an employee whose conditions of employment are not set by an industrial instrument and whose annual remuneration is greater than $62,200 (or a greater amount prescribed by the Regulations). The purpose of the amendments, according to the Second Reading Speech (Legislative Council, 8 April 1998, p.3796) was to exclude matters arising from the dismissal of employees from the jurisdiction of the Commission relating to unfair contracts. This was because the explicit restrictions on access to the unfair dismissal jurisdiction (award coverage or earnings less than the prescribed amount) were being circumvented by those who could afford to litigate an unfair contract claim. 59 The conditions of employment of Mr Hanning and Mr Anderson were not set by an industrial instrument and their annual remuneration far exceeded the maximum amount. Therefore had the 1998 amendments been applicable to their circumstances, proceedings under the IR Act could not have been taken against them either under Part 9 (unfair contracts) or Part 6 (unfair dismissals). The significance of the amendments for present purposes is that they reflect a legislative view that the Commission's specialisation does not extend to disputes regarding the employment of highly paid employees whose conditions of employment are not set by an industrial instrument. 60 In all the circumstances I reject the submission that there is something special about the expertise or jurisprudence of the Commission in Court Session which makes it a more appropriate tribunal than this Court to deal with a matter such as the present case, which involves highly paid executive employees whose conditions of employment are not governed by an industrial instrument and who are in a dispute with a predominantly commercial and corporate flavour.

Forum shopping 61 The defendants draw attention to the following chronology: their employment was terminated on 3 July 1998; they commenced their s 106 proceedings in the Commission on 4 November 1998, and the first defendant commenced proceedings in the Chief Industrial Magistrate's Court on 27 November 1998; the present plaintiffs filed their substantial affidavits in the Commission on 19 March 1998 and commenced proceedings in the Federal Court, as well as the proceedings in this Court, on 24 March 1999. The defendants say that the institution of Federal Court proceedings contemporaneously with the present application, and so long after the institution of industrial proceedings by them, must be seen as a ploy by the plaintiffs to transfer the dispute to a more amenable tribunal. 62 I reject this submission. The Federal Court proceedings follow on from and reflect the matters set out in the minutes of the board meeting of 3 July 1998. The expiration of time between the dismissal and in the institution of the Federal Court proceedings, less than nine months in all, is explicable at least in part by the preparation during the intervening time of a forensic report which was made available to the plaintiff's lawyers on 19 March 1999, and is exhibited to an affidavit in the s 106 proceedings. The facts of this case are obviously distinguishable from cases such as Wood v Boral Resources (NSW) Pty Ltd (cited above), where the Federal Court proceeding was instituted after the failure of applications for interlocutory relief in the Supreme Court and the Industrial Court, strongly suggesting forum shopping in a manner contrary to the public interest.

Conclusions 63 In my opinion the plaintiffs have made out their case for the orders which they seek in paragraphs 1-6 of the summons, although the orders should refer to removal rather than transfer of the proceedings. If the Federal Court decides not to transfer the proceedings before it to this Court, it may be necessary for me to make further orders, and therefore I should grant liberty to apply on, say, 48 hours' notice. 64 The only remaining issue is whether, following the lead given by Young J in Minproc Ltd v Killinger (cited above), I should, while making the orders sought, also order that they not be entered until a later date, so as to permit a conciliation process to take place in the Commission. That would ensure that the policy underlying s 109 of the IR Act would be properly implemented. I shall hear the submissions of the parties on that question, and also on the question of costs. * * * * * * * * * *

Last Modified: 07/20/1999 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.

Corporations Law, the Trade Practices Act 1974(Cth)

(Cth), the Fair Trading Act 1987(NSW)

Jurisdiction of Courts (Cross-vesting) Act 1997(NSW)

Jurisdiction of Courts (Cross-vesting) Act 1997(Cth)

Industrial Relations Act 1991(NSW)

Family Provision Act 1982(NSW)

Industrial Arbitration Act 1940(NSW)

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