Idameneo (No 123) v Ko Ko Swe

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4712/01 - IDAMENEO (NO 123) PTY LIMITED v KO KO SWE PTY LIMITED & ANOR JUDGMENT 1 This is another case of conflicting contract-based proceedings in this court and in the Industrial Relations Commission, with each tribunal confined to its own jurisdiction and no facility for the whole of the matters in contention between the parties to be brought together and dealt with in one consolidated proceeding. 2 By the notice of motion currently before me, the defendants in the proceedings in this court seek a stay of those proceedings pending determination of Industrial Relations Commission proceedings instituted by them. The proceedings the defendants wish to have stayed are proceedings in which the plaintiff sues the defendants in respect of alleged breaches of contractual provisions under which the defendants accepted restraint upon the pursuit of their business or professional activities after the termination of a relationship involving the provision of services. The plaintiff seeks injunctive relief and damages. 3 The proceedings in this court were commenced on 24 September 2001. They have reached the stage where all evidence of the plaintiff has been filed. There was a direction that the defendants' affidavits be served by 25 April 2003 but this has not yet been complied with. The proceedings are listed for further directions on 16 May 2003, no doubt on the assumption that all evidence will then be on. 4 After a change of solicitor, the jurisdiction of the Industrial Relations Commission was invoked by the defendants by way of an application under s.106 of the Industrial Relations Act 1996 to set aside or vary the contract from which the plaintiff's claim in this court arises. This application in the Industrial Relations Commission was filed on 11 December 2002 which, as the plaintiff was at pains to point out, was 444 days after the commencement of the plaintiff's proceedings in this court. 5 It is also to be noted that the proceedings in the Industrial Relations Commission were commenced more than twelve months after termination of the relevant contract. This raises an issue under s.108B of the Industrial Relations Act 1996 which says that an application for an order under the relevant division of the Act in relation to a contract that has been terminated must be made not later than twelve months after termination of the contract. The section goes on to say that the Commission does not have jurisdiction to extend the time for making any such application or to accept such an application after the time prescribed by the section. This section came into operation on 24 June 2002, that is to say after the termination of the contract in question but before the initiation of the defendants' proceedings in the Industrial Relations Commission. 6 The plaintiff as respondent in the Industrial Relations Commission has filed a notice of motion challenging the Commission's jurisdiction in the matter on the basis of s.108B. That motion is returnable in the Industrial Relations Commission tomorrow. Whether s.108B applies in relation to termination of contract occurring before the section came into operation on 24 June 2002 (or is confined to termination occurring after commencement of the legislation) is a question that has not been considered by the Commission or a court. 7 The plaintiff, while opposing the grant of the stay sought by the defendants, submits in the alternative that an appropriate outcome at this point would be that the present notice of motion be adjourned pending the outcome of the notice of motion in the Industrial Relations Commission. The defendants say in response that that is merely to postpone the central issue that has now been argued, namely, whether the scope of the Industrial Relations Commission proceedings and their possible impact are, in the whole of the circumstances, such as to warrant a stay of these proceedings. 8 I was initially attracted to the idea of adjourning the current stay application until after the notice of motion in the Industrial Relations Commission had been determined. On reflection, however, I agree with Mr Moses, counsel for the defendants, that that would be merely a postponement of a proper consideration of the merits. 9 As to those merits, I have been referred to criteria that were listed by Santow J in Environmental Group Ltd v Croudace & Croudace Holdings Pty Ltd (unreported, NSWSC, 7 August 1998) in a way that restated considerations enunciated by Lockhart J in Sterling Pharmaceuticals Pty Ltd v The Boots Company (Australasia) Pty Ltd (1992) 34 FCR 287. The relevant passage in the judgment of Santow J is as follows: "In my opinion relevant considerations to be taken into account in the present case include the following: • Which proceeding was commenced first. • Whether the termination of one proceeding is likely to have a material effect on the other. • The public interest. • The undesirability of two courts competing to see which of them determines common facts first. • Consideration of circumstances relating to witnesses. • Whether work done on pleadings, particulars, discovery, interrogatories and preparation might be wasted. • The undesirability of substantial waste of time and effort if it becomes a common practice to bring actions in two courts involving substantially the same issues. • How far advanced the proceedings are in each court. · The law should strive against permitting multiplicity of proceedings in relation to similar issues. • Generally balancing the advantages and disadvantages to each party." 10 In the end, it seems to me that a balance must be struck in a case such as this according what is best calculated to see the controversy between the parties determined effectively and in a way that properly accommodates all relevant claims and all relevant defences without, at the same time, visiting any unwarranted prejudice upon either party. 11 It is true that the Industrial Relations Commission proceedings were not initiated until a substantial time after these proceedings had been commenced. As to the state of these proceedings, the evidence of the defendants has not been filed and served even though it appears that that should have happened by 25 April 2003 but, as I have said, all the evidence of the plaintiff is on. It may therefore be said that these proceedings are substantially advanced but not yet at a point where they could be said to be ready for trial. 12 The most significant issue, as I see it, is that the Industrial Relations Commission proceedings have as their objective either avoidance or variation of the contract upon which the plaintiff sues in this court. Section 106 of the Industrial Relations Act and its related provisions create a statutory jurisdiction for the review and, as appropriate, avoidance and variation of contracts. Where that jurisdiction is regularly invoked, it should normally be expected that, in the absence of countervailing circumstances, there should be an opportunity for the jurisdiction to be played out so that the final shape and form of the relevant contract is determined before proceedings based on the contract and seeking what one might call regular relief at law or in equity are determined. Unless that course is taken, there is a danger that the court asked to award injunction and damages will proceed on what becomes, under the statutory scheme, a false premise because grounds exist to change the contractual framework. That to my mind is an important consideration in this case. In that respect, I refer to the following statement in the judgment of Goldberg J in Software Engineers Australia (NSW) Pty Ltd v Bonket Pty Ltd [2002] FCA 1168 where, after referring to the considerations mentioned by Lockhart J and Santow J, his Honour said: "I consider that I should take into account the considerations referred to by Lockhart J … . An application of these considerations leads me to the conclusion that I should exercise my discretion and stay the present proceeding before me pending a final determination of the proceeding before the IRC in Court Session. I am satisfied that the determination of that proceeding may well have a material effect on this proceeding. If the further employment agreement, release and the consultancy deed are declared void then the causes of action based upon breaches of those agreements and documents will lapse. If the first employment agreement is varied, in particular in the manner sought in relation to cl4.1, then such variation will have significance in relation to a number of the particulars which are relied upon as constituting breaches of the first employment agreement. If those agreements and documents are not avoided or varied as sought, then a range of defences to the claims under those agreements and documents by the respondents will not be available to them." 13 These observations seem to me to apply to the case before me. It is relevant to note, in this connection, the decision of the Court of Appeal in Tszyu v Fightvision Pty Ltd (2001) 104 IR 225. In that case, the Court of Appeal granted a anti-suit injunction restraining the continuation of proceedings in the Commission under s.106 of the Industrial Relations Act seeking avoidance or variation of a contract in respect of breaches of which remedies had already been awarded by a judgment of this court. The basis for the grant of that injunction emerges from the following paragraph in the judgment of Mason P: "The contract formed upon the due exercise of the option in 1995 was the basis upon which the issue of breach was addressed and concluded in the contract proceedings and the yardstick against which damages were calculated (see especially 47 NSWLR at 491-496, 497). Conversely, the award of damages was the enforcement of a secondary obligation necessarily based upon the primary obligation of the contractual terms cf Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 at 848-849). For that contract now to be declared void or varied in its terms (an essential precursor to relief pursuant to s106(5) whether against Fightvision or those standing behind it) would be to contradict the very basis upon which the judgment stands, together with issues necessarily decided by that judgment. Cf also Caird v Moss (1886) 33 Ch D 22. Viewed in this way, the continued prosecution of the industrial proceedings would run smack into the principles of issue estoppel and for that reason their continuation was properly held to be an abuse of process." 14 It follows from the decision in Tszyu that a judgement of this court on the contract as it stands will preclude subsequent exercise of the s.106 jurisdiction to avoid or vary the contract. 15 Another factor at work here is that, under the Industrial Relations Act provisions, parties are required to engage in mediation before the controversy between them is heard and determined. The court places a high value on mediation and would therefore tend to favour a course that sees the parties resort to it. They may come to some resolution in that context of the whole of their differences: see RSL Com Personal Communications Pty Ltd v Mobile Tron Pty Ltd (2001) 108 IR 212. 16 It is, of course, a significant imposition upon the plaintiff to delay the progress of its proceedings in this court, particularly since they have been pending since September 2001. An important countervailing factor is that the defendants have indicated that, if the stay they seek is granted, they will give to the court two undertakings: first, an undertaking that the Industrial Relations Commission proceedings will be prosecuted "with utmost expedition"; and, second, a renewed undertaking concerning the subject matter of the disputes that will be, until determination of these proceedings, an interim substitute for the injunctive relief the plaintiff seeks. The defendants, by proffering those undertakings, have taken steps that enhance the case they make for the grant of a stay. 17 I note the undertakings 1 and 2 in the short minutes of order which I initial and date, being undertakings given to the court. I make order 1 in the short minutes. I order that the costs of the notice of motion be reserved. **********

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