L & W DEVELOPMENTS PTY LTD v DELLA - [2003] NSWCA 140 - NSWCA 2003 case summary — Zoe

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L & W DEVELOPMENTS PTY LTD v DELLA

[2003] NSWCA 140

Court of Appeal (NSW)|2003-05-08|Before: Mason P, Giles JA, Santow JA, Gzell J

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Source facts

Court

Court of Appeal (NSW)

Decision date

2003-05-08

Before

Mason P, Giles JA, Santow JA, Gzell J

Source

Original judgment source is linked above.

Judgment (58 paragraphs)

[1]

CITATION : L & W DEVELOPMENTS PTY LTD v DELLA [2003] NSWCA 140 revised - 25/06/2003 HEARING DATE(S) : 1, 8 May 2003 JUDGMENT DATE : 5 June 2003

[2]

JUDGMENT OF : Mason P at 1; Giles JA at 63; Santow JA at 64 DECISION : Appeal dismissed with costs. See par 62

[3]

CATCHWORDS : Stay of proceedings in Commercial List pending determination of related proceedings in Industrial Relations Commission - sufficiency of reasons granting stay - "justifiable sense of grievance" - whether order on same terms appropriate - temporary nature of stay - factors to be considered in exercise of discretion to grant stay (D) LEGISLATION CITED : Industrial Relations Act 1996 ss105,106, 108A, 108B, 179 Fair Trading Act 1987 s42 Beale v Government Insurance Office (1997) 48 NSWLR 430 CSR Limited v Cigna Insurance Australia Limited (1997) 189 CLR 345 Majik Markets Pty Ltd v S & M Motor Repairs Pty Ltd (No 3) unreported, 13 October 1987 Mitchforce Pty Ltd v Starkey (2002) 117 IR 122 Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 CASES CITED : Premier Sports Australia Pty Ltd v Dodds [2001] NSWSC 707 Rexam Australia Pty Ltd v Optimum Metallising Pty Ltd [2002] NSWSC 916 RSL Com v Mobile Tron [2001] NSWSC 819 Sterling Pharmaceuticals Pty Ltd v Boots Co (Australia) Pty Ltd (1992) 34 FCR 287 The Environmental Group Ltd v Croudace unreported, 7 August 1998 Tszyu v Fightvision Pty Ltd [2001] NSWCA 103; 104 IR 225 Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538. PARTIES : L & W DEVELOPMENTS PTY LTD v Alain DELLA FILE NUMBER(S) : CA 41116/02 COUNSEL : Appellant: S Wheelhouse Respondent: R Butler SOLICITORS : Appellant: Gye Associates Respondent: Mannix Lawyers

[23]

Facts 3 In 1997 the appellant obtained development and building approval to construct 63 strata title units on a site at Willock Avenue Miranda. By early 1998 the project was encountering problems. The appellant's chosen builder was in financial difficulties and there were disputes with the principal financier, the Bank of China. 4 In about June 1998 Alain Della, the respondent, was engaged as managing director of the appellant to supervise completion of the project. Ten percent of the appellant's shares were issued to the respondent. At that stage a new builder, Yatooma Construction Pty Ltd, had tendered to do the construction work which was expected to be completed within a year. 5 Construction took many months longer than anticipated. There were disputes with the builder, Sutherland Shire Council, the new financier (Suncorp Metway Ltd) and the Department of Fair Trading. 6 By late 1999 relations between the respondent and the principal shareholder of the appellant, Mr Peter Li had become very strained. According to Mr Li, the respondent chose not to be involved in the appellant's activities from December 2000 onwards. According to the respondent, the appellant had ceased to pay him an agreed retainer of $50,000 per annum from April 1999 onwards. 7 On 1 May 2001 the respondent was removed from his positions as director and manager of the appellant. 8 The contractual arrangements as to the respondent's remuneration are in dispute. The appellant's position, in brief, is that the respondent was to be paid 10% of the net profits of the project, to be received as a dividend on the shares that were issued to him. In the circumstances, nothing is payable because of the project's loss and the appellant's consequential inability to pay any dividend to shareholders. On top of this, the appellant blames the respondent for its losses and seeks damages accordingly. 9 According to the respondent, the agreed remuneration package was that he would be paid an annual retainer of $50,000 and that he would also receive 10% of profits, calculated on the basis that shareholders' and other loans, apart from the external bank debt, would not be brought into account (Further Amended Summons for Relief Under s106, par 6). It is also alleged that the appellant had agreed to pay the rent on office space occupied by the respondent when he was asked to become the managing director of the appellant. 10 This summary of the contractual relationships is taken from the pleadings filed in the two sets of proceedings and from Mr Li's lengthy affidavit sworn 9 October 2002 and filed in the SC proceedings. 11 The last unit was sold in April-May 2002. According to the appellant, the project generated a net loss in excess of $3 million dollars and the appellant has a deficiency of assets to liabilities in that region (see Mr Li's affidavit pars 150-153; Appellant's Reply to amended summons for relief under s106, par 16). The appellant's liabilities in these calculations include the loans owing to Mr Li or parties related to him. The respondent contends that these should be disregarded in the calculation of his entitlement to 10% of the net profit of the project.

[27]

15 The Supreme Court does not have jurisdiction to make orders under s106. 16 To the extent that the Commission acts within its jurisdiction, its orders avoiding or varying contracts have the capacity to affect the rights of parties seeking to litigate related claims in the Supreme Court. The Commission considers the law as to the scope of s106 to be well settled; and that merely because a contract or arrangement might be characterised as "commercial" is not a basis upon which to conclude it cannot be challenged under s106 (Mitchforce Pty Ltd v Starkey (2002) 117 IR 122 at 135). Commission decisions are protected from challenge in this Court to a substantial degree, by s179 of the Industrial Relations Act. 17 The Mitchforce decision and the scope of this privative clause are under challenge in proceedings in this Court in which judgment stands reserved. However, no party to the current proceedings put in issue the correctness of the propositions summarised in the preceding paragraph. In any event, the facts in Mitchforce are removed from the present case, because there could be no doubt that the contract between the present parties is one whereby the respondent performed work in an industry. 18 In the summons in the IRC proceedings, the respondent claims to be owed approximately $1 million according to his version of the agreed remuneration arrangements. As Mr Mannix, his solicitor, deposed in an affidavit of 30 October 2002: The [respondent's] case in the IRC proceedings is that he worked full time in the capacity of project manager for the Miranda Project and only received $50,000 income, provided office space at his expense for the Miranda Project, lent money to the plaintiff all on the expectation or pursuant to an oral arrangement that he would receive 10% of the gross profit enjoyed by the plaintiff on the Miranda Project less bank debt with any shareholders' loans being treated as equity for the purposes of calculating the defendant's 10% fee. The defendant says that on this basis with the completion of the Miranda Project in about December 2001 he is entitled, subject to final accounting, to the sum of approximately $1m.

[32]

30 The sparseness of his Honour's reasons, about which the appellant complains, make it necessary to set out the transcript of the proceedings. This shows the issues that were fought although it does not appear to be a complete record of counsel's submissions. The transcript states: HIS HONOUR: The application is what? DUBLER: There are and have been since December 2001 Industrial Relations Commission proceedings involving similar but not completely identical parties, but it is common ground the factual matrix is identical, and more recently, on 21 August 2002, the Supreme Court proceedings have been commenced. By motion filed 11 October 2002 we seek a stay of these proceedings to allow the Industrial Relations Commission proceedings to proceed to finality. HIS HONOUR: What is the nature of the application being made in the Industrial Relations Commission? DUBLER: The relief sought is orders for avoidance and/or variation of the contract or arrangement between the applicant and the respondents and payment of a sum of money. In this Court the plaintiff relies on three causes of action: (1) alleged misleading and deceptive conduct; (2) breach of contract; (3) tort, which is negligence in and about performing work for the plaintiff. (On inquiry from his Honour as to the basis for opposition to the motion, Mr Wheelhouse stated there was no coincidence in jurisdiction in relation to the dispute between this Court and the Industrial Relations Commission. He stated in the Industrial Relations Commission the defendant here, applicant there, invokes the jurisdiction under section 106 of the Industrial Relations Act. Mr Wheelhouse stated he relied on the implied terms in the contract to ground a claim in negligence. Mr Wheelhouse further stated that by Monday the plaintiff will have filed all its evidence in chief, indicating it was unlikely that the Industrial Relations Commission proceedings would commence within the next twelve months, or towards the end of next year.) HIS HONOUR: If I were minded to grant your motion, would your client give an undertaking to take all necessary steps to ensure that the matter is brought before the Commission as expeditiously as possible? DUBLER: Yes, we would seek the first available directions date. HIS HONOUR: I grant leave to file in court two affidavits of Tania Schiff, sworn 23 October 2002 and 8 November 2002. EXHIBIT #A - COPY LETTER OF 4 APRIL 2001 FROM JOHN WALSH & PARTNERS, LAWYERS, TO THE PLAINTIFF AND COPY OF FAX FROM ERNST & YOUNG TO JOHN WALSH & PARTNERS DATED 10 APRIL 2001 TENDERED, ADMITTED WITHOUT OBJECTION. (Mr Wheelhouse took his Honour to the originating summons in the Industrial Relations Commission, exhibit A to the affidavit of Tania Schiff sworn 23 October 2002.) AFFIDAVIT OF JOHN JOSEPH MANNIX FILED 30 OCTOBER 2002 READ AFFIDAVIT OF THE DEFENDANT FILED 31 OCTOBER 2002 READ WHEELHOUSE: Mr Della's affidavit raises factual matters which I am not in a position to confirm today. I would object to paragraphs 2 to 6 on the grounds of relevance. HIS HONOUR: I reject the tender of paragraphs 2 to 6 on the basis they are irrelevant to the application before me. I will take account of the obvious circumstance there is a wastefulness in two lots of proceedings that anybody would wish to avoid, and there may be circumstances in which a plaintiff, because of his peculiar circumstances, may find it even more onerous. What is the utility of the first application before the Industrial Relations Commission to set aside the contract? If you set aside the contract, what remuneration is your client entitled to? DUBLER: None, and the Commission orders what it considers to be fair compensation. Its utility is to enliven the jurisdiction to give a payment. FOR JUDGMENT SEE SEPARATE TRANSCRIPT. DUBLER: Costs should follow the event. HIS HONOUR: I will make an order that the plaintiff pay the defendant's costs of the motion. (His Honour indicated he would take a short adjournment to enable the parties to prepare short minutes.) SHORT ADJOURNMENT (Both counsel provided his Honour with a copy of short minutes. Discussion re objections to short minutes.) HIS HONOUR: Order as per short minutes of order initialled by me, dated by me and placed with the papers.

[36]

The orders and the reasons supporting them 36 I cannot accept the appellant's submission that the orders made by Gzell J were tantamount to a permanent stay of the SC proceedings. 37 The orders effected a temporary, conditional stay of the SC proceedings. It is clear that Gzell J was providing a regime that suspended further prosecution of the SC proceedings conditionally upon the expeditious prosecution of the IRC proceedings. It is equally clear that the orders contemplate recommencement of the SC proceedings upon completion of the IRC proceedings and subject to such matters as have been determined by the final orders made in the IRC proceedings. The temporary, interlocutory nature of the orders and the liberty to apply expressly reserved would allow the appellant to return to the Supreme Court if there were any material change in circumstances. 38 The significance of this characterisation of the orders will appear when I turn to the substantive issue in the appeal. 39 It is convenient at this stage to address the appellant's complaint as to Gzell J's exposure of reasons. The appellant cited Beale v Government Insurance Office (1997) 48 NSWLR 430 and submitted that it has a justifiable sense of grievance because it does not know the essential reasoning process which led to the orders. 40 The appellant submits that his Honour should have made findings about the nature of the respective IRC and SC proceedings and should have addressed the appellant's complaint that the respondent had disentitled himself to a stay by reason of dilatoriness in prosecuting the IRC proceedings. 41 I would uphold the appeal on this ground alone. It is true that there were no contested issues of primary fact. It is also likely that his Honour dealt with a number of pressing matters in a crowded list. Nevertheless, the losing party was, in my view, entitled to a fuller exposure of the weighing process necessarily involved in a case of this nature according to the legal principles referred to below. 42 I suspect that the word "not" should have been inserted before the words "naturally arise" in the vital second sentence of his Honour's reasons for judgment. The omission is probably a slip of expression or transcription, but it adds to my sense of disquiet. Assuming the insertion of "not", the point being made by his Honour was that it was on the cards that the Commission could reformulate the contract in a way that affected the rights of the parties in the SC proceedings. If it happened, it would affect the outcome of the SC proceedings, including if there were a cross-claim whereby any damages would be offset by allowance for remuneration properly due. 43 But, in light of the principles discussed below, this alone would not require the staying of the SC proceedings if for reasons such as delay in the IRC proceedings it was proper to allow them to proceed. Several factors needed to be weighed and this required their identification. Without this, the appellant could not really know why the respondent's motion was granted, leaving the appellant with a justifiable sense of grievance and in the dark as regards bases for appellate accountability. 44 Mr Wheelhouse also informed us that he specifically invoked before Gzell J the argument (repeated in this Court) that the principles dealing with power to stay for forum non conveniens applied in the present case. This argument is not recognised or refuted in the reasons for judgment. 45 In the result, the orders cannot stand unless this Court is positively satisfied that a stay on identical terms is appropriate. 46 For reasons which follow, I would dismiss the appeal. I am satisfied that a stay on the same terms is appropriate. In so concluding, I have addressed the substantive issue raised in the appeal and have had regard to the evidence before the primary judge as well as some new evidence placed before this Court. My reasons follow.

[37]

Principles governing the stay sought in these proceedings 47 The appellant's primary submission is that Gzell J failed to give proper weight to the fundamental principle that a party who has regularly invoked the jurisdiction of a competent court has a prima facie right to insist upon its exercise and to have the claim heard and determined. Only if it is oppressive, vexatious or an abuse of process should proceedings be stayed. Alternatively, this Court is urged to apply this principle in its independent assessment of the issues. 48 The appellant cites Deane J in Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 at 243-4 where he said that: … the traditional process of determining such an application for the dismissal or stay of an action is not a mere balancing or convenience or inconvenience or the resolution of competing claims of different jurisdictions neither of which could be said to be clearly inappropriate: cf per Gibbs J., Cope Allmann (Australia) Ltd v Celermajer [(1968) 11 FLR 488 at 492]. The starting point of the determination of such an application in accordance with traditional principle must be the prima facie right of a plaintiff to insist upon the exercise of competent jurisdiction which he has regularly invoked. That prima facie right of a plaintiff is not to be lightly displaced or denied. As Sir Gorell Barnes pointed out in his judgment in Logan v Bank of Scotland (No 2) [[1906] 1 KB 141 at 150]: In my opinion, however, the jurisdiction of the Court to stay proceedings on the ground of vexation should be exercised with great care; indeed, I find that Cotton LJ in McHenry v Lewis [(1882) 22 Ch D] at 406, said: 'In the first place, it is a jurisdiction which one ought to exercise with extreme caution. Stopping in the middle of a suit a plaintiff from going on, when he has a right of action as against the defendant, is a jurisdiction which has to be exercised with very considerable caution.' Not only is the jurisdiction one which should be exercised "with great care" or "extreme caution". It has, as has been indicated, traditionally been seen as a jurisdiction which is only available to be exercised on inappropriate forum grounds where the court whose jurisdiction has been invoked by the plaintiff is so inappropriate for their determination that a continuance of the proceedings in it would be productive of the injustice of oppression and vexation of the defendant.

[41]

53 Several decisions in the Equity Division have recognised this distinction in a context similar to the present, where a defendant to commercial contract proceedings in the Equity Division has applied to the Industrial Relations Commission pursuant to s106 of the Act seeking to have the underlying contract avoided or varied. These cases include Majik Markets Pty Ltd v S & M Motor Repairs Pty Ltd (No 3) unreported, 13 October 1987 (Young J); The Environmental Group Ltd v Croudace unreported, 7 August 1998 (Santow J); Premier Sports Australia Pty Ltd v Dodds [2001] NSWSC 707 (Palmer J); RSL Com v Mobile Tron [2001] NSWSC 819 (Barrett J) and Rexam Australia Pty Ltd v Optimum Metallising Pty Ltd [2002] NSWSC 916 (Einstein J). These decisions correctly recognise the distinction between a stay based on forum non conveniens and a temporary stay of proceedings in one court to enable related proceedings in another to proceed first to determination (see esp RSL Com at 14; Rexam Australia Pty Ltd at 21-22). 54 In The Environmental Group Ltd, Santow J cited and applied the decision of Lockhart J in Sterling Pharmaceuticals Pty Ltd. His Honour then analysed the nature of the Supreme Court proceedings which he had jurisdiction to determine and of the related proceedings in the Industrial Relations Commission which he did not have jurisdiction to determine. He stated his conclusion in terms which are equally applicable to the present situation: Several things are therefore clear. First, neither the Supreme Court nor the IRC can deal with all matters in dispute between the parties. Second, if all are to be litigated it would be inevitable there will be two sets of proceedings. Thus while 'the law should strive against permitting multiplicity of proceedings in relation to similar issues', here a multiplicity of proceedings may prove unavoidable. It is true it could be said that hearing one set of proceedings before the other makes it less likely the second set will ever be litigated. But that begs the question which proceedings should be heard first and either party may claim first right to be heard.