Macquarie Bank Limited v. Bell & Anor. [1999] NSWSC 957

COUNSEL : Mr. B.W. Collins QC with Mr. A. Bell for Plaintiff Mr. P. Hall QC with Mr. R. Dalgleish for Defendants SOLICITORS : Abbott Tout, Sydney for Plaintiff Hickson Wisewoulds, Sydney for Defendants CATCHWORDS : COURTS - JURISDICTION - CROSS-VESTING; ESTOPPEL - ISSUE ESTOPPEL. Proceedings were brought in the Industrial Commission and in the Federal Court, both based on the acceptance of employment in reliance on misleading representations. After significant procedural steps in the Commission, the defendant applied to transfer the IRC proceedings to the Supreme Court. HELD that the specialist expertise of the IRC, determination of substantial issues by the IRC, and delay, were factors against transfer; that the question was whether these factors were outweighed by the justice and convenience of avoiding multiplicity of proceedings; that this in turn depended on the likely effect of issue estoppels; that the Federal Court proceedings were unlikely to be significantly shortened by issue estoppels arising from the IRC proceedings; and that transfer should be ordered. CASES CITED : Heath v. Hanning (1999) NSWSC 719 Blair v. CLurren (1939) 62 CLR 464 DECISION : See pages 12 and 13 of judgment

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

NO. 2106 OF 1999 MACQUARIE BANK LIMITED V. BELL & ANOR.

1 By its summons in these proceedings filed on 23rd April 1999, the plaintiff (which I will call "Macquarie") seeks an order that proceedings No.6793 of 1997 and No.6794 of 1997 in the Industrial Relations Commission of NSW be removed to this Court pursuant to s.8 of the Jurisdiction of Courts (Cross-Vesting) Act 1987. Those proceedings were brought respectively by the first defendant Mr. Bell and the second defendant Mr. Berg against Macquarie, and also against a Hong Kong company Macquarie International Capital Markets Limited (which I will call "Macquarie International"); but for reasons which will appear below, removal is sought of the proceedings only in so far as they concern Macquarie. 2 The summons also sought removal to this Court of proceedings No.NG1042 of 1997 in the Federal Court of Australia, being proceedings brought by Messrs. Bell and Berg against Macquarie and Macquarie International. However, it is plain that this Court cannot make such an order.

HISTORY 3 I will begin with a brief outline of the history of those other proceedings. 4 On 5th December 1997, Messrs. Bell and Berg filed an Application and Statement of Claim in the Federal Court. In short, they claimed damages and/or an account of profits on the basis that Macquarie had made a series of representations to them as to the benefits they would receive from a business venture in Asia, in reliance on which they first accepted and later continued in employment with Macquarie and Macquarie International; that this employment came to an end without their receiving those benefits; that the conduct of Macquarie was misleading and deceptive and caused loss; and that Macquarie and Macquarie International acted unconscionably in appropriating for their own benefit the confidential information, knowledge and experience of Messrs. Bell and Berg. 5 On 9th December 1997, Mr. Bell and Mr. Berg each filed a summons in the Industrial Relations Commission seeking declarations that the contracts and/or arrangements between each applicant and Macquarie and Macquarie International were unfair, harsh and unconscionable; orders varying such contracts and/or arrangements; and orders for the payment of money ($20.1 million for Mr. Bell, $12.5 million for Mr. Berg). The grounds were essentially the representations and non-receipt of benefits alleged in the Federal Court proceedings. 6 On 19th February 1998, Macquarie and Macquarie International filed a Notice of Motion in the Industrial Relations Commission seeking orders setting aside or staying the proceedings as an abuse of process, and a declaration that the Industrial Relations Commission had no jurisdiction in respect of Macquarie International. 7 On 15th May 1998, Lehane, J. in the Federal Court heard a motion by Messrs. Bell and Berg seeking an adjournment of the proceedings either until final determination of the Industrial Relations Commission proceedings, or for six months. Lehane, J. held that it was appropriate that the Industrial Relations Commission proceedings be heard and determined first, and he stood the Federal Court proceedings over to 27th November 1998. The proceedings have since then been further stood over by consent. 8 On 26th June 1998, there was a contested hearing before Marks, J. in the Industrial Relations Commission, in which there was argument as to whether the Industrial Relations Commission proceedings were an abuse of process, and as to whether a question of territorial jurisdiction in relation to Macquarie International should be the subject of a preliminary hearing. Marks, J. gave judgment on those matters on 17th August 1998, deciding that the Industrial Relations Commission proceedings were not an abuse of process, but that there should be a preliminary hearing as to territorial jurisdiction; and that in such a hearing, the applicants should have the onus of proof on the balance of probabilities. 9 On 10th September 1998, Messrs. Bell and Berg filed an application for leave to appeal and a Notice of Appeal to the Full Bench of the Industrial Relations Commission, against the decision of Marks, J. on the question of the preliminary hearing concerning territorial jurisdiction. That matter was heard by the Full Bench on 13th November 1998. 10 It appears that on 18th February 1999, the solicitors for Macquarie became aware, for the first time, of my decision in Bruning v. Kingsmill (Australia) Pty. Limited (1998) 44 NSWLR 180, to the effect that where there were overlapping proceedings in the Industrial Relations Commission (for relief under s.106 of the Industrial Relations Act) and the Federal Court (for relief inter alia under the Trade Practices Act), this Court could remove the Industrial Relations Commission proceedings to the Supreme Court , in anticipation of the Federal Court proceedings being likewise removed to the Supreme Court, following which the Supreme Court could hear and determine both sets of proceedings. It appears that, until that time, Macquarie's solicitors had considered that this could not be done; and it appears from submissions by Senior Counsel for Messrs. Bell and Berg before Lehane, J., that this view was shared by their solicitors also. 11 On 12th March 1999, the Full Bench granted leave to appeal and upheld the appeal from Marks, J. The Full Bench held that, if there was to be a preliminary hearing concerning jurisdiction, it could only be dealt with as a strike-out point, with the onus squarely on the respondent. However, the Full Bench noted that there was a question as to whether each applicant should have leave to proceed against Macquarie International, as a party which had entered a conditional appearance and was contending that the Court had no jurisdiction. The Full Bench ordered that Marks, J. determine jurisdictional and other procedural questions, and undertake the conciliation required by s.109 of the Industrial Relations Act. 12 By letter dated 29th March 1999, Macquarie's solicitors invited Messrs. Bell and Berg's solicitors to consent to having the proceedings in both courts removed to the Supreme Court. This invitation was refused by a letter dated 13th April 1999. The solicitors for Messrs. Bell and Berg pointed out that the preparation of the case in the Industrial Relations Commission was well advanced; and that the best way to minimise legal costs was to advance those proceedings quickly to conciliation and/or trial. This application was then brought on 23rd April. 13 On 17th June 1999, there was a contested hearing before Marks, J. in the Industrial Relations Commission as to whether Macquarie International had been served within the jurisdiction, and if not, whether the applicants should have leave to proceed. On 9th July 1999, Marks, J. gave his decision, against Messrs. Bell and Berg on both points. 14 On 28th July 1999, an appeal was lodged against that decision, and that appeal is to be heard on 22nd November 1999. 15 The hearing before me took place on 25th August 1999.

SUBMISSIONS 16 Mr. Collins QC for Macquarie provided written submissions which I will leave with the papers. These submissions suggested there would be much saving of expense and inconvenience if the two sets of proceedings were effectively consolidated. There would be overseas witnesses. There would be complicated evidence as to the financial prospects of joint venture projects in Asia, which would involve evidence as to the effect on those proposals of the Asian economic crisis. If the matters were dealt with separately, awkward questions of issue estoppel were likely to arise. The overall dispute was an appropriate one for the Supreme Court. Multiplicity of proceedings should be avoided. 17 Mr. Hall QC for Messrs. Bell and Berg submitted that, as a practical matter, the Industrial Relations Commission proceedings would either finalise the dispute, or greatly limit the issues to be determined in the Federal Court proceedings. The orders in the Industrial Relations Commission were sought on the basis of the same alleged misrepresentations and actions in reliance as were the basis of the Federal Court proceedings; so that the decision in the Industrial Relations Commission would, at the very least, greatly reduce the areas for dispute in the Federal Court. Mr. Hall referred me to Hibbert v. Lubidineuse (1990) 37 IR 150, and Sterling Pharmaceuticals Pty. Limited v. Boots Company (Australia) Pty. Limited (1992) 34 FCR 287. 18 Next, Mr. Hall submitted that there had been inordinate delay in making this application, from December 1997 to April 1999. There had been very substantial contests in both the Industrial Relations Commission and the Federal Court, with costs being incurred, with no suggestion from Macquarie that an application such as this was to be made. Even after Macquarie's solicitors learnt of the decision in Bruning, they waited until after an adverse appeal decision before raising the question of cross-vesting: in those circumstances, this could be seen as a case of forum shopping. 19 Mr. Hall submitted that I should not follow my previous decision in Bruning, or the decisions following it in Minproc Limited v. Killinger (1999) NSWSC 564 and Heath v. Hanning (1999) NSWSC 719. He submitted that, in any event, this case was different from those cases, in that there was no consent, as in Bruning; while the other matters were cases where the proceedings in the different jurisdictions were initiated by different parties. 20 Finally, Mr. Hall submitted that the Industrial Relations Commission was the appropriate court to hear proceedings under s.106. It had specialist expertise, and this was particularly important in relation to the exercise of jurisdiction concerning employees seconded overseas. Furthermore, s.106 required in substance the exercise of arbitral power, rather than an ordinary judicial function.

DECISION 21 In my opinion, I should follow Bruning and the other two cases following it, and hold that this Court has jurisdiction to order removal of the Industrial Relations Commission proceedings. 22 I accept, as submitted by Mr. Hall, that in exercising the Court's discretion, weight should be given to the specialist expertise of the Industrial Relations Commission concerning applications under s.106. However, I think it is fair to say that this consideration has somewhat less weight in relation to claims of this size and nature, than in relation to claims more directly related to industrial relations, particularly claims which in one way or another involve industrial awards. 23 I accept also, as submitted by Mr. Hall, that weight should be given to the circumstances that there has been delay in making this application, that substantial issues have been fought and determined in the other jurisdictions, and that substantial costs have been incurred. However, there was no cross-examination of the plaintiff's solicitor, who put on an affidavit, to suggest that the delay from mid-February 1999, when the solicitors learnt of the decision in Bruning, to 29th March 1999, when cross-vesting was suggested, was in order to ascertain whether a favourable decision was to be obtained from the Industrial Relations Commission. I do not think I should infer from that delay that this is a case of forum shopping. In my opinion, the belief of both sets of solicitors that transfer was not available explains the delay to mid-February 1999; although this does not eliminate delay as a significant discretionary factor. 24 In my opinion also, it is clear that there should be no effective removal of the proceedings from the Industrial Relations Commission until the Full Bench has decided the appeal which has been brought to it; until the s.109 conciliation procedure has been completed; and until there has been an order for transfer by the Federal Court of the proceedings before it. This could give rise to further delay. 25 In my opinion, the substantial question I have to decide is whether the factors outlined above are or are not outweighed by considerations of justice and convenience in avoiding a multiplicity of proceedings. 26 If I could be confident that the proceedings in the Industrial Relations Commission would either resolve the dispute entirely, or as a practical matter greatly limit the scope of the Federal Court proceedings, I would incline against ordering removal. However, plainly Messrs. Bell and Berg do not have confidence that the Industrial Relations Commission will entirely resolve the dispute, because the whole point of their bringing two sets of proceedings is that, if they do not get what they want from the Industrial Relations Commission proceedings, they will proceed with the Federal Court proceedings. In my opinion, I have to regard that as a substantial possibility. The cases before the Industrial Relations Commission are cases concerning claims totalling more than $30 million, requiring a hearing time estimated at about three weeks by the applicants, or six to eight weeks by the respondents, and involving considerable complexity, particularly on questions of quantum; and unless the decision in the Industrial Relations Commission proceedings greatly limits the extent of subsequent Federal Court proceedings, the hearing of those proceedings would probably be of similar duration and complexity. 27 The question whether the extent of the Federal Court proceedings would be so limited depends very much on how the principles of issue estoppel would operate. In Heath at paragraphs 39-42, Austin, J. discussed awkward questions of issue estoppel that could arise in the proceedings that he was considering. Mr. Hall submitted that such awkward questions would not arise in this case, because the issues in both sets of proceedings were so similar. 28 However, it is necessary to consider what the situation will be if Messrs. Bell and Berg do not get the result they want from the Industrial Relations Commission. This may happen because of factual findings about the alleged representations or their truth, or about reliance, or about the benefits actually received, or about causation, or about quantum of loss; or because the Industrial Relations Commission considers the facts as found do not justify a variation of the agreements and/or arrangements (or sufficient variation) or the payment of money (or sufficient payment). 29 Now issue estoppel will arise only as to "the point actually decided" and "matters which were necessary to decide and were actually decided as the groundwork of the decision itself though not then directly the point at issue": R. v. Hartington Middle Quarter Inhabitants (1855) 4 E&B 780 at 794; Blair v. Curren (1939) 62 CLR 464 at 510. As Dixon, J. said in Blair at p.532: "Findings, however deliberate and formal, which concern only evidentiary facts and not ultimate facts forming the very title to rights give rise to no preclusion" These matters are discussed at paragraphs 202 and 205 in Spencer Bower & Handley, Res Judicata (3rd. Ed. 1996): 202. "The difficulty in the actual application of these conceptions", continued Dixon, J., [at p.533 in Blair ] "is to distinguish the matters fundamental or cardinal to the prior decision or judgment, or necessarily involved in it as its legal justification or foundation, from matters which, even though actually raised and decided as being in the circumstances of the case the determining considerations, yet are not in point of law the essential foundation or groundwork of the judgment". In order to make this distinction one has to inquire whether the determination was so fundamental to the decision that the latter cannot stand without it. Even where this condition is met, it is suggested by Dixon J that there is another test to pass, viz. Whether the determination is the "immediate foundation" of the decision or merely "a proposition collateral or subsidiary only, i.e. no more than part of the reasoning supporting the conclusion". A mere step in the reasoning is insufficient. What is required is a determination fundamental to the decision.

One test which has been suggested is: was it possible to appeal against the determination? This will not decide the question in all cases; but is often a useful test. There are many determinations which cannot effectively be challenged on appeal. If there can be no effective appeal against a particular determination it is not fundamental to the judgment. But this is not the only test; the inquiry must always be - is the determination such that without it the judgment cannot stand? ...

205 A decision of fact or law against the party who succeeded will not found an estoppel because it cannot be fundamental to the decision. It would be unjust to make such a decision the foundation of an estoppel, for no appeal is available to the person against whom it was given. A similar argument applies where several factual grounds are advanced as alternative bases for a cause of action and the court finds more than one in favour of the party who succeeds. No estoppel can be founded on any of the separate findings, for the party failing on such issues cannot appeal any of them separately. To succeed on appeal he must succeed on all the issues, and if the finding on one is good, this will be fatal. There will be a cause of action estoppel, but the separate issues will not ground issue estoppels because none was fundamental to the decision. 30 It is clear that, if the Industrial Relations Commission wholly dismisses the applications of Messrs. Bell and Berg without making findings of fact against them, there will be no issue estoppel. In particular, findings of fact in their favour will not bind Macquarie. Even if there are findings of fact made against them, there could be questions as to whether the point in issue was merely whether the agreements and/or arrangements were unfair, harsh or unconscionable, whether the factual findings were necessary to the decision of that issue, and whether the findings were of evidentiary rather than ultimate facts; and even if it were considered that the findings were of ultimate facts, there could be questions whether the findings were under a description appropriate to be conclusive in relation to the different issues which would be before the Federal Court. 31 To elaborate on the last point, there could be findings as to the making of representations. The representations alleged in this case are in substance representations that Messrs. Bell and Berg would receive certain benefits in certain circumstances. It is extremely unlikely that the Industrial Relations Commission would find the exact words of conversations. What would be found would be the substance of the conversations; and what the court considers to be the substance of the conversations will depend upon the ultimate issues the court is considering. The Commission might address the question in terms of whether or not the representation amounted to a legally binding contract that the applicant have benefits X in circumstances Y; or a promise short of a legally binding contract that the applicant would have benefits X in circumstances Y; or a representation that the applicant would get a contract in certain circumstances to receive benefits X in circumstances Y; or a representation that the applicant would receive benefits X in circumstances Y; or a representation that the applicant would have a reasonable prospect of receiving benefits X in circumstances Y; and there are other possible formulations. There could also be variations as to what could be considered the substance of the benefits X and the circumstances Y, having regard to the ultimate issues before the Commission. 32 Then, if the Commission made a finding about whether or not the "representations" it found were untrue or misleading, it would presumably do so without the assistance of s.51A of the Trade Practices Act. That section, which would apply to the claims brought in the Federal Court, is in the following terms: 51A(1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.

(2) For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation.

(3) Subsection (1) shall be deemed not to limit by implication the meaning of a reference in this Division to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead. 33 A finding by the Commission that a representation as to the future was not misleading could plainly not preclude a contrary finding in the Federal Court, based on s.51A. Also, the Commission could hold that a representation was not made but that, even if it had been made, it was not proved to be misleading. In those circumstances, the finding that the representation was not made would not be necessary for the adverse ultimate decision, and could not ground an issue estoppel. 34 In relation to matters of reliance, causation, and quantum, the Commission could focus on aspects of those questions which are not identical to the aspects which would concern the Federal Court in relation to the issues before it. It seems to me that, in all these matters, there is a very substantial possibility of difficult and technical questions concerning estoppel, and also the strong possibility that even determinations of fact in favour of a successful party before the Commission would not prevent the matter being substantially re-litigated before the Federal Court. 35 Similarly, if the Commission were to give some relief to Messrs. Bell and Berg, which they consider to be inadequate, the same kind of questions could arise both in relation to matters found in their favour and in relation to matters found against them. 36 Having regard to the scope and complexity of the allegations and the amount of money apparently involved, I have no confidence that the parties would not seek, as far as possible, to re-litigate matters in the Federal Court; and I believe that, if Messrs. Bell and Berg are not satisfied with the result in the Commission, the proceedings in the Federal Court would not be substantially shorter. Indeed, they could well be longer and more complex. 37 For those reasons, so long as Messrs. Bell and Berg want to have the advantage of both sets of proceedings, the balance of the considerations favour the removal of both cases to the Supreme Court, if that can be achieved. If they elected to discontinue one or other of the sets of proceedings, the position would be otherwise. 38 Accordingly, I propose to order the transfer of the Industrial Relations Commission proceedings to the Supreme Court. I would stay that order until the expiration of one week after all of the following have occurred, namely the decision of the Full Bench of the Industrial Relations Commission in the appeal presently scheduled to be heard on 22nd November 1999; the completion of the conciliation process under s.109 of the Industrial Relations Act; and an order by the Federal Court transferring the Federal Court proceedings to the Supreme Court. 39 If during the stay Messrs. Bell and Berg decide to discontinue one or other of the sets of proceedings, they may apply to have this order vacated. 40 At present, my tentative view is that the costs of this application should be costs in the proceedings. I will direct that, when transferred to the Supreme Court, the other proceedings are to be considered as cross-claims in the present proceedings. *************

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