McLennan & Anor v Infinity Constructions Pty Limited & Ors [2007] NSWIRComm 10 | Case summary

1 This judgment concerns a further amended application for a declaration pursuant to s 154 of the Industrial Relations Act 1996 ("the Act") and orders pursuant to s 174 of the Act. The further amended application, which was filed on 8 December 2006, related to proceedings which were brought under s 106 of the Act (IRC No 3402 of 2005). 2 It is helpful to recount the course of those proceedings before considering the application which was supported by affidavits sworn by Carl McLennan ("the first applicant") on 30 August 2006 and 8 December 2006. The respondents did not take issue with the facts recited by the first applicant. Background 3 The applicants filed a summons for relief in IRC No 3402 of 2005 on 30 June 2005 and, in accordance with s 109 of the Act, the matter was allocated to me for conciliation. Conciliation conferences were convened on 23 March 2006 and 11 April 2006, at the conclusion of which the parties signed a document titled "heads of agreement" setting out the heads of an agreement they intended to reach with respect to the resolution of the applicants' claims against the respondents. The heads of agreement contemplated that the settlement agreement would be formalised by way of a deed of release. The terms of that deed of release, and in particular, the very terms of the releases to be provided under it, had not been agreed. 4 A deed of release was subsequently drafted and its terms negotiated. The terms were agreed between the parties, following which an executed copy of the deed was provided by the respondents to the applicants and signed by them on 20 June 2006. 5 Clause 4 of the heads of agreement provided that settlement moneys were to be paid by the respondents within seven days of receipt by their solicitors of the deed of release duly executed by the applicants. 6 On 30 June 2006, the then solicitors acting for the applicants, wrote to the solicitors for the respondents pointing out that seven days had elapsed since the deed of release, duly executed by the first applicant, had been delivered to their office. 7 On 30 June 2006, the solicitors for the respondents wrote to the solicitors for the applicant complaining that the first applicant had made a statement to the WorkCover Authority of New South Wales in respect of a prosecution brought against the first respondent. Relevantly, this letter was in the following terms: We refer to the settlement arrangements in this matter embodied in the deed of release agreed on 15 June 2006. It has come to our clients' attention that, on 16 June 2006, Mr McLennan gave a statement to inspector Melissa Chaston of WorkCover NSW ("the McLennan Statement"). A copy of the McLennan Statement was provided to Mr Yazbek and Infinity by Mr Jeffrey Doo of Shaw McDonald Pty Limited, the solicitors for WorkCover. The allegations made in the McLennan Statement clearly amount to negative and disparaging comments about, and in relation to, Infinity, Mr Yazbek and Mr Orfanos. They are of a type and nature that, if believed, would undoubtedly bring our clients into disrepute with WorkCover and other members of our clients' business sector. Even more seriously, we are instructed that many of the allegations in the McLennan statement are completely false. Our clients are also in possession of information which causes them to believe that the McLennan Statement was not solicited or otherwise requested by WorkCover, and was, instead, proffered by Mr McLennan at his own behest. We are instructed that this information, together with the nature of the allegations and the timing of the statement, cause our clients to believe that the McLennan Statement was actuated by malice, in a deliberate attempt to cause harm to our clients. Mr McLennan's actions appear to amount to a blatant breach of clause 7.1 of the agreed deed of release, as well as a blatant breach of the previously agreed settlement terms. Our clients have already suffered loss and damage as a result of Mr McLennan's breach, in the form of legal costs incurred in having to deal with, and respond to, the McLennan Statement. The McLennan Statement will also undoubtedly cause further loss and damage to our clients into the future. Indeed, we are instructed that the total loss and damage likely to be suffered by our clients is likely to significantly exceed the amounts payable by them under the deed of release. In these circumstances, our clients' initial view is that they have a right to withhold all payments set out in the deed of release until such time as their own damages arising from Mr McLennan's breach can be properly quantified. At that point, they consider they will have a right to set off any such payments against the loss and damage which they have suffered. They will also have a right to take further legal action to recover expected losses in excess of the withheld amounts. In the circumstances, our clients propose to take the approach set out above unless your clients can provide compelling reasons why such a course should not be adopted. 8 The respondents have not paid the moneys, as agreed, in accordance with the deed of release. The applicants seek a declaration under s 154 of the Act as to the existence of a binding settlement agreement and submit that even though settlement may have been reached, this is not an impediment to the making of orders pursuant to s 174 of the Act. 9 The applicants seek the following declaration in paragraph B of the application: (i) the agreement constituted by Terms of settlement dated 11 April 2006, a copy of which is at Attachment A to this Application, is a valid and enforceable agreement between the parties according to its terms; (ii) an order pursuant to s 174 that the parties do all things necessary to effect the agreement referred to in paragraph B(i) above. (iii) Costs and Interests. (iv) Declaration that the evidence given by the Applicant before Justice Schmidt in proceedings number 628 of 2006 on 28 and 29 November 2006 be immune from civil suit. 10 In respect of the declarations sought at paragraph (iv) of the further amended application, Mr M R Elliott of counsel, who appeared for the respondents, submitted that it had nothing to do with the claim before the court. Counsel submitted that it had been included in the further amended application filed the day before the hearing, and that it should be struck out. Counsel submitted that he was not in a position to form any view about this prayer. 11 Dr J Berwick of counsel, who appeared for the applicants, pressed the application, including paragraph (iv), submitting that it flows out of the history of the dealings between the parties, contending that it is necessary to demonstrate that the applicant has behaved lawfully. 12 The Court was informed that the WorkCover prosecution of the first respondent is presently part heard before her Honour Justice Schmidt and that no application has been made to her Honour in terms of paragraph (iv) of the further amended application. 13 In the circumstances, I directed the applicants to file and serve written submissions by 19 December 2006 as to why this court, as presently constituted, should entertain the prayer for relief found in paragraph (iv) of the further amended application. The respondents were directed to file and serve written submissions as to why they contend the prayer should be struck out, on or before 29 January 2007. I will return to this issue later in these reasons. 14 I turn to consider the application for a declaration under s 154 and orders in accordance with s 174 of the Act. 15 The relevant statutory provisions relied upon by the applicants are in the following terms:

16 The case advanced for the applicants by Dr Berwick was that, despite a settlement being reached in this matter, there was no impediment to making orders pursuant to s 174 of the Act. Counsel relied upon decisions of this Court, at first instance, in Best v Barlings Beach Community Pty Limited and Ors [2003] NSWIRComm 435 at [17] and Fox v GIO Australia Limited (2002) 120 IR 401 at [20], [63]. 17 It was further submitted that there are strong public policy considerations militating in favour of the Court holding parties to their bargain: Dr Payne v The University of Sydney & Anor [2000] NSWIRComm 102 at [94]. It was submitted that the behaviour of the respondent was unconscionable in that it refused to co-operate to effect the terms of the settlement, which was based on a misapprehension as to the effect of the first applicant providing a statement to WorkCover. Such an approach had the potential, it was submitted, to subvert the prosecution under the Occupational Health & Safety Act 2000. 18 Dr Berwick acknowledged that s 174 orders are discretionary. However, he submitted that it was not to the point that there may be another cause of action, that is, breach of contract, or specific performance. 19 Mr Elliott submitted that the applicants' claim failed for two reasons. Firstly, because the applicants seek a declaration as to the existence of an alleged agreement, and certain consequential orders in relation to that agreement, in circumstances where the alleged agreement (if it existed at all) was superseded by another agreement between the parties. In developing this contention, counsel referred to cl 12.2 of the deed, which provided that the deed superseded all previous negotiations, understandings and agreements. Secondly, it was submitted, that the Court did not have jurisdiction to grant the relief. Counsel submitted that the power to make a declaration pursuant to s 154 is limited to a matter in which the Court has jurisdiction. It was submitted that this is a matter of contract law and outside the ordinary purview of this Court. In order for the applicants to succeed, they must demonstrate that the matter of contract law is within the jurisdiction of the Court because of the operation of s 174 of the Act. It was submitted that s 174 does not give the Court the power to declare whether a binding contract of settlement exists, nor does it give the Court power to make an order compelling performance of a term of such a contract. That, it was submitted, is the province of commercial courts. Consideration 20 The provisions of s 174 of the Act have been considered in the following decisions: Fox v GIO, Shunmoogam Pragalathan Pillay v Central Sydney Area Health Service [2003] NSWIRComm 297 and Best v Barlings Beach Community Pty Limited and Ors. The principles which emerged from these decisions are that s 174 limits the making of orders in terms agreed by the parties in settlement of the matter and no more (Schmidt J in Best) and s 174 provides a discretion which enables the Court to give consideration to the "validity or illegality" of any settlement agreement and to consider any unconscionable conduct on the part of one or other of the parties (see Walton J, Vice-President in Fox). 21 Put simply, s 174 gives the Court the power to make such orders as the parties are prepared to consent to the Court making, for the purposes of bringing the proceedings to a close. Clearly, there is jurisdiction to make such orders and it follows that the Court could entertain an application pursuant to s 154 of the Act in respect of whether a binding settlement agreement had been reached, which was reflected in orders made pursuant to s 174. However, s 174 does not give the Court power to declare whether a binding contract of settlement exists, nor does it give the Court power to make an order compelling performance of the term of such a contract. This, it seems to me, is the province of the commercial courts. Section 174 provides that the Court may "make an order 'on' the agreed terms of settlement". It does not seem to me that the word "on" means "the existence of", nor does it mean "enforcing". Rather, it means the Court may make an order on the terms of an order the parties have agreed may be made. 22 Heads of agreement were reached at the conclusion of the conciliation in matter No IRC 3402 of 2005, and in my view, there is jurisdiction to make an order under s 174 of the Act. However, unlike the circumstances considered in Fox v GIO and Best v Barlings Beach Community Pty Limited and Ors, the heads of agreement were superseded by another agreement. Orders under s 174 are discretionary. A deed of release was executed by the parties, which imposed obligations on each of them. It seems to me that the parties, because of their own actions, now have mutual difficulties in the enforcement of the deed. On the one hand, the respondents, in breach of the deed, have failed to pay the applicants a sum of money in accordance with the terms of the deed. On the other hand, the first applicant, so the respondents contend, has breached the non-disparagement term in the deed. In making this observation, I am not suggesting that the WorkCover Authority of New South Wales interview was, or amounted to a breach of the deed. However, the complaint that is made is in respect of the extreme terms of the interview, which the respondents contend, transcended being interviewed. It may be that the respondents may have a defence of equitable set-off, or a cross-claim about an unrelated matter wholly outside this Court's jurisdiction, which it would be entitled to raise by way of defence and/or set-off in any court having power to deal with purely contractual disputes. 23 For these reasons, I decline to exercise my discretion to make an order in accordance with s 174 of the Act. 24 In respect of the prayer for immunity, I am not persuaded that the applicants should be allowed to pursue such a claim (which was made one day prior to the hearing). I am not aware of any authority where a judge dealing with proceedings initiated pursuant to a summons filed in accordance with s 106 of the Act could provide an indemnity to a person giving evidence in a criminal prosecution brought pursuant to the Occupational Health & Safety Act 2000. Such an order would seem to me to be an inappropriate exercise of power by one judge in respect of a matter which is part heard before another judge, which is the case here. Although I do not propose to determine this issue in these proceedings, I do propose to accede to the respondents' application to strike out the prayer for relief found in paragraph B(iv) of the further amended application. It seems to me that if the applicants wish to pursue such an application, it should be brought before the judge hearing the matter in which immunity is sought. 25 I should also observe that the applicants, in filing the further amended application, failed to comply with the requirements of Pt 20 of the Industrial Relations Commission Rules 1996 ("the Rules"). No application was made pursuant to r 69(2) for the Court to dispense with the requirements of the Rules dealing with amendments of process (Pt 20 of the Rules). Paragraph B(vi) should therefore be struck out on this basis alone. Conclusion 26 In accordance with the reasons set out in this judgment, I decline to make orders in accordance with s 174 of the Act and a declaration pursuant to s 154 of the Act. 27 The prayer for relief in paragraph B(iv) of the further amended application is struck out. ORDERS

McLennan & Anor v Infinity Constructions Pty Limited & Ors

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