McRann v UnitedGlobalcom Inc and ors

PARTIES : THIRD RESPONDENT/THIRD APPLICANT ON THE MOTION Austar United Communications Limited

FOURTH RESPONDENT/FOURTH APPLICANT ON THE MOTION Austar Entertainment Pty Limited

FIFTH RESPONDENT/FIFTH APPLICANT ON THE MOTION CTV Pty Limited

SIXTH RESPONDENT/SIXTH APPLICANT ON THE MOTION STV Pty Limited FILE NUMBER: 3104 of 2001 CORAM: Peterson J CATCHWORDS : Unfair contract claim - Interlocutory motion by respondents to dismiss proceedings before hearing - Applicant and first respondent citizens of USA - Applicant as employee of first respondent seconded to work in Australia as Managing Director of Australian affiliates of first respondent - US litigation pending - Questions of jurisdiction - Whether contract "in and of New South Wales" - Questions of issue of estoppel - Whether deed of release operates as an estoppel - Whether motion premature - Motion denied on all grounds. LEGISLATION CITED : Industrial Relations Act 1996 Interpretation Act 1987 Nagle (t/as W D & J L Nagle & Sons) v Tilburg (1993) 51 IR 8 Western Sydney Area Health Service v Gibson (2001) 109 IR 359 Reich v Client Server Professionals of Australia Pty Ltd (2000) 49 NSWLR 551 McGurk v ECC Lighting Ltd [1996] NSWIRComm 159, 30 August 1996, unreported. Thoday v Thoday [1964] P 181 Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589 Hoyts Pty Ltd v Spencer (1919) 27 CLR 133 Mayburry v Atlantic Union Oil Co Ltd (1953) 89 CLR 507 CASES CITED : Kish v V G Haulage (1971) AR 956 Bartolacci v Permanent Custodians Ltd (1992) 44 IR 388 David Jones Limited v Cukeric (1997) 78 IR 430 Chrysler Jeep v Canberra Star Motors (1997) 79 IR 452 Origin Energy Limited v Smith (NSW) [2001] NSWIRComm308 Kosta Tszyu v Fight Vision Pty Ltd (2001) 104 IR 225 Grant v John Grant & Sons Pty Limited (1954) 91 CLR 112 Regie National des Usines Renault SA v Zhang (2002) 187 ALR 1 OJEH Pty Ltd and ors v Primus Telecommunication Pty Ltd [2001] NSWIRComm 27

HEARING DATES: 12/12/2002; 12/13/2002 DATE OF JUDGMENT: 04/24/2003

APPLICANT/RESPONDENT ON THE MOTION Mr J N West QC

SOLICITOR Harmers Lawyers SYDNEY. LEGAL REPRESENTATIVES: RESPONDENT/APPLICANT ON THE MOTION Mr G J Hatcher SC

SOLICITOR Acuiti Legal SYDNEY.

JUDGMENT: - 7 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

Application under s106 of the Industrial Relations Act 1996. INTERLOCUTORY JUDGMENT

1 These are motions by each of the respondents for an order dismissing proceedings brought by the applicant under s106 of the Industrial Relations Act 1996 ('the Act'). While the motion raises expressly a lack of jurisdiction in the Commission to hear and determine the proceedings, a number of other grounds were argued in circumstances which I will develop.

2 The applicant, Robert McRann, is a citizen of the United States of America. In February 1995 he was offered, and accepted employment, by the first respondent, UnitedGlobalcom (then known as United International Holdings, Inc but which I shall refer to as "UGC") to be seconded on a full-time basis as Managing Director of its Australian affiliates, CTV Pty Limited ('CTV') and STV Pty Limited ('STV') (the fifth and sixth respondents respectively). The employment commenced on 19 March 1995 and for a little more than two years the applicant fulfilled the intended role. During 1997 it eventuated that the applicant was offered and accepted the position of Chief Executive Officer of an affiliate of UGC in the Netherlands, A-2000NV. The circumstances of the contractual relationship in the Netherlands were the subject of a document entitled The A2000 Agreement.

3 While in Australia the applicant had developed certain employment rights which, it appears, it was necessary to resolve prior to his departure for the position in the Netherlands. The circumstances which gave rise to that resolution are a matter of some contention between the parties but that matter is not presently relevant except by way of background. The resolution itself was effected by a document ultimately executed between the parties entitled the Compensation and Release Agreement. That document, the details of which I shall come to in due course, was entered into between the applicant and UGC, the second respondent; UGC ASIA/Pacific Communications, Inc, ('UGC AP'); the fourth respondent, Austar Entertainment Pty Limited ('Austar Entertainment'); CTV and STV.

4 The initiating summons in these proceedings claims an order varying the terms of the Compensation and Release Agreement (referred to in the summons as the Termination Agreement) from 30 June 1999 so as to provide: "1.1 for the issue to the applicant, with effect from the date of listing of the third respondent on the Australian Stock Exchange, of options to acquire 2,439,500 fully paid, ordinary shares of the third respondent at a price of $1.80 per share, such options to be otherwise on the terms of the share options in the third respondent granted to senior executives of the third respondent on its listing as aforesaid; and

1.2 for the payment to the applicant, on any failure to issue the options as aforesaid, in lieu of the issue of the options, of such sum as would compensate the applicant for any loss suffered by him (including by loss of the opportunity to exercise the options) as a result of that failure.

2. An order that the respondents pay to the applicant the sum of money in connection with the Termination Agreement which are particularised below as being the loss which has accrued to the applicant as a result of the failure of the respondents since July 1999 to procure the issue to the Applicant of the aforementioned options, or such other sum as the Commission considers just.

3. An order that the respondents pay to the applicant interest upon the amount of money ordered to be paid under Order 2.

4. An order awarding costs of and incidental to these proceedings to the applicant."

5 After setting out the summary of matters of fact and law the summons also identifies the grounds of unfairness upon which the applicant relies as follows: "1. The Termination Agreement was or has become unfair, harsh and unconscionable in that: (a) It provided for the restructuring, in good faith, of the Applicant's Remaining Equity Interest into stock options and the Respondents who are parties to the Termination Agreement have failed and refused to undertake such a restructuring; (b) It provided for the restructuring of the Applicant's remaining Incentive Interest into stock options in the Third Respondent in terms which were sufficiently non-specific as to allow the Respondents to seek to exploit that uncertainty by failing and refusing to honour their obligations thereunder; and (c) Pursuant to the Termination Agreement, the Applicant agreed to the termination of his valuable rights under the CTV/STV Arrangement. In return, the Applicant was promised certain rights under the Termination Agreement (including his rights under clause 6 of Chapter II to a restructuring of his Remaining Incentive Interest) and a long-term engagement to work at A-2000 NV on the terms of the A-2000 Arrangement. The Respondents have since, by their conduct in relation to the Termination Agreement and the A-2000 Arrangement, sought to keep for themselves the benefit of the termination of the CTV/STV Arrangement and to deny to the Applicant both the benefit of the A-2000 Arrangement and the benefit of any restructuring of his Remaining Incentive Interest into stock options as promised in the Termination Agreement. Such conduct on behalf of the Respondents is such as to have rendered the Termination Agreement unfair, harsh and unconscionable."

6 The summons also seeks an order for the payment to the applicant of the sum of $10,489,850, being profit foregone in relation to share options referred to in paragraph 1.1 of the claims.

7 Before turning to the detail facts of the matter I observe that the principles applicable to the hearing and determination of an interlocutory, strike-out motion are now well settled (see Nagle (t/as W D & J L Nagle & Sons) v Tilburg (1993) 51 IR 8 at 10-12 and the cases there sited, and Western Sydney Area Health Service v Gibson (2001) 109 IR 359 at 368 et seq). It is plain from those authorities that in order to succeed, the applicants on the motion ('the respondents') must be able to establish, with certainty, that the summons for relief cannot succeed. Ordinarily, a strike-out motion will proceed on the basis of the summons and any material filed in support of it.

8 In the present case the evidence has not yet been put on, although the court has before it additional affidavit and documentary material which has been tendered by consent on the motion. However, despite a minor controversy between the parties as to the status and effect of the disputed material, I intend to determine the questions for resolution having regard to that additional material, but not accepting against the applicant's interest any aspects identified as contentious.

9 I now develop the history of the matter. As I have said earlier the applicant was seconded to work in Sydney in March 1995. In May/June 1997 he was offered a position with A-2000 NV in Amsterdam. On 30 June 1997 the Compensation and Release Agreement was forwarded to the applicant by UGC under cover of a letter signed by Michael T Fries, the Asia Pacific head of UGC. This was signed by the applicant on 2 July 1997 as approved and agreed.

10 In July 1997 the applicant moved to Amsterdam to commence work for A-2000 NV. His employment therewith was terminated without notice or compensation in November 1997.

11 On 23 April 1998 the applicant commenced proceedings against UGC and UIH AP in the United States District Court for the District of Colorado. These proceedings, referred to as the 'First Colorado Proceedings', involved claims by the applicant related to breach of contract, misrepresentation, promissory estoppel, unjust enrichment and civil conspiracy. No claim was advanced with respect to share options.

12 On 9 June 1998 UGC and UIH AP filed a "First Amended Answer and Counterclaim in the First Colorado Proceedings".

13 On 12 April 1999 UGC and UIH AP applied for summary judgment in the First Colorado Proceedings.

14 In July 1999 the applicant sought to amend his claim in the First Colorado Proceedings to plead a failure by UGC to restructure his remaining incentive compensation under clause 6 of the Compensation and Release Agreement. This claim relates to what is now the substance of the present proceedings.

15 On 30 July 1999 Judge Nottingham, sitting in the First Colorado Proceedings, rejected the applicant's application to amend his claim with respect to the restructure of incentive compensation.

16 On 23 August 1999 Judge Nottingham granted summary judgment in favour of UGC and UIH AP by striking out the breach of contract claim against A-2000 NV, and the misrepresentation and unjust enrichment claims. He refused the application for summary judgment on the issues of civil conspiracy and promissory estoppel.

17 On 4 May 2001 the applicant commenced these s106 proceedings and on 15 May and 8 June 2001 the respondents variously filed motions in identical terms seeking to strike the proceedings out.

18 On 9 July 2001 the s106 proceedings came before Wright J for directions when the representative of the respondents indicated that they were prepared to have the motions await the final determination of the proceedings.

19 On 30 July 2001 Judge Nottingham, on his own motion, dismissed the applicant's claim of civil conspiracy in the First Colorado Proceedings.

20 On 1 August 2001 the parties to the First Colorado Proceedings entered into a Stipulation (a form of agreement in the proceedings which was given effect to by order) whereby the remaining proportion of the applicant's claim was dismissed "with prejudice". Judgment was entered in favour of UGC and UGC AP in the sum of $98,000, however, subject to a covenant not to enforce judgment pending the outcome of the s106 proceedings. It seems that it was intended that should the applicant succeed in a s106 proceedings there would be an offset of the $98,000 payable under the Stipulation.

21 On 28 August 2001 the applicant appealed to the Tenth Circuit of the US Appeals Court against the decision of Judge Nottingham to grant summary judgment in the First Colorado Proceedings. That appeal was heard during September 2002 and at the date of hearing of this motion, 13 December 2002, had not been the subject of judgment.

22 On 7 December 2001 UGC filed a motion, in the appeal proceedings from the summary judgment of Judge Nottingham, for an anti-suit injunction against the applicant in respect of the s106 proceedings.

23 On 12 December 2001 UGC commenced proceedings against the applicant in the District Court of Colorado ('the Second Colorado Proceedings') seeking a declaration of the rights of the parties under the Compensation and Release Agreement.

24 On 2 January 2002 the applicant filed a motion to dismiss or stay the Second Colorado Proceedings, relying on the s106 proceedings and the International Doctrine of Abstention.

25 On 19 February 2002 UGC's motion for an injunction in the appeal proceedings was dismissed.

26 In February 2002 UGC filed a motion for preliminary injunction against the applicant in the Second Colorado Proceedings. That motion was heard and denied by Judge Nottingham on 23 May 2002.

The Compensation and Release Agreement 27 The Compensation and Release Agreement is in the following terms: This Compensation and Release Agreement (the "Agreement") is entered into between United International Holdings, Inc. ("UIH"), including its affiliated companies UGC Asia/Pacific Communications, Inc., Austar Entertainment Pty Ltd., CTV Pty Limited and STV Pty Limited and its officers, directors and employees (together with UIH, the "Company") on one hand, and Robert G. McRann (the "Employee") on the other.

The purpose of this Agreement is to forever resolve any and all legal disputes between the Company and the Employee with respect to the Employment Letter Agreement between the Employee and UIH dated February 21, 1995 and any amendments thereto (the "Existing Agreement"), and to provide the Employee with the compensation and benefits described herein to which Employee would not otherwise be entitled in exchange for Employee giving up any and all legal rights or claims which arising out of the Existing Agreement.

As consideration for entering into this Agreement, Employee shall be entitled to the following incentive compensation benefits for services provided to Austar Entertainment Pty Ltd., CTV Pty Limited and STV Pty Limited (together "Austar").

As of July 4, 1997, Employee will be deemed to have vested a total of 0.50% of the Residual Equity Value (as defined below) (the "Incentive Interest").

Austar agrees to purchase from Employee 50% of the Incentive Interest for a cash payment of US$387,500. Payment will be made on July 31, 1997. The Employee understands that all payments made by Austar (or the Company on Austar's behalf) under this Agreement may be subject to withholding for standard payroll deductions and federal and state taxes in the United States.

At any time during the twenty-four (24) month period beginning on March 13, 1999, Employee may elect to require Austar to purchase the balance of the Incentive Interest (i.e. 0.25% of the Residual Equity Value, or the "Remaining Incentive Interest"). At any time during the twelve (12) month period beginning March 13, 2001, Austar or the Company may elect to purchase the Remaining Incentive Interest from Employee. Either party will give written notice of its intent to sell or purchase the Remaining Incentive Interest as the case may be ("Notice Date"). There will be a minimum value for the Remaining Incentive Interest of US$387,500 and a maximum value of US$775,000 in the event the Remaining Incentive Interest is purchased by Austar or the Company at any time and for any reason.

For purposes of this Agreement, the "Residual Equity Value" will be calculated as follows:

Step 1: The assets of Austar will be valued at ten (10) times EBITDA for the twelve (12) months prior to the Notice Date ("Asset Value"). EBITDA will be calculated in accordance with U.S. GAAP.

Step 2: The Asset Value will be reduced by (a) Net Liabilities of Austar and (b) an amount which is equal to the total shareholder investment in or loans to Austar, plus a 12% compounded annual rate of return on such capital. "Net Liabilities" refers to total long-term liabilities less net working capital of Austar.

If there is a Change of Control (as defined below), then for six (6) months thereafter the Residual Equity Value will be equal to the greater of (a) the Residual Equity Value calculated in Clause 4, and (b) the implied equity valuation of Austar derived from the pro rata gross proceeds to shareholders of Austar from such Change of Control event, less an amount which is equal to the total shareholder investment in or loans to Austar, plus a 12% compounded annual return on such capital.

If Austar goes public, then Employee and the Austar agree that, in good faith, the Remaining Incentive Investment will be restructured into stock options or any comparable incentive arrangement offered to then current employees of Austar.

A Change of Control event shall be defined as any sale or merger transaction involving Austar which results in UIH (or any affiliated company of UIH) owning less than a 50% economic interest in Austar.

Employee gives up his right to bring any legal claims against the Company of any nature and related in any way, directly or indirectly, to his employment relationship with the Company pursuant to the Existing Agreement or the termination thereof, and his secondment to Austar. This release in favor of the Company is intended to be interpreted in the broadest possible manner, to include all actual or potential legal claims that Employee may have against the Company in relation to the Existing Agreement and his secondment to Austar. This release in favor of the Company is intended to be interpreted in the broadest possible manner, to include all actual or potential legal claims that Employee may have against the Company in relation to the Existing Agreement and his secondment to Austar. For avoidance of doubt, Employee also releases all claims against the Company's officers, directors, agents and employees.

This Agreement shall be governed by the laws of the State of Colorado, and may be enforced in any court of competent jurisdiction.

Employee acknowledges that he has read this Agreement in its entirety, understands that this is a legally binding document, and has been provided with an opportunity to consult with a lawyer before executing it below.

28 Of particular interest for present purposes are clause 1, Purpose of the Agreement, clause 2, Compensation and Benefits (particularly paragraphs 2, 3, 4 and 6 and clause 4, Governing Law). It is to be observed that the provisions of clause 2 of Part 2, Compensation and Benefits, was given effect to upon the applicant's departure from the Australian assignment in July 1997. That is to say, the applicant received US$387,500 in respect of 50 percent of his incentive interest. No payment has been made under clause 3 and no restructuring of the remaining incentive interest into stock options has occurred although Austar went public in July 1999.

29 The arguments by the respondents, as applicants on the motion, arise on a number of levels as follow: a. That the applicant is estopped from arguing that these proceedings are concerned with more than the interpretation and enforcement of the Compensation and Release Agreement. This argument is effectively based upon the position which has developed in other litigation undertaken in Colorado, U.S.A. both by the applicant and by UGC and the remaining respondents in the present matter;

b. the Compensation and Release Agreement is not a contract or arrangement or condition or collateral arrangement within the definition of contract provided in s105 of the Act and accordingly is not amenable to the court's jurisdiction;

c. the Compensation and Release Agreement is not a matter in and of New South Wales;

d. that there is no unfairness capable of being established in the proceedings; e. the Compensation and Release Agreement prevents the bringing of these proceedings. f. based on the notion of forum non-conveniens, the proceedings ought be stood over pending the conclusion of outstanding Colorado proceedings. g. the matter is ripe for determination. The facts are sufficiently clear to satisfy the court the appropriate material is before it and it is desirable that the issues be determined at an early stage. I now turn to deal with the arguments, which were seriously contested by the applicant, in that order.

30 The first issue is that of an alleged estoppel based upon the position adopted by the applicant in the second Colorado proceedings before Nottingham J on 23 May 2002. Those proceedings involved a motion by UGC for a preliminary injunction against the applicant in proceedings where UGC was seeking a permanent injunction to enjoin or prohibit the applicant from ever litigating in Australia issues surrounding the Compensation and Release Agreement. In the course of those proceedings, expert evidence was called by both sides for the purpose of informing the court of the nature and scope of the s106 power in this court and the nature and scope of the proceedings as here pressed by the applicant. UGC adduced evidence in its case from Jeffrey Shaw QC, as he then was, and the applicant adduced evidence from Mark Steele of counsel of the NSW Bar. Having examined the transcript of the proceedings before Nottingham J, I am satisfied that, from time to time, observations were made by US counsel then appearing for Mr McRann which, if taken in isolation, might be interpreted as indicating that these s106 proceedings were concerned with the interpretation and enforcement of the Compensation and Release Agreement. These observations were made in the context of explanations given about, particularly, the way in which this court could respond to any finding of unfair conduct which made the contract unfair. This involved the conveying of an understanding of the effect of the judgment in Reich v Client Server Professionals of Australia Pty Ltd (2000) 49 NSWLR 551, a matter which, at least initially, caused Nottingham J a little difficulty. However, taken overall, it appears to me that any isolated comment by counsel to this effect did not lead to a position where Nottingham J was misled as to the true purpose and scope of the s106 proceedings.

31 In the course of an extensive, and immediate, oral judgment on the motion, Nottingham J said, speaking of this court's position and jurisdiction: I think all parties would agree that at least viewed from the perspective of American lawyers, the Court is an unusual court, created by Australian statute, and having as part of its mandate, or at least as part of its power, the power to vary contracts which it finds to be unfair, harsh or unconscionable.

And moreover, "contract" is defined to include a contract or an arrangement which I take it from the experts' testimony is a term that is broader than the contract and encompasses business situations where there is no contract.

Notwithstanding the language of the statute, which was, of course, the first thing the Court heard this morning, the evidence supports the view that this court, while it has unique, what might be called, equitable powers to reform contracts in certain situations, really doesn't have power which differs significantly from powers that are possessed by American courts.

It is clear from the case -- from the Australian case law that the court now has the power to adjudicate cases where breaches of contract are alleged by virtue of the Reich decision.

It is also clear that as the Reich decision construes the Court's power, the term "vary" is broad enough in Australian legal parlance to encompass the process of interpreting the contract.

Whatever may be the powers -- the limits of the power of the Australian courts, both of the experts agree that its power in any given case is limited by the pleadings in the case, which is not a surprising proposition, because that generally defines the power of an American court, as well.

And the pleading that we have in this case is the summons which both parties have introduced as evidence, filed on May 4, 2001 in the Industrial Relations Commission in New South Wales in Court Session.

While the Court initially raised questions with both counsel concerning what I think are some deliberately ambiguous terms in the pleading, I'm satisfied that the pleading that we have here is not that much different from a run-of-the-mill complaint in an American court.

32 Later, his Honour said: An issue is how they would -- how the Australian court would regard Colarado law.

The drafters of this contract unfortunately included a provision that the contract be governed by Colorado law without an accompanying provision limiting the jurisdiction to the courts of Colorado, or at least the courts of the United States, overlooking, perhaps, that the courts of Australia might have jurisdiction over the agreement.

One has to ask the question, what would happen if the plaintiffs sued in the jurisdiction or if the case were pending in a jurisdiction which did not recognize a choice of forum provision or a choice of law provision?

I'm aware of no provision of law that would say that because the jurisdiction -- competent jurisdiction doesn't recognize a choice of law provision in a contract, that makes it a court of incompetent jurisdiction or that means that the case can't proceed there.

In any event, the question of what effect the Australian Industrial Court is going to give to Colorado law is muddled on this record. It's the one area where the experts have succeeded, I think, in confusing me by somewhat varying opinions.

It appears to me in sorting all of that out that once the jurisdictional hook of fairness or unconscionability is satisfied or met, the Australian court will, in the view of both experts, as I understand it, apply Colorado law. But the disagreement is over what will happen if Colorado law conflicts with this general, vague, mandate of fairness or unconscionability.

The suggestion of Mr Steele was that if the Colorado court, for example, said that a provision in a contract were too vague to be enforced, the Australian court would recognize that, say it were too vague to be enforced, and reform it to conform with the Court's view of equity, fairness and conscionability.

I'm not convinced that that is anything different from what the Colorado court would do if it were for -- if it were faced with a provision that were too vague to be enforced.

It may be that there are differences in the way that the Australian courts will resolve this case, with regard to the Industrial Court. It may be that plaintiff chose the court for that reason. And certainly, as counsel points out, there is an element of forum shopping here, because the plaintiff could have come back to this court.

On the other hand, the plaintiffs in this case and the plaintiff in Australia, and Mr McRann in the previous case, certainly have the right under most legal doctrines of choosing the place they want to sue, subject to dismissal for lack of venue, dismissal for lack of jurisdiction, transfer for having chosen an inconvenient forum, and other related doctrines which operate as some limit on the plaintiffs' choice of forum. If those doctrines apply here, there is nothing in this record to suggest that the Australian court won't apply them, just as an American court would apply them.

But subject to that, Mr McRann is entitled to choose a court which he believes will be most favourable to him. That wasn't this court. The Court had already decided large parts of the case against him, so it doesn't surprise me that he wouldn't come back to this court, even though he has the case on appeal. Doesn't surprise me, nor do I see anything wrong with his going to the Australian court with this unique type of jurisdiction.

If it's not a competent court, the plaintiff should present that issue to the court itself.

33 As his reasons illustrate, the summons for relief in the present proceedings was exhibited before Nottingham J and, was central to the consideration given in resolution of the motion there. The applicant has submitted here that the proceedings before Nottingham J were not conducted by the applicant upon the basis that interpretation and enforcement of the Compensation and Release Agreement were the sole issues for determination on the merits in the present proceedings. I consider a fair reading of the transcript of proceedings and the reasons for judgment of Nottingham J do support that position.

34 The principles relating to estoppel were referred to in a judgment of Hungerford J, advanced by the respondents, in McGurk v ECC Lighting Limited [1996] NSWIRComm 159, 30 August, 1996, unreported. His Honour referred to res judicata (or cause of action estoppel) as explained by Diplock L.J. in Thoday v Thoday [1964] P 181 at 197-198 as: "that which prevents a party to an action from asserting or denying, as against the other party, the existence of a particular cause of action, the non-existence or existence of which has been determined by a court of competent jurisdiction in previous litigation between the same parties."

35 Diplock L.J. also described issue estoppel this way: "The second species, which I will call "issue estoppel," is an extension of the same rule of public policy. There are many causes of action which can only be established by proving that two or more different conditions are fulfilled. Such causes of action involve as many separate issues between the parties as there are conditions to be fulfilled by the plaintiff in order to establish his cause of action; and there may be cases where the fulfilment of an identical condition is a requirement common to two or more different causes of action. If in litigation upon one such cause of action any of such separate issues as to whether a particular condition has been fulfilled is determined by a court of competent jurisdiction, either upon evidence or upon admission by a party to the litigation, neither party can, in subsequent litigation between one another upon any cause of action which depends upon the fulfilment of the identical condition, assert that the condition was fulfilled if the court has in the first litigation determined that it was not, or deny that it was fulfilled if the court in the first litigation determined that it was."

36 Hungerford J then observed, in terms having a resonance here: "It will be apparent, from his Lordships approach, that the concept of res judicata may be pleaded in bar in two ways, namely, as cause of action estoppel and issue estoppel; in both cases, however, there must be identity of parties (as there is in this case) between the first and the subsequent litigation. But, for the species of cause of action estoppel to apply per rem judicatam the "cause" must be identical."

37 In Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, Gibb CJ, Mason and Aickin JJ dealt with these two forms of estoppel as follows (at 597-598): The difference between res judicata (cause of action estoppel) and issue estoppel has been expressed in similar terms in the House of Lords - see Carl Zeiss Stiftung v Rayner & Keeler Ltd ([1967] 1 AC 853, at pp.913, 964 et seq.). Subject to an examination of the application of the principle in Henderson v Henderson ((1843) 3 Hare 100 [67 ER 313]), it is evident from the discussion which has already taken place that this is not a case of res judicata. The rule as to res judicata comes into operation whenever a party attempts in a second proceeding to litigate a cause of action which has merged into judgment in a prior proceeding. Here the indemnity cause of action was not litigated in the Soterales proceedings. The judgment in that case did not deal with that cause of action, though it evidently proceeded on the assumption that the Authority was not entitled to an indemnity. For a similar reason this is not a case of issue estoppel in the strict sense. The Full Court was correct in deciding that the existence of an indemnity is a defence to a claim for contribution under s24(1)(c) of the Wrongs Act and that the absence of an indemnity is not an ingredient in the cause of action for contribution. It was not a necessary step to the decision that Anshun was entitled to contribution for the Court to decide that the Authority was not entitled to an indemnity against Anshun: Carl Zeiss ([1967] 1 AC at p.965). Had the Authority pleaded the indemnity as a defence to Anshun's claim for contribution, a decision on that defence would have been a necessary step to the ultimate decision that Anshun was entitled to contribution. The defence or indemnity not having been raised, the judgment for Anshun did not involve a determination of that issue. The critical issue, then, is whether the case falls within the extended principle expressed by Sir James Wigram V.C. in Henderson v Henderson ((1843) 3 Hare, at p.115 [67 ER at p.319]). The Vice-Chancellor expressed the principle in these terms: "where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time." The existence of the principle has been affirmed by the Judicial Committee on four occasions ( Hoysted v Federal Commissioner of Taxation (1925) 37 CLR 290 at p.303; [1926] AC 155 at p.170; Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993, at pp.1010-1011; Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581; Brisbane City Council v Attorney General (Q) [1979] AC 411 at 425). See also Carl Zeiss [1967] 1 AC at pp.915-916, 966). In two of these cases the principle was applied so as to shut out litigation of an issue which could and should have been litigated in the earlier proceedings.

38 It seems, in the light of these authorities, that the substance of the issues arising in these s106 proceedings cannot be said to have been embraced to any degree in either the first or second Colorado proceedings. The aspect of interpretation and enforcement of the Agreement was not raised in the first Colorado proceedings and, as I apprehend it, the power to vary the Agreement neither was, nor could have been, raised. It is thus not possible to find that estoppel runs against the applicant's bringing the present proceedings. I would conclude that, on this ground, the respondents have not demonstrated that the applicant should be treated as estopped by his conduct of the proceedings before Nottingham J to which I have referred from having his case under s106 heard and determined on the merits.

39 The respondents' next argument was that the Agreement was not a contract or arrangement under which work was performed, but the complete antithesis of such. Senior counsel's submissions dealt with the development of authority in this court upon the scope of, particularly, "collateral arrangement" in the definition of contract. It was submitted that the legislature intended that term to have the same connotations as were generally understood for collateral contracts (as to which see Hoyts Pty Ltd v Spencer (1919) 27 CLR 133 and Mayburry v Atlantic Union Oil Co Ltd (1953) 89 CLR 507). It was submitted that the observations of Cahill J in Kish v V G Haulage (1971) AR 956 at 969 to the effect that an arrangement whereby the applicant, a lorry owner driver, had entered into a haulage contract with an attended obligation to apply for shares in the haulage company seemed to his Honour "to be a classic case of a collateral arrangement within the meaning of s88F(1)" reflected that Cahill J had very much in mind the formulation in relation to collateral contracts referred to in those judgments.

40 This is a view with which I cannot agree. His Honour in those observations made no reference at all to the "classic case" of a collateral contract and, upon my reading of the judgment, was concerned to express the opinion that the arrangement was one fairly and squarely within the scope of the statutory expression.

41 I consider the judgment of Hungerford J in Bartolacci v Permanent Custodians Ltd (1992) 44 IR 388 and the judgment of the Full Court dismissing an appeal from his Honour's judgment (1992) 94 IR 122 do not advance the present matter. The question in issue in those proceedings was whether a mortgage granted by an employee as security for a loan to be made by an employer was an arrangement collateral to her employment contract which had subsisted for some three years previously. The Full Court described the critical matter for determination as being ". . . whether the mortgage itself, assuming it could correctly be categorised as an "arrangement", was a collateral arrangement in relation to, or running side by side with, or accompanying or attendant upon, the employment contract between the appellant and the company, that contract being one "under which a person performs work in any industry"."

42 However, the judgments in Bartolacci determine definitively that the words "under which a person performs work in any industry" did not qualify the expression "any related condition or collateral arrangement" in the phrase, then contained in s275 of the 1991 Act, "any contract or arrangement or any related condition or collateral arrangement under which a person performs work in any industry".

43 In David Jones Limited v Cukeric (1997) 78 IR 430 the Full Bench of the Commission in Court Session was required to consider, on appeal, the effect of a release which had been entered into after the contract of employment between the appellant and the respondent had come to an end. The Full Bench said (at 455): The release was part of an agreement reached between the parties as to the terms on which their relationship would come to an end. Such an agreement cannot deprive the Court of its jurisdiction under s275 of the Act. (See Chysler Jeep Automotive Distributors Australia Pty Ltd v Canberra Star Motors Pty Ltd (unreported, NSW Industrial Relations Commission, Full Bench, 19 November 1997), p.17.) Nevertheless, a release may well provide a good defence to an application under the unfair contracts provisions of the statute. Given the public interest in parties being held to the settlements reached in respect of litigation, the Court will not lightly ignore the terms of a release.

However, in some circumstances, the Court will refuse to act in accordance with the terms of a release. Where the response of an applicant against whom a release is raised, is to submit that the respondent is estopped from relying upon the release because it was obtained by fraud or duress or misrepresentation, a serious question is raised which the Court must consider and determine. Such an argument requires consideration of the relevant rules of law. (See Qantas Airways Ltd v Gubbons (1992) 28 NSWLR 26.)

Approaching the question of the release in that way, it is our view that the conclusion of Marks J that Mr Cukeric was induced to sign the release at least in substantial part by the misrepresentations made by the Company was not only open but was correct. We will later deal further with this. At this point, however, we observe that the doctrine of estoppel was relevant to be considered by his Honour in determining whether the Company was entitled as a matter of law to rely on the release it obtained. The conclusion that it was not, was in our view also correct. That conclusion was a proper basis for the discretionary decision that the release did not provide a valid basis for the Court to dismiss Mr Cukeric's claim.

44 The Full Court also said (at 454): While the release was given after the contract was terminated, it was plainly the condition upon which payments were made under the arrangement between the parties - the contract of employment and the superannuation scheme. The deed was at the lowest, a condition related to the parties' contracts and overall arrangement. Indeed the agreement between the parties as to those payments, including the release, could itself be said to be a collateral arrangement within the meaning of s275 or alternatively a constituent of an overall arrangement.

45 In the present matter the Compensation and Release Agreement was entered into by the parties during the continuance of the employment. Its justiciability is, for that reason, an even stronger case than David Jones v Cukeric.

46 It is also necessary to observe that in Cukeric the Full Court was able to state that (at 454) ". . . . the evidence disclosed a manifest and real association between the contract of employment, the employment itself, the superannuation scheme and the agreement made as a result of the offer of 28 October." Here, senior counsel for the applicant has submitted that the Commission could not hold that the Compensation and Release Agreement was not within the terms of s105 without considering whether the evidence demonstrated such an association; that must await a full hearing on the merits.

47 In my opinion, the respondents have failed at this interlocutory stage to demonstrate that the Compensation and Release Agreement is necessarily outside the scope of the relief available under s106.

48 The respondents' argued that the Compensation and Release Agreement was not "in and of New South Wales". That phrase derives from s12 of the Interpretation Act 1987 which in s12(1)(b) provides:

(b) a reference to a locality, jurisdiction or other matter or thing is a reference to such a locality, jurisdiction or other matter or thing in and of New South Wales.

49 As cl.IV, Governing Law provides, the Agreement is to be governed by the laws of the State of Colorado but, consistently with Nottingham J's observation, may be enforced in any court of competent jurisdiction.

50 The respondents' argue that the Compensation and Release Agreement stands alone. However, it seems to me that must remain a question answerable only in the context of whether or not the Agreement may be said to be part of a contract or arrangement or perhaps a collateral arrangement, a question answerable only in the context of the wider proceedings.

51 The respondents also rely upon the expression in the course of the judgment of Nottingham J, dealing with the view that the respondents (as plaintiffs in those proceedings) were seeking, by their pursuit of a preliminary injunction in those proceedings, to short circuit the process of arguing the point in New South Wales. His Honour said "For all we know, the Court may agree with the plaintiffs that it is not a court of competent jurisdiction, that this is not the kind of case which it should hear, a case between United States citizens whose only connection with Australia is that a contract was to be performed in Australia."

52 The applicant argues that there is a real and substantial nexus between the matters in dispute in New South Wales upon the following bases:

a. The jurisdiction of the Commission is founded on the relationship between the Compensation and Release Agreement and Mr McRann's employment in New South Wales over the period from March 1995 to June 1997;

b. four of the six respondents are companies incorporated and doing business in New South Wales;

c. the Compensation and Release Agreement was negotiated, agreed and executed by Mr McRann while he was in New South Wales;

d. the conduct which is the basis of the applicant's claim is the failure of the respondents to restructure Mr McRann's remaining incentive interest under the Compensation and Release Agreement into share options in the 3rd respondent (a New South Wales company) upon it listing on the Australian Stock Exchange; and

e. the relief sought in the proceedings relates to the grant of the Australian options in a New South Wales company.

53 Although senior counsel did not address the matter exhaustively, as I apprehend the state of the law in the context of s106 and its extension to matters having some potentially extraterritorial operation, the principles are dealt with exhaustively by the Full Bench of the Commission in Court Session in Chrysler Jeep v Canberra Star Motors (1997) 79 IR 452. In that matter the relevant contract was a motor dealership agreement by deed between Chrysler Jeep in New South Wales and Canberra Star Motors located in the Australian Capital Territory. The area described by the deed in which the dealer would carry out the marketing of Jeep products included the ACT region and eight shires within New South Wales. The evidence filed in support of the summons asserted through the principal of Canberra Star Motors that it had undertaken various activities pursuant to the dealership arrangement within New South Wales. The dealership deed provided that the proper law of the contract would be that of New South Wales.

54 On appeal the Full Bench said, in relation to the judgment under appeal:

His Honour concluded on the authorities that the jurisdiction of the Court under s106 of the 1996 Act did not depend upon any agreement between the parties as to the proper law of the contract but rather whether the circumstances demonstrated that the contract had ". . . a relevant and sufficient connection with the State of New South Wales". (See: Ex parte Richardson; Re Hildred (1972) 2 NSWLR 423 per Asprey JA; Cosgrove v International Opal Pty Ltd [1977] AR (NSW) 751; Maloney v Hoffman [1980] AR (NSW) 318 per Watson J; Chevron Breeders and Producers of Australia Pty Ltd v Fast Food Service Development Pty Ltd [1984] AR (NSW) 576 per Glynn J; Fouad R Soueid v GE Nixon Pty Ltd (unreported, 28 September 1992) per Bauer J; Stevens v WTH, trading as Avis Australia (unreported, 7 May 1993) and Mansweto v Midas Australia Pty Ltd (1996) 65 IR 182 per Maidment J.).

55 The Full Bench in their reasoning on the appeal said (at 459):

His Honour properly approached the question he was called upon to decide by asking, consistent with the authorities, whether the evidence demonstrated that the parties' contract had the necessary connection with the State of NSW. His Honour's approach to the question of the proper law of the contract was, in our view, also correct. Parties' choice of law is not of itself a matter sufficient to give the Court jurisdiction to deal with a contract otherwise outside the purview of the section; such an agreement can neither confer nor remove jurisdiction. Nevertheless, an agreement as to the proper law of the contract is a factor proper to take into account in determining whether in a particular case the necessary connection with NSW exists.

56 The Full Bench also adverted to the degree of activity undertaken under the dealership deed within New South Wales and came to the view that the contract had a sufficient connection with New South Wales so as to ground jurisdiction to deal with the application.

57 Where a contract has that relevant and sufficient connection with New South Wales so as to enable the view to be taken that it is a contract "in and of New South Wales" the adoption by the parties of a proper law of the contract other than New South Wales cannot operate to limit or remove the statutory jurisdiction conferred on this court by the Act. Providing each of the relevant criteria are satisfied, namely, the statutory limitations or necessities of s106 are met, the court has jurisdiction to entertain and determine an application. I think, with respect, the observation of Nottingham J to the effect that the contract was between US citizens without any relevant connection with New South Wales, did not take fully into account the matters which I have enumerated in par.52 above. Those matters show that while it is true the initial contract was between US citizens, there developed a significant connection with New South Wales which went beyond those US citizens and embraced, apart from the work performed in New South Wales, corporate respondents of that State and options in an Australian listed corporation.

58 It is not necessary for a contract to be one exclusively "in and of New South Wales", that is having no connection with some or any other place. To come within the court's jurisdiction it is sufficient that it have "a relevant and sufficient connection" with New South Wales.

59 I would conclude that upon the material presently before the court the Compensation and Release Agreement, for the reasons advanced by the applicant, has a real and substantial connection with New South Wales and is a contract "in and of New South Wales".

60 The next argument of the respondents is that no unfairness is capable of being established in relation to the Agreement. This submission relies upon an observation made by Mr Steele of counsel in his evidence before Nottingham J as follows: "It's predicated on the opposite position, that is to say, it starts from a position that the Agreement is legally binding and enforceable by both parties and seeks relief with respect to the performance of an obligation of the Agreement in terms of clause 6, paragraph 6."

61 The respondents interpret this observation as meaning that the attack is not on the fairness of the Agreement but rather on the alleged non-performance of it, the claim for which is advanced under the principles in Reich v Client Server Professionals of Australia Pty Ltd (2000) 49 NSWLR 551. The submission was made that the majority in Reich overstated the position (at 567) in describing the way in which ". . . contravention of the contract of employment, particularly by committing a fundamental breach thereof, then that may only mean that the contract otherwise was unfair in so allowing or not preventing such unfair conduct or, indeed, in failing to make appropriate provision in the event occurring. In any of those situations, we think it clear that s106 could be called in aid by the aggrieved party to obtain relief."

62 Reference was also made to the view on this point of the minority (at 603): Section 106(2) is concerned with conduct of the parties which reveals how it is that the contract in question is unfair, either when entered or subsequently. It has not, however, done away with the need for a relevant finding of unfairness, so far as the contract in question is concerned.

Section 106 does not give the Court power to make any orders if the contract in question is not demonstrated on the evidence to be unfair, as defined. That is what the section is concerned with. The conduct of parties to the contract is a relevant consideration, directed however to the determination of whether, and how the contract rather than the conduct is, in the words of s105:

(c) . . . provides a total remuneration that is less than a person performing the work would receive as an employee performing the work; or

(d) . . . . designed to, or does, avoid the provisions of an industrial instrument.

63 The submission was made that were the view of the minority to prevail, the applicant's case must fail, there being no unfairness pointed to in the Compensation and Release Agreement.

64 The respondents' referred also in this connection to the observations of the Full Bench of the Commission in Court in Origin Energy Limited v Smith (NSW) [2001] NSWIRComm308 at p.6 par 20: "Although conduct of a party which renders a contract or arrangement unfair or otherwise actionable under s.106 of the Industrial Relations Act may well provide jurisdiction for relief under that provision, the primary focus of the exercise of the Court's jurisdiction should be, where relevant and available, the contract or arrangement and its respective terms or omitted terms as to the effect thereon of the impugned conduct. This approach will usually lead to orders (where orders are made) more certainly well-founded jurisdictionally and will be less likely to result in appeals which, whilst superficially thought to be available, upon examination on appeal are soon shown to lack substance."

65 However, it was accepted by the respondents that the Commission is bound by the view of the majority in Reich. That is so. Reich is authority for the proposition that the unfairness necessary to enliven the jurisdiction of the Commission under s106 may be found in conduct of a respondent in relation to non-performance of an obligation under a contract, as was submitted for the applicant. Whether that conduct and the resulting unfairness is able to be established is a matter impossible of determination on an interlocutory motion and accordingly this ground of the motion must fail.

66 The respondents next argued that the summons for relief was prevented by the specific terms of the Agreement, and it would be contrary to the principles of issue estoppel and an abuse of process to permit them to continue (see Kosta Tszyu v Fight Vision Pty Ltd (2001) 104 IR 225 at 238-239). The proceedings in the District Court of Colorado were determined adversely to the applicant's interest and any attempt to go beyond interpretation and enforcement of the Compensation and Release Agreement would be contrary to the first Colorado proceedings and thus prevented by the specific terms of the deed (Grant v John Grant & Sons Pty Limited (1954) 91 CLR 112 at 131). It was argued that the Compensation and Release Agreement was intended to anticipate any claim that travelled beyond mere enforcement of the Agreement.

67 The applicant's argument was that the respondents' submissions on this point proceeded on a number of false premises. There is nothing inconsistent between the application and the findings in the first Colorado proceedings. Nottingham J, in the second Colorado proceedings, emphatically rejected the contention that he had found, in the first Colorado proceedings, any obligation in relation to the remaining incentive interest under the Compensation and Release Agreement was capped at $775,000.

68 Again, I consider the respondents' contentions in this regard are not able to be accepted. In the May 2002 proceedings, Nottingham J reacted to a suggestion that his judgment of 23 August 1999 capped any second payment under the Agreement for the incentive interest at $775,000 by describing the suggestion as absurd. He said: "There was no issue of Clause 6 before this court at any time raised by any party".

69 In his Honour's judgment on that day he said: ". . . my dialogue with counsel had to do with the suggestion that there was somehow a lid on the second payment by virtue of this Court's finding in the motion for summary judgment. And I was at pains and I am at pains to emphasise, that's not . . . that that fact is taken out of context. That was not presented to the Court as an issue in the case, because the Court didn't have to decide the complicated formula for determining the deferred compensation arrangement."

70 Also in discussion with counsel for the respondents on 23 May 2002, Nottingham J responded to an argument dealing with the question of no irreparable harm and the suggestion that the release was supposed to be in part for peace and to stop proceedings going on this way: "They're litigating what's due under the release. That's what they're trying to litigate".

71 It was in this context that Nottingham J declined to grant the respondents an interim injunction, the effect of which would have restrained the applicant from continuing with his s106 proceedings. Thus, as I apprehend it, the motion now before this court may be determined upon its merits without any concern for a conflict arising between that determination and the determinations made so far in the US proceedings.

72 The respondents argued that this court is an inappropriate forum for the determination of, in effect, the issues between the parties. This argument relies upon the proper law clause in the Agreement; the fact the Agreement was entered into between United States citizens "whose only connection with Australia was that a contract was to be performed in Australia" (per Nottingham J); extensive litigation has already been undertaken in the District Court of Colorado and that the issue for determination, the interpretation and enforcement of the Agreement is presented for determination in the District Court of Colorado.

73 That final submission seems to me to be inaccurate. While the law of Colorado will govern the construction of the Agreement and the Agreement provides that it may be enforced in any court of competent jurisdiction, here the applicant relies on the particular power conferred by s106 of the Act in relation to the matter of share options. That issue, as I have found, was not raised by the applicant in the first Colorado proceedings and, as it appears to me, could not be raised.

74 In these circumstances, the observations of Callinan J in Regie National des Usines Renault SA v Zhang (2002) 187 ALR 1 to which the respondents referred, are inapplicable. There his Honour said: "So called globalisation, the deterrence of forum shopping, comity between nations with established judicial systems . . . require that, in general, suits should not be determined in a jurisdiction which has, with respect to the relevant events, no real connexion with the defendant."

75 The respondents' final argument was that the matter is ripe for determination; the court may here be satisfied that the appropriate material has been put before it and that it is desirable to resolve the issues raised at this early stage (see OJEH Pty Ltd and ors v Primus Telecommunication Pty Ltd [2001] NSWIRComm 27 at par.30).

76 In the light of certain evidence given by Mr Steele before Nottingham J, dealing with the propensity for jurisdictional objections such as this to be decided at an early stage, it was submitted that the applicant ought not now be entitled to claim as he did in his outline of contentions "that the Commission could not be satisfied on an interlocutory basis that the facts were sufficiently established "to enable the court to be satisfied it has the necessary material to reach a clear and final decision on the question". (cf. Western Sydney Area Health Service v Gibson (2001) 109 IR 359 at par.20).

77 In a sense this argument has already been determined by my rejection of the other arguments advanced by the respondent. However, once it is accepted that the nature of the relief sought is potentially wider than merely the interpretation and enforcement of the Compensation and Release Agreement, it seems to me to become impossible to accept that the matter may be finally disposed of at an interlocutory stage. I would reject this aspect of the respondents' argument.

78 Costs should follow the event so far as the motion is concerned. I order that the motion be dismissed and that the applicant shall have his costs of the motion in a sum as may be agreed or, in the absence of agreement, assessed.

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