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[2018] FCA 2001
Federal Court of Australia
2018-12-18
Story J, Bromwich J
Original judgment source is linked above.
Counsel for the Applicant: Mr G Hatcher SC with Mr H Stitt
Solicitor for the Applicant: Mills Oakley Lawyers
Counsel for the Respondents: Mr Y Shariff with Mr N Condylis
Solicitor for the Respondents: King & Wood Mallesons
AND: MICHAEL THOMAS KEEFE (and others named in the schedule) First Respondent
JUDGE: BROMWICH J DATE OF ORDER: 18 December 2018
Introduction 1 The applicant, Mr Kevin Olson, seeks leave to file a further amended statement of claim (FASOC). The respondents object to that leave being granted on the basis of asserted deficiencies in the FASOC. There have been two prior judgments in the proceeding: Olson v Keefe [2017] FCA 101; and Olson v Keefe (No 2) [2017] FCA 1168; 122 ACSR 395. Both judgments provide considerable detail as to the nature of this case. Apart from providing an overview, these reasons will therefore be limited to those details that are necessary to determine whether leave to file the FASOC should be granted or refused. 2 The third respondent, Hilco Merchant Resources LLC (Hilco USA) is part of a group of companies operating worldwide and specialising in what is described as "asset valuation, asset monetisation and advisory solutions". Relevantly, that work includes what is described as "store closing projects", which apparently involve giving effect to the closing of failed retail businesses, including inventory and other asset sales. 3 The fourth respondent, Hilco Merchant Australia Pty Ltd (Hilco Australia), is a wholly owned subsidiary of Hilco USA. Mr Olson was the managing director of Hilco Australia. Hilco Australia has been involved in store closing projects in Australia. 4 The first respondent, Mr Michael Keefe, was at all relevant times the Chief Executive Officer of Hilco USA and a director and officer of Hilco Australia. 5 On 16 October 2017, summary judgment was entered in favour of the second respondent, Mr Cory Lipoff. Mr Lipoff was at all relevant times the executive vice president of Hilco USA and a director and officer of Hilco Australia. References in these reasons to "the respondents" therefore no longer include Mr Lipoff. 6 In general terms, the issues in this case arise out of the employment of Mr Olson. The identity of his employer is one of the complexities of the case, due to ambiguities in the contract he signed. He asserts in various parts of his present and proposed pleaded case, in the alternative, that he was employed (1) by Hilco Australia; or (2) by Hilco USA; or (3) possibly by both Hilco USA and Hilco Australia. 7 The procedural history of this proceeding is of considerable importance to the present application for leave to file a FASOC. There have been repeated attempts by Mr Olson to rectify fundamental defects in his pleadings, especially insofar as they seek to plead causes of action going beyond a claim of breach of contract against Hilco Australia, as well as a historic contract claim made against Hilco USA. Mr Olson's pleaded case as to breach of contract is not affected by those defects, except as to certain particulars by the amendments he now wishes to advance. He candidly admits that any success in his case if confined to breach of contract as against Hilco Australia may end up being pyrrhic, perhaps due to a lack of assets owned by Hilco Australia that would be available to meet a judgment debt.
Procedural history 8 The key procedural events are as follows: (1) On 6 September 2016, Mr Olson filed an originating application and statement of claim. (2) On 22 November 2016, Mr Olson filed an amended originating application and amended statement of claim. (3) On 23 February 2017, the Court confirmed the validity of service out of the jurisdiction, on the first, second and third respondents, of the amended originating application and amended statement of claim: see Olson v Keefe [2017] FCA 101. (4) On 29 September 2017, the Court gave judgment in Olson v Keefe (No 2), leading to the strike out and summary dismissal of several parts of Mr Olson's pleading, including the case against Mr Lipoff, by way of further orders made on 16 October 2017. (5) Later in 2017 or early in 2018 (the record is unclear), Mr Olson served on the respondents a further amended version of the statement of claim and a further amended originating application, subsequently seeking leave to file those documents. The respondents opposed the filing of those documents on several grounds. (6) At a subsequent hearing of an application for leave to file those documents on 16 March 2018, Mr Olson withdrew his application for leave and was ordered to pay the respondents' costs. (7) Mr Olson now seeks leave to file the present FASOC, dated 10 May 2018 in the Court Book for the present application, and provided to the Court on 25 June 2018 by email. The grant of leave is again opposed by the respondents.
The applicable legal principles 9 The central principles applicable to an application to amend pleadings in circumstances in which there is a dispute as to their adequacy or viability are not in doubt. What is in contention is the application of those principles to the present circumstances. As to the principles of summary judgment or strike out in relation to all or part of a pleading, which are applicable to this situation, it is convenient to reproduce what I said in Olson v Keefe (No 2) at [6]-[7] (emphasis in original): There was no dispute as to the applicable principles. For summary judgment under s 31A of the Federal Court Act 1976 (Cth), the text of the provision cannot be improved upon: summary judgment may be given where the Court is satisfied that the relevant party has "no reasonable prospect of successfully prosecuting the proceedings" or part thereof. The statutory test, being a radical departure from earlier tests, is not to be paraphrased or further defined: Spencer v Commonwealth (2010) 241 CLR 118; 269 ALR 233; [2010] HCA 28 at [53], [58]. What is required is a critical examination of the material advanced in support of the application to determine whether there is a real question of fact or law to be determined at trial, the onus being on the moving party: see Australian Securities and Investments Commission v Cassimatis (2013) 220 FCR 256; 302 ALR 671; 94 ACSR 623; [2013] FCA 641 at [46]-[50]. The strike out provisions in r 16.21 of the Federal Court Rules 2011 (Cth) are similarly clear and blunt: 16.21 Application to strike out pleadings (1) A party may apply to the Court for an order that all or part of a pleading be struck out on the ground that the pleading: (a) contains scandalous material; or (b) contains frivolous or vexatious material; or (c) is evasive or ambiguous; or (d) is likely to cause prejudice, embarrassment or delay in the proceeding; or (e) fails to disclose a reasonable cause of action or defence or other case appropriate to the nature of the pleading; or (f) is otherwise an abuse of the process of the Court. (2) A party may apply for an order that the pleading be removed from the Court file if the pleading contains material of a kind mentioned in paragraph (1)(a), (b) or (c) or is otherwise an abuse of the process of the Court. The meaning of the above terms used were not in dispute and do not require elaboration. 10 To the above may be added the following short points of principle, highlighted in authorities referred to in the respondents' submissions: (1) "[T]he moving party on an application for summary dismissal is likely to succeed on its persuasive onus if it is able to demonstrate to the court that the applicant's success in the proceedings relies upon a question of law that is straightforward and confined, or is trite in the sense that it is well-settled on authority, such that the question can be resolved summarily without the necessity for a full trial": Australian Securities and Investments Commission v Cassimatis [2013] FCA 641; 220 FCR 256 at [48]. (2) "The function of pleadings is to state with sufficient clarity the case that must be met … to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision": Banque Commerciale S.A., En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 286. (3) "In order to disclose a reasonable cause of action, the statement of claim must contain all the relevant facts to support any allegation made": Christou v Stantons International Pty Ltd [2010] FCA 1150 at [5]. (4) "[T]he central function of pleadings must be borne squarely in mind in applying [the principles governing the exercise of discretion to grant leave to amend], namely, to state with sufficient clarity the case to be met so as to ensure as a matter of procedural fairness that a party has the opportunity of meeting the case against it … leave will generally be refused where the amendment would be futile, such as where it fails to disclose a reasonable cause of action or is otherwise liable to be struck out": Australian Parking and Revenue Control Pty Ltd v Reino International Pty Ltd (No 3) [2017] FCA 1273 at [11].
Summary of Mr Olson's case 11 Mr Olson's case may be summarised as follows and taken at face value for present purposes: (1) Between 2003 and 2006, Mr Olson was employed by a company related to Hilco USA. From 2006 to 2009, he worked as a contractor to Hilco USA and in about 2009, he became a permanent contractor and received weekly remuneration. (2) For the period from 2006 to 2010, Mr Olson was responsible for business development, identifying and pursuing opportunities for Hilco USA's services and doing due diligence reviews of identified opportunities. (3) In about late November 2010, Mr Olson attended a training seminar conducted by a vice president of operations of Hilco USA and another person. At the seminar, he says an offer was made to all attendees that any contractor was entitled to 10% of the net profit earned by Hilco USA in relation to any job obtained by such a contractor. Mr Olson claims to have accepted such an offer, apparently at large, calling it a Commission Agreement, and asserts that from then on, it was a term of his contractor agreement that he was entitled to 10% of the net profits of any job obtained by him for Hilco USA. (4) In December 2010, Hilco USA invited Mr Olson and his family to move to Chicago, where the company is based, with a view to taking up full-time employment. (5) In about March 2011, Mr Olson identified the closure of the Borders bookshop chain in Australia as a business opportunity for Hilco USA (Borders transaction). Mr Keefe and another representative of Hilco USA travelled to Sydney to assist Mr Olson with securing the contract for the orderly disposition of Borders' Australian assets. Mr Olson claims that he then secured that contract for Hilco USA, and shortly afterwards an Australian Company Number was granted by the Australian Securities and Investments Commission to conduct business in Australia. (6) In or about April 2011, upon Mr Olson's return to the United States, he was offered and accepted full-time employment with Hilco USA in Chicago. (7) In or about late June 2011, Mr Olson was asked by Hilco USA to return to Australia to market its services. On 3 July 2011, Hilco USA further asked Mr Olson to consider moving to Australia to be managing director of the new business unit of Hilco USA in Australia. (8) In July 2011, while in Chicago, Mr Olson was asked to provide a detailed budget and business plan for the Australian operations. Later in July/August 2011, he prepared and presented an annual budget for the new Australian business, including his necessary expenses for relocation, schooling, accounting expenses and so on. At a meeting with Mr Keefe and Mr Lipoff, Mr Olson was offered a salary of US$350,000, part of which would be paid as a guaranteed bonus, and was informed that he would receive some equity in the Australian business. (9) From 1 September 2011 until what Mr Olson describes as his "purported termination" on 17 March 2016, he was either employed by Hilco Australia (his primary position), or, alternatively, his place of employment with Hilco USA was moved to Sydney. The lack of clarity on this issue in part arises from the written terms of this employment in a document which is headed "EMPLOYMENT TERM SHEET: DRAFT", and may be conveniently referred to as the term sheet. The term sheet was signed by Mr Olson and Mr Keefe. Mr Keefe was described on the face of the term sheet as the president and CEO of Hilco USA, rather than as holding any position with Hilco Australia. (10) The term sheet included a number of express terms, including as to bonus compensation and the vesting of what was described as "profits interest". The profitability of Hilco Australia was relevant to the calculation of the quantum of benefits to which Mr Olson was entitled. (11) Mr Olson asserts that the contract of employment represented by the term sheet was also the subject of express verbal terms and implied terms as to benefits, such as relocation expenses, return airfares to visit family, tax planning expenses, costs in forwarding personal mail to Australia and termination without cause by either Hilco USA or Hilco Australia upon giving reasonable notice. (12) Mr Olson asserts that Hilco USA allocated large amounts of expenses to Hilco Australia that were reflected in the profit and loss statements of Hilco Australia, which adversely affected the profitability of Hilco Australia and thereby the basis for the calculation of his bonus compensation and profits interest. He asserts that those expenses were artificially inflated. 12 The pleaded case that Mr Olson already brings, and additionally seeks to bring, alleges: (1) failure by Hilco USA to pay him commission to which he was entitled arising out of his prior work as a consultant in obtaining the Borders transaction in Australia; (2) breach of express terms of his contract of employment in Australia with Hilco Australia, with Hilco USA, or with both companies; (3) breach of implied terms of his contract of employment, including as to conduct that he asserts deprived him of bonus compensation and a profits interest by reason of not giving him information, in breach of statutory obligations; (4) in the alternative to his contract of employment claims, misleading or deceptive conduct contrary to ss 18 and/or 31 of the Australian Consumer Law in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (ACL) in relation to asserted representations made by Hilco USA and Hilco Australia to persuade him to take up employment with Hilco Australia, including representations that he would obtain shares in Hilco Australia, and as to his remuneration and expenses; (5) short payment of commission to which he was entitled in Australia; (6) victimisation by Mr Keefe, as a director of Hilco Australia, by way of termination of his employment for the proscribed reason of Mr Olson making a "protected disclosure", contrary to ss 1317AC(2) and 1317AC(3) of the Corporations Act 2001 (Cth); and (7) unconscionable conduct in a variety of ways, largely focusing on deprivation of his bonus compensation and profits interest.
The respondents' opposition to the filing of the FASOC 13 The respondents' primary opposition to the filing of the FASOC is upon the basis that key aspects of what is sought to be litigated is liable to be summarily dismissed, or to be struck out in several critical respects: see s 31A of the Federal Court of Australia Act 1976 (Cth) (Act) and rr 16.01 and 16.21 of the Federal Court Rules 2011 (Cth) (Rules). The respondents contend that the following paragraphs of the FASOC are fatally defective: (1) [124] to [162], which allege contraventions of ss 20 and 21 of the ACL (Unconscionable Conduct Claim); (2) [42(c)], [85], [129] and [138], which allege rights to a "profit interest" or equity share in the sale of the Australian business (Profit Interest Claim); (3) [42(d)] and [80], which allege an implied term in the "Contract of Employment" to act with fidelity to "the bargain" (Implied Terms Claim); and (4) [51] to [66], which allege contraventions of the Corporations Act based on financial information that was not provided to Mr Olson (Financial Reporting Claim). (At the hearing of this leave application, senior counsel for Mr Olson advised that there was no separate financial reporting claim, and that this aspect of Mr Olson's pleading went to his breach of contract claim.) 14 The respondents' above objections to the grant of leave to file the FASOC are advanced in the nature of a pre-emptive strike, seeking to prevent the filing of that amended pleading in the first instance, rather than standing by while it is filed and later seeking summary judgment or strike out. In this circumstance, as the above-cited authorities indicate, the principles applicable to the grant or refusal of leave to file the FASOC in its present form include, as a matter of logic, principles pertaining to summary judgment or strike out. That is because a court will not grant leave to amend a pleading that is shown to be liable to be struck out or summarily dismissed. 15 The respondents also make a more general complaint about the quality of the pleadings, which is addressed at the conclusion of these reasons.
Unconscionable Conduct Claim: Contraventions of ss 20 and 21 of the ACL, as alleged at [124]-[162] of the FASOC 16 The respondents characterise Mr Olson's unconscionability case, at its highest, as appearing to encompass the following: (1) that Mr Olson's services in Australia were acquired directly from him by Hilco USA while he was employed by Hilco Australia, or, alternatively, that Hilco USA obtained certain services from Hilco Australia, which in turn required him to perform those services - I note that the distinction is not clearly pleaded at [124] and [125] of the FASOC, itself an objection that is taken, as identified below; (2) that Hilco USA made representations to Mr Olson, inducing him to relocate to Australia and run its Australian business (whether as a direct employee, or as an employee of its subsidiary, Hilco Australia); (3) that part of the consideration would involve remuneration by way of "Profit Interest", or an equity share in the Australian business; (4) that Mr Olson moved to Australia based on those representations; (5) that once Mr Olson was in Australia, and after he had relocated his family, Hilco USA renegotiated with him a new agreement that was less favourable than that which was represented to him; and (6) that the alterations to the proposed remuneration once he was in Australia were unconscionable, with the disadvantage pleaded being the fact that he had relocated his family to Australia and therefore had no alternative but to accept the revised terms that had been offered. 17 The respondents submit, by way of their written submissions, that Mr Olson's unconscionability claim discloses no reasonable cause of action for the following reasons: (1) The assertions pleaded at [124]-[125] of the FASOC as to who, between Hilco USA and Hilco Australia, was retaining Mr Olson's services are a "model of ambiguity", containing conclusory assertions as to the acquisition of services by Hilco USA, and an asserted "Services Contract" on two different bases. The respondents complain that this is done without any pleading or particularisation of the material facts upon which those alternative conclusions are based, with the earlier part of the pleading (at [35]) asserting that he was employed by Hilco USA, or Hilco Australia, or by both companies, without any terms of any such contract(s) being pleaded. The respondents submit that the pleading at [124]-[125] of the FASOC is therefore embarrassing. (2) The respondents submit that a related problem underpinning the s 21 claim is the manner in which it is pleaded. Hilco USA is said to have acquired services from Mr Olson, but nothing is pleaded to establish the nature of any contractual relationship as between Hilco USA and Mr Olson. Hilco USA did not acquire services from Mr Olson, and Mr Olson was an employee of Hilco Australia. It is submitted that the bare assertion that Hilco USA acquired services from Mr Olson because he was an employee of Hilco Australia conflicts with commercial reality and is not supported by any authority. (3) It is submitted that s 21 of the ACL does not apply to the case against Hilco USA or Hilco Australia. This is because the definition of "services" contained in s 2(1) of the ACL expressly excludes "the performance of work under a contract of service", and no s 21 claim could thus be made against the employing entity, presuming that to be Hilco Australia. This submission is not addressed to s 20, which only operates outside the sphere of the operation of s 21, and addresses conduct more broadly than the supply of services. (4) It is submitted that an additional reason why s 21 of the ACL does not apply to Hilco Australia is that there is no pleaded conduct against it. Paragraph 135 of the FASOC only pleads a claim under s 21 of the ACL against Hilco USA, and the preceding paragraphs do not allege that Hilco Australia took any part in the renegotiation of the contract of employment, which is described as the "Purported Renegotiation" at [137] and thereafter in the FASOC. (5) In any event, it is submitted that the case under ss 20 and 21 of the ACL as against Hilco Australia is not clear. Mr Olson does not articulate any specific conduct of Hilco Australia, let alone conduct that is said to be unconscionable. It is not sufficient to merely plead the conclusory assertion that Hilco Australia was "involved" (as pleaded at [153] of the FASOC) in the conduct of Hilco USA and therefore acted unconscionably. That is a claim of accessorial liability, which must be properly pleaded. (6) Even if the above impediments to the claim under s 21 of the ACL could be overcome, it is submitted that Mr Olson has no reasonable prospects of success given that no "special disadvantage" can be proven within the meaning given to that term in the authorities on this topic, and no alternative specific basis for asserting unconscionability has been pleaded. Mr Olson's case, be it as to "special disadvantage" or some other sufficient basis for asserting unconscionability, is centred on him having already relocated to Australia and thus having been placed in a weaker position to renegotiate his terms of employment. The authorities are clear and express that a mere difference in bargaining power is not sufficient to establish a "special disadvantage" or something akin to that state of affairs so as to make some particular aspect of the conduct unconscionable, citing in particular Australia & New Zealand Banking Group v Karam [2005] NSWCA 344; 64 NSWLR 149 at [63]-[66] (see also the case there cited of Bridgewater v Leahy [1998] HCA 66; 194 CLR 457 at [75]-[76]). (7) Further, it is submitted that the state of mind element of unconscionability under s 21 (knew or ought reasonably to have known of whatever asserted special disadvantage is relied upon) has not been pleaded in accordance with r 16.43 of the Federal Court Rules. (8) To the extent that there is any case based on accessorial liability as against Mr Keefe under ss 20 and 21 of the ACL (as pleaded at [151] of the FASOC), the respondents submit that that case fails for the same reasons that the primary case against Hilco USA and Hilco Australia fails, as well as for its lack of articulation of the basis upon which Mr Keefe could be an accessory.
Section 21 of the ACL and "services" 18 Mr Olson seeks to evade the restriction in the scope of s 21 of the ACL by reason of the definition of "services" in s 2(1), which excludes contracts of service. He does so by asserting that the focus of s 21 is on conduct, rather than on a contract or other legal relationship being in existence. He submits that all he needs to be able to avoid the "services" definition carve-out is for the relationship between him and Hilco USA not to involve a contract of service, even though a part of the way in which he seeks to plead his case relies, at least in the alternative, on such an employment relationship existing with Hilco Australia. 19 Mr Olson was unable to identify any authority for the proposition that an employee of a wholly-owned subsidiary who provides services to the parent company by reason of that employment does so directly, rather than via the subsidiary, so as not to be "in connection with" the contract of employment. Any services that he provided to Hilco LLC unavoidably arose "in connection with" the supply of services to Hilco Australia if that was his employer, or directly under such a contract if Hilco USA was his employer. None of the services that Mr Olson provided to Hilco USA could be unconnected to a contract of employment. The carve-out of his employment contract, however it is characterised, from the operation of s 21 therefore cannot be avoided. His attempt to rely upon s 21 cannot properly be advanced in such an employment context and, accordingly, leave to plead or re-plead a case in those terms cannot be granted.
Special disadvantage as a requirement in an unconscionability case under s 20 of the ACL 20 A second way that Mr Olson seeks to avoid the definition of "services" in s 2(1) is by relying upon his alternative unconscionability claim under s 20, to which the definition of "services" does not expressly apply. There is room to doubt that the relationship between s 20 and 21 is such that the former permits a claim arising out of a contract for services. However, it is not necessary to decide that one way or the other, especially as this point was not argued. That is because it has been repeatedly held that in order to succeed in such a claim, something at least akin to conduct of the kind described in Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447 must be established. As Mason J said in Amadio: (1) at 461: "relief on the ground of 'unconscionable conduct' is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage"; and (2) at 462, after quoting from Blomley v Ryan (1956) 99 CLR 362 at 405 per Fullagar J and at 415 per Kitto J, his Honour observed that the particular examples given by their Honours were: no more than particular exemplifications of an underlying general principle which may be invoked whenever one party by reason of some condition of circumstance is placed at a special disadvantage vis-a-vis another and unfair or unconscientious advantage is then taken of the opportunity thereby created. I qualify the word "disadvantage" by the adjective "special" in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order to emphasize that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party. 21 More recently, the High Court in Kakavas v Crown Melbourne Limited [2013] HCA 25; 250 CLR 392, in addressing the earlier version of s 20 of the ACL in s 51AA of the Trade Practices Act 1974 (Cth) and after quoting part of the second passage above from Amadio, as cited in argument, said (at [19]): In proceeding to consider whether equitable intervention is warranted in this case, a number of points may be made at the outset. First, the principle which the appellant invokes is not engaged by the circumstance that a plaintiff's transaction with a defendant has resulted in loss to the plaintiff, even loss amounting to hardship. In Tanwar Enterprises Pty Ltd v Cauchi [[2003] HCA 57; 217 CLR 315 at [26]], Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ said that it is wrong "to speak of 'unconscionable conduct' [as suggesting] that sufficient foundation for the existence of the necessary 'equity' to interfere in relationships established by … the law of contract, is supplied by an element of hardship or unfairness in the terms of the transaction in question, or in the manner of its performance." 22 For the reasons that follow, it is clear that in order for a claim to proceed under s 20 (and for that matter, under s 21), it is not enough to plead a set of facts and a bare conclusion that, in all the circumstances, what has taken place is unconscionable in the sense identified in the authorities cited above, or in some like sense. The FASOC does not rise much higher than a bare narrative and conclusory allegation. Senior counsel for Mr Olson was adamant that no more was required than is in the FASOC. I disagree. 23 What is required in bringing a claim under s 20 in this case (and for that matter, under s 21) is a pleading as to what particular conduct or part of the conduct is said to be unconscionable, and why. It is only then that the pleadings will serve to ensure that a clear distinction is maintained and adjudicated upon between, for example, contractual dealings that may be seen as no more than robust, or even harsh or unfair, and conduct that crosses the proscribed line of unconscionability. When the legal and factual distinction between what is permitted and what is forbidden may be close or finely balanced, such pleadings are especially important. This is far from pedantic. It serves to ensure that the "basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision" is fulfilled: Banque Commerciale S.A., En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 286.8; see also Australian Building and Construction Commissioner v Hall [2018] FCAFC 83; 277 IR 75 at [49]-[50]. 24 Two particular and related features of Mr Olson's argument as to the pleading requirements for a claim of unconscionability warrant a principled rejection. The first argument is that, as put by Mr Olson's senior counsel, "unconscionability is determined by the circumstances … [y]ou plead the circumstances", that all that is required is to plead "the facts that give rise to the conclusion that it's unconscionable" and that there is no need to spell out why the pleaded conduct is unconscionable. The second and related argument is that, having done no more than plead what has happened and assert a conclusion that it is unconscionable, the Court is required, without any allegation as to why particular conduct is unconscionable, to determine whether that has been established by applying "the jurisdictional standard of whether it [i.e., the pleaded conduct] conflicts with contemporary morality", citing Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90; [2013] ATPR 42-447 at [23]. That evaluative task is very different and much more difficult if it is required to be carried out in a pleading vacuum. 25 There are three distinct problems with such a pleading vacuum. The first problem is that without pleading why particular conduct is said to be unconscionable, the party against whom the allegation has been made does not have anything clear or specific to admit or deny, or to counterplead. Such clarity enables the real issue in dispute to be identified in a given case. For example, a party pleading in response to such an allegation may deny that the conduct alleged was unconscionable in the way asserted. The party may otherwise plead that the conduct did, in fact, take place as an objective fact, but deny the necessary awareness of the circumstances pleaded by the party making the allegation. There may also be a myriad of intermediate pleading stances, whereby parts of what is alleged to have occurred are admitted, while other parts are denied. This response frames the case for evidentiary purposes and beyond. 26 The second problem with Mr Olson's stance is that the Court in that situation has insufficient clarity of what is alleged in order to make the necessary focussed determination on the facts that are disputed, or only admitted in a qualified way, so as to progress to the evaluative stage. 27 The third problem with Mr Olson's stance is that the evaluative stage is required to be carried out by the Court without knowing in advance of the trial, and perhaps even during the running of the trial, why what has taken place is said to be unconscionable. It is simply not good enough for this to be identified during the trial or in closing submissions. An aspect of this problem is a real risk of the Court, even when the trial has concluded, being forced to make a determination which may be seen to be based on some kind of personal view on the part of the judge of commercial morality, poisoned by hindsight reasoning, rather than by the parties joining issue on the particular basis upon which the determination is required to be made. As Middleton J helpfully pointed out in Paciocco v Australia and New Zealand Banking Group Limited [2015] FCAFC 50; 236 FCR 199 (at [402]): On the issue of statutory unconscionability, a rationally based system of law needs to set out the limits of acceptable commercial behaviour in order that persons can order their commercial affairs in advance. Such a system cannot depend on the personal approach of a judge, based upon his or her view of commercial morality. Worse still, if there is the perception that the judge makes the law in any individual case and then applies it retrospectively. 28 The notion that clear pleading of why conduct gives rise to the equivalent of an equitable entitlement to relief is neither new nor novel. Indeed, the notion that a statutory form of an equitable remedy needs a clear articulation at the outset of why the conduct alleged gives rise to an entitlement to relief finds support in the equity origins for pleading such causes of action, namely the form of a bill of equity (being the form in which such claims were brought to a court). In Commentaries on Equity Pleadings and the Incidents Thereof, According to the Practice of the Courts of Equity of England and America, by Joseph Story, Little, Brown & Co, published in 1865 in Boston, the development of the then "modern" bill of equity was traced (at pp 5 to 17, paragraphs 17 to 25). The author was at that time a Justice of the Supreme Court of the United States of America and a professor of law at Harvard University. 29 At [26] of Commentaries on Equity Pleadings, it is stated that "[i]n its modern structure, a bill is, or may be, composed of nine parts". At [27], the third and most important part of such a bill, the "premises" or the "stating part", is described. This part was required to contain, inter alia, "a narrative of the plaintiff's case, and of the wrong or grievance of which he complains". Later, at [251], it is said, by way of illustration as to what is required of a stating part, by reference to the example of a claim of fraud in equity, that it is not sufficient to make such a charge in general terms, but that, rather, a stating part should point out and state particular acts of fraud. This is reinforced at [251a], where it is stated that "an allegation of fraud was insufficient without a statement of the circumstances constituting the fraud", because fraud is "a conclusion of law, and it is insufficient to allege, that a deed has been obtained by fraud, unless the things done, constituting such fraud, are stated on the face of the bill". 30 By parity of reasoning, unconscionability is ultimately a conclusion of law required to be reached by a court before a claim on that basis can succeed. The things done which are said to meet that description must be stated, in the sense of asserting why that conclusion is warranted. It is only then that the respondents in this case could properly have been called upon to plead to such allegations, so that issue could be joined and that issue could proceed to the filing of evidence and to trial. The substance of this requirement was raised on the first occasion that a further amended pleading was advanced during the interlocutory hearing on 16 March 2018, but to no avail upon the apparent basis that Mr Olson did not consider it necessary despite clear warnings from the Court to the contrary. 31 In the circumstances of this case, the respondents were entitled to be told why Mr Olson contended that any particular aspect of what they were said to have done met the threshold of being unconscionable so that they could appropriately plead to it. In the case of the s 20 claim at least, there had to be an identification of special disadvantage, or something akin to that, such that this could be admitted or denied, before the question of whether that was known, or ought to have been known, by the respondents could be addressed. While it is alleged (in only the first of six subparagraphs at [149] of the FASOC) that Mr Olson was at a special disadvantage, that is said to be so by reason of no more than a bald assertion that he was denied information which he contends was necessary to protect his position. Nothing is pleaded as to why this is capable of constituting a special disadvantage in the circumstance of him being the managing director of Hilco Australia and a highly paid executive. The mere incantation of those conclusory words does not constitute any sufficient pleading. It has not been pleaded in a way that properly asserts that any such relatively extreme circumstance existed so as to permit Mr Olson to go in this way beyond his core case of breach of contract. 32 Even if a proper case of unconscionability were able to be pleaded, for which there must be some real doubt given the limited scope of what has been relied upon thus far, two opportunities to address this have already been had. A third should not now be countenanced in the particular circumstances of this case. A claim of unconscionability by Mr Olson cannot now be allowed to proceed. It follows that leave cannot be granted to plead a claim under s 20, the basis for a claim under s 21 already having been denied by reason of the definition of "services" in s 2(1) of the ACL. As this is Mr Olson's fourth attempt at rectifying his pleading, I do not consider that this topic should be revisited by any further attempt at amending the pleadings in relation to the topic of unconscionability.
The remaining pleading objections summarised at [17(1), (2), (4), (5) and (8)] above 33 In light of the above conclusions, there is, strictly speaking, no need to say more on the topic of unconscionability. However, for completeness on this topic, I also conclude that: (1) The manner in which the contractual and service arrangements between Mr Olson, Hilco Australia and Hilco USA are pleaded in the FASOC at [124] and [125] is aptly described by the respondents as embarrassing and, independently, could not be permitted to be part of the FASOC as filed. (2) The case sought to be brought under ss 20 and 21 of the ACL as against Hilco Australia is, in any event, either not pleaded at all or inadequately pleaded because the specific conduct of Hilco Australia that is said to be unconscionable is not identified in terms of alleged material facts and circumstances, as opposed to conclusory assertions. Mr Olson would have needed to identify with some reasonable precision what Hilco Australia is said to have done so as to have been "involved" as an accessory in the conduct of Hilco USA and thus to have been legally responsible for any unconscionable conduct. In the absence of that minimum standard of pleading, Hilco Australia could not have been expected to plead its defence, let alone be required to defend its conduct at trial. (3) The accessorial case brought against Mr Keefe is inadequately pleaded by reason of the failure to identify the specific acts that are said to have made him an accessory. 34 If each of the additional pleading defects identified in the preceding paragraph were, each or together, the only problem, they might have been cured by re-pleading. However, the more fundamental defects detailed before the preceding paragraph mean that there is no utility in permitting such re-pleading to occur.
Conclusion on unconscionability 35 For the reasons set out above, Mr Olson's entire case of unconscionability under the ACL cannot be permitted to proceed. Leave to file the FASOC in a form bearing those allegations cannot be granted.
Profit Interest Claim: "profit interest" or equity share in the sale of the Australian business alleged at [42(c)], [85], [129] and [138] of the FASOC 36 The respondents' written submissions correctly point out that an earlier pleaded profit interest claim was struck out in Olson v Keefe (No 2) at [19]. In his submissions, Mr Olson accepts that that is so, but denies that he is attempting to reintroduce the substance of the same claim in another guise. That denial is, to say the least, curious when regard is had to the proposed pleading as follows (at [42(c)], emphasis added): In addition to the express terms referred to in paragraphs 39 to 41 above, the Employment also included the following relevant implied terms: … (c) Whether by way of implication or construction of the Contract of Employment, Hilco Aust and/or HMR LLC and/or both were required to do all that was necessary to afford to Olson the benefit of his equity share by way of Bonus Compensation and Profits Interest in Hilco's Australian Business. 37 This does not need to be debated further. The profit interest claim was abandoned at the hearing that took place on 14 June 2017, partly for the reason that the claim could only arise in the event of the sale of Hilco's Australian business, which it has never been suggested took place. That claim cannot now be reintroduced, whether as a particular to another claim or otherwise. Leave to make a claim for profits interest in any guise must be refused.
Implied Terms Claim - an implied term in the "Contract of Employment" to facilitate compliance with statutory obligations alleged at [42(b)] and [47-[49] and to act with fidelity to "the bargain" alleged at [42(d)] and [80] of the FASOC 38 The key paragraphs of the FASOC for which leave is sought and opposed are as follows: 42. In addition to the express terms referred to in paragraphs 39 to 41 above, the Employment also included the following relevant implied terms: … (b) Statutory Obligations: As part of the Contract of Employment, and pursuant to the statutory obligations of companies as set out in the Corporations Act. The Respondents would take all steps necessary to ensure that Olson could comply with the obligations imposed upon him as the Managing Director of Hilco Aust, including providing accurate financial information to Olson concerning Hilco Aust. … (d) Fidelity: Both parties to the Contract of Employment would act honestly and with a fidelity to the bargain, as well as not to act dishonestly or to undermine the bargain entered and/or undermine the substance of the contractual benefit bargained for. … 80. This action by HMR LLC was a breach of the implied term of the Contract of Employment to act honestly and with a fidelity to the bargain, as well as not to act dishonestly or to undermine the bargain entered and/or undermine the substance of the contractual benefit bargained for. 39 The same argument applies to the balance of [42(c)], already dealt with at [36]-[37] above as to the profit interest claim. A pleading that a party was required to do all "that was necessary" to afford a contractual benefit is inherently vague and uncertain. 40 The respondents submit that it is unclear how such broad and general terms are to be implied into any contract of employment, with the additional point that the implication advanced as to fidelity may be read as no more than an obligation to adhere to the contract bargain, in which case the implication adds nothing of substance. The respondents note that it is well established that such implications are reluctantly made, as it is ordinarily to be taken that "what parties have actually agreed represents the totality of their willingness to agree": Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 346. The substance of the respondents' objection is that nothing is pleaded to say why such sweeping implications should apply, let alone what the precise terms to be implied might be, rendering the pleading of a defence impossible. Moreover, the respondents submit that such vague terms are not identified at law, are ambiguous and, in any event, would be impossible to enforce. The respondents' other complaints as to the pleadings of breach and remedies do not need to be detailed here, as the implication point must first be overcome. 41 Mr Olson's response to the implication point made by the respondents is either unsatisfactory or unacceptable. Mr Olson relies upon the established principle of necessity for such an implication to take place, citing Commonwealth Bank of Australia v Barker [2014] HCA 32; 253 CLR 169 at [25] and [29], but does not explain why the implications he relies upon, especially as to the obligations under the Corporations Act, are even reasonable, let alone necessary. Mere assertion of necessity will not suffice, especially when attended by such manifest vagueness as to what is sought to be implied. As the respondents point out, and to which Mr Olson provides no satisfactory answer, it has not been explained how statutory obligations are to be implied into Mr Olson's contract of employment. This includes no explanation particularly as to how regulatory obligations are able to be implied into contracts, as opposed to being independent, non-contractual legal obligations. Much more than bald assertion and litigation convenience in advancing a case is required before any term will be implied into a contract, let alone such terms that are broad, vague and impossible to plead to. 42 Nor has it been explained what basis exists, let alone there being a necessity, for implying any obligation to do "all that was necessary to afford" Mr Olson access to contractual benefits going beyond the express contractual terms and entitlements, and thereby obligations, forming part of the contractual bargain. 43 It follows that leave to rely upon these additional implied terms cannot be granted. It is doubtful that the defects identified can easily be rectified by re-pleading. If that is what Mr Olson seeks, he will again need to seek leave to do so by reference to a draft pleading that makes the basis and necessity for any such implication crystal clear.
Financial Reporting Claim - contraventions of the Corporations Act alleged at [51] to [66] of the FASOC based on financial information that was not provided to Mr Olson 44 As it transpired, this aspect of the FASOC is not sought to be advanced as a free-standing claim, but, rather, as a further aspect of, or particulars to, the implied contractual term (pleaded at [42(b)]) to comply with statutory obligations arising under the Corporations Act by providing financial information, which has already been disallowed. As the asserted contraventions are not able to be anchored in any surviving substantive part of the FASOC, they should not form part of the pleaded case. Leave to rely upon those asserted contraventions therefore cannot be granted.
A more global complaint 45 The respondents complain more generally that the FASOC suffers from prolixity, incoherence and a lack of logic. It is submitted that, as a drafting exercise, the FASOC displays no real attempt to develop causes of action by way of a clear progression of assertions of fact and law, making the pleading of a defence difficult, if not impossible, if the proposed terms are maintained. The respondents therefore question the utility of, in effect, continuing to tinker with a document that is fundamentally flawed. There is some real substance in many of those complaints. However, this Court cannot assume the role of supervising the drafting of pleadings. It suffices to say that Mr Olson would be well advised to endeavour to produce a better final pleading so as to avoid the risk of leave being refused to rely upon it or running a case that is ultimately inadequately pleaded, noting the possible costs and outcome consequences that may arise from the matter proceeding to trial in that way.
Conclusion 46 Leave to file the FASOC in the draft form provided to the Court on 25 June 2018 is refused. There does not seem to be any apparent reason why costs should not follow the event, and I will so order. The respondents foreshadowed seeking costs on an indemnity basis. The threshold for such an order is substantial. I will, however, allow an opportunity for such an application to be brought. I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bromwich.
Associate: Dated: 18 December 2018 SCHEDULE OF PARTIES NSD 1498 of 2016 Second Respondent CORY LIPOFF Third Respondent HILCO MERCHANT RESOURCES LLC Fourth Respondent HILCO MERCHANT AUSTRALIA PTY LTD ACN 150 215 875
Olson
Keefe
[2014] HCA 32
(1990) 169 CLR 279
(1956) 99 CLR 362
(1982) 149 CLR 337
(1983) 151 CLR 447
(2010) 241 CLR 118
(2013) 220 FCR 256