Qureshi v De Haas

LEGISLATION CITED: Industrial Relations Act 1996

Adams and anor v Noakes and anor [2005] NSWIRComm 170 Broken Hill Chamber of Commerce and others v Construction, Forestry, Mining and Energy Union (New South Wales Branch) and others [2002] NSWIRComm 244; (2002) 118 IR 183 CASES CITED: Campbells Cash and Carry Pty Limited v National Union of Workers, New South Wales Branch [2001] NSWIRComm 79; (2001) 104 IR 400 De Haas v Chloer Pty Ltd, in liq. (formerly Business Catalyst International Pty Ltd) and Another [2008] NSWIRComm 227 Surfing Hardware International Holdings Pty Ltd v McCausland [2006] NSWIRComm 276; (2006) 156 IR 352 Transport Industry - Waste Collection and Recycling (State) Award, Re [2000] NSWIRComm 236; (2000) 102 IR 192

APPELLANT: Mr F Austin of counsel

LEGAL REPRESENTATIVES: RESPONDENT: Mr A W G Metcalfe of counsel Solicitor: Ms E J Magill Barwick Legal

Application by Zia Qureshi for leave to appeal and appeal against a judgment of Justice Backman given on 2 February 2009 in Matter No. IRC 5872 of 2003

1 On 20 February 2009, Mr Zia Qureshi ("the appellant") filed an application for leave to appeal and to appeal the decision and orders of Backman J in De Haas v Chloer Pty Ltd, in liq. (formerly Business Catalyst International Pty Ltd) and Another [2008] NSWIRComm 227. The decision was given on 28 November 2008 and the final orders were made on 2 February 2009. At the directions hearing on 2 March 2009, counsel for the appellant, Mr F Austin, requested and was granted an interim stay whilst the parties conferred over the terms of a proposed stay order. The parties were unable to come to an agreement on the terms and the appellant filed a notice of motion seeking a stay of her Honour's orders on the condition that $30,000 be deposited into a controlled monies account. The appellant, during the course of the hearing of the motion on 1 April 2009, amended this amount to $55,000. The respondent opposed the granting of the stay. This judgment deals with the stay application.

2 The judgment at first instance concerned a claim by Mr Eric De Haas ("the respondent") under s 106 of the Industrial Relations Act 1996, that the contract of employment between the respondent and the appellant was unfair, harsh, unconscionable or against the public interest. The factual background of this matter was complex and involved the employment contract between the two parties and a collateral arrangement in the form of an "Employee Participation Trust Scheme". The principal grounds in support of the respondent's application for relief were summarised by Backman J at [1] of her judgment: [1] The present proceedings are brought by the applicant under s 106 of the Industrial Relations Act 1996. In the amended summons for relief the applicant seeks declarations and orders that his contract of employment was unfair, harsh, unconscionable or against the public interest. The principle (sic) grounds relied upon in support of the claim are the failure of the first respondent to provide for reasonable notice or payment in lieu of notice upon termination, and the respondents' failure to afford the applicant procedural fairness, natural justice and substantive fairness in relation to the circumstances of the applicant's termination of employment. Declarations are also sought that the contract between the applicant and the first respondent contained a related condition or collateral arrangement, namely the BCI Employee Participation Trust Scheme (the Scheme) and that in relation to this Scheme it was unfair because the applicant was unfairly induced by representations made by the respondents to participate in the Scheme. The Scheme was also alleged to be unfair in relation to its operative terms at the time of the applicant's termination of employment. Declarations are also sought by the applicant that his contract of employment "became unfair" because of a variation said to have occurred between the period 9 December 2002 and 28 February 2003 whereby the applicant's salary was reduced by 30 per cent. Monetary orders are sought in relation to each head of unfairness. In addition the applicant seeks interest and costs.

3 The respondent relied on five grounds to contend that the contract and/or the collateral arrangement was or became unfair. Backman J, however, found only three of those grounds established. First, her Honour found that there was insufficient evidence to justify the respondent's dismissal based on poor work performance, and that on the evidence there was no proper basis for the view that the respondent had breached any duty of confidentiality. As the respondent had been terminated whilst on leave, without any prior warning or counselling and without the opportunity to respond to the allegations (which her Honour found unsubstantiated), the contract was unfair or became unfair as it permitted the appellant to terminate the respondent's employment without affording him procedural fairness. 4 Secondly, Backman J found that the payment in lieu of notice was unfair, given the circumstances of the respondent's termination and the potentially serious consequences that the termination could have had on the respondent given his seniority, experience and age. 5 Thirdly, her Honour found that the terms of the collateral arrangement, namely the BCI Employee Participation Trust Scheme ("the Scheme") was unfair. At [132]-[133] her Honour said: [132] The issue for determination is whether the Scheme as it was presented to the applicant as an eligible unit holder and as it emerged in its final form in the executed Trust deed was unfair. In my view, the Scheme in its terms manifested unfairness because it contained no express provisions for the redemption of units in the event of a participant's termination of employment except in the event of retirement. The only option open to a participant whose employment was terminated was to formally apply for a redemption of units to the trustee. In these circumstances, the participant was utterly dependent upon a favourable exercise of discretion by the trustee. In circumstances such as those encountered by the applicant, where his employment was terminated without cause, the Scheme offered inadequate protection to him as a participant relying on a favourable exercise of discretion for the redemption of his units. It cannot be ignored, given the facts, that the same person who engineered the applicant's termination, that is, the second respondent, was also the sole director of both the trustee and manager of the Trust. The second respondent was of the firm belief that the actions of the applicant in copying his email of 29 April 2003 to other Scheme participants constituted a breach of his duty of confidence which warranted summary dismissal. The second respondent's evidence was that upon receipt of the email he telephoned the applicant and informed him, "you are finished with the firm and someone will be in touch to organise the termination arrangements". Allegations of poor work performance advanced by the second respondent as a justification for the applicant's termination were without substance. Nor, as I have found, was the allegation that the applicant breached a duty of confidence, sustainable on the evidence. Given these facts, it may be reasonably inferred that had the applicant formally applied for a redemption of his units, his application would have been rejected in the exercise of discretion. These facts serve to illustrate that the Scheme lacked reasonable and proper, protective provisions to allow unit holders to redeem their units. The absence of such protective provisions, manifested unfairness in the Scheme's operation: see for example GIO Australia Limited and Another v O'Donnell (1996) 70 IR 1 at 24. [133] The same facts, in my view, reveal also that the Scheme became unfair by reason of the second respondent's conduct in terminating the applicant's employment without proper cause. The applicant's only opportunity to redeem his units, and recoup his loss was to formally apply to the second respondent as sole director, of both the trustee and manager. It was then up to the second respondent in his capacity as trustee or manager, to decide whether to exercise a discretion under the Trust and grant the request. Given the circumstances of the applicant's termination, and the dissatisfaction expressed by the second respondent towards the applicant, coupled with his refusal to see him because he "was not willing to waste any more time" on any objective view, the applicant was in a difficult position with regard to the success of an application to redeem his units. These circumstances combine in my view to facilitate the finding that the Trust operated unfairly against the applicant at the time of his termination. The consequence for the applicant was that he assumed liability for outstanding payments on the loan, as well as the interest payments, and lost any entitlements to the value of his units in the Scheme. 6 Backman J rejected the claim that the Scheme was unfair because the respondent had been unfairly induced into it as a result of representations made by the appellant. Further, her Honour found that the salary reduction of 30 per cent for the period 9 December 2002 and 28 February 2003 was not unfair as "the evidence, which was unchallenged, does sustain a finding of an economic downturn which impacted adversely on the [appellant's] business and provided a justification for the salary reductions." 7 Her Honour indicated that she would make the following orders: [179] Consequent upon the findings of unfairness which I have made I have assessed a reasonable payment in lieu of notice to the applicant upon termination of his contract of employment at an amount equivalent to five months salary. The period of five months takes into account the payment of four weeks salary made to the applicant as part of his termination payment and the fact that the applicant was successful in obtaining employment on 1 September 2003 at a salary level commensurate to the salary he was earning while employed by the first respondent at the date of the termination of the contract of employment. The orders that will be made with regard to this claim, therefore, will be for a payment to the applicant representing three months gross salary at the rate paid to him at the time of termination of the contract of employment. With regard to the Scheme I have assessed compensation payable to the applicant at $25,739.00. This amount takes into account the applicant's payment of the loan principal following termination of the contract of employment in an amount of $20,000.00 and interest payments made on the loan following the termination of his contract of employment in an amount of $5,739.00. The second respondent therefore is to pay the applicant an amount equivalent to three months gross salary to be calculated on the applicant's gross salary payable as at the date of the termination of the contract of employment. In addition the second respondent is to pay the applicant an amount of $25,739.00. Interest should also be paid by the second respondent on both amounts in accordance with Schedule 5 of the Uniform Civil Procedure Rules 2005. Interest shall be payable from the date of the filing in Court of the amended summons for relief which was 23 August 2007. The second respondent shall pay the applicant's costs of the proceedings in an amount as agreed or assessed. [180] The parties are directed to file agreed minutes of the orders reflecting this judgment and the declarations sought in the amended summons within 14 days of today's date.

8 On 20 February 2009, following the final orders being made in Chambers, the appellant filed an application for leave to appeal and appeal and requested a stay of her Honour's decision and orders. The main bases of the appeal included: · that her Honour had failed to properly engage and address the appellant's case theory, in particular in respect to the appellant's contention that the respondent breached his duty of good faith, mutual trust, confidence and fidelity; · that her Honour erred in law in an order for the payment of an amount representing three months salary; · that her Honour failed to give adequate reasons for the finding that the unit trust scheme was unfair and the consequential order for payment of money; and · that her Honour erred in law in failing to allow the appellant to address the court in relation to costs. 9 Following the directions hearing, and the failure of the parties to come to an agreement over the terms of the stay order, the appellant filed a notice of motion, which was later amended. The motion sought the following orders:

1. An order that the decision of Her Honour Justice Backman on 2 February 2009 be stayed on the condition the appellant deposits the sum of $55,000 in to a controlled monies account in the name of Barwick Legal by way of an initial payment of $15,000 within 14 days of this order and thereafter monthly payments of $10,000.

2. An order that the costs of this motion be costs in the cause. 10 The motion was heard on 1 April 2009 with Mr Austin of counsel, appearing for the appellant. The appellant sought a stay on the terms of the amended motion. Mr Austin accepted that in seeking the stay application, the appellant had to convince the Court of the prima facie merits of the appeal, which he maintained the appellant had done. Mr Austin submitted that: Mr Qureshi is volunteering to pay the judgment amount and he wishes the court to take into account the merits of the appeal and his situation and I submit that is a fair proposition to put before the court and in the interests of justice and using this court's discretion, your Honour will award a stay on the provision that he complies with the payment schedule.

11 Mr A Metcalfe of counsel for the respondent, submitted that no order staying the decision and orders of Backman J should be made. In support of this submission the respondent relied on the decision of Wright J, President, in Re Transport Industry - Waste Collection and Recycling (State) Award [2000] NSWIRComm 236; (2000) 102 IR 192. At [18] - [19] of that decision, his Honour set out the principles governing the grant of a stay pending the hearing of an appeal:

[18] The principles relevant to the grant of a stay pending the hearing of an appeal against a decision of a member of the Commission pursuant to s 190 of the Act are now well settled: see, for example, the judgment of the Court of Appeal in Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685, as adopted by the Industrial Commission of New South Wales in Court Session in Water Industry Salaried Officers' Union v Professional Officers' Association (NSW) (1987) 22 IR 178. See also the recent judgment in Green v Brown (2000)102 IR 30. It is clear that special circumstances are not required for the grant of a stay, it being sufficient that the applicant demonstrates a reason or an appropriate case to warrant the relevant exercise of discretion. Although that very limited criterion has been established here, nevertheless, as the authorities make clear, that consideration may be merely the initial consideration as to the grant of the stay. In other words, should that limited criterion or test not be satisfied then the stay application fails in limine. However, should it be satisfied then there may very well be other factors which require consideration. These considerations are helpfully set out in the detailed discussion of the principles set out in the judgment of the Court of Appeal in the first case referred to (at 694-695) in the following terms: There are other principles to be kept in mind. The onus is upon the applicant to demonstrate a proper basis for a stay that will be fair to all parties: Trlin v Marac Finance Australia Ltd (unreported, Court of Appeal, 4 March 1985). The mere filing of an appeal will not, of itself, provide a reason or demonstrate an appropriate case, nor will it discharge the onus which the applicant bears: see Supreme Court Rules, Pt 51, r 10; Waller v Todorovic (unreported, Court of Appeal, 21 December 1979). The Court has a discretion whether or not to grant the stay and, if so, as to the terms that would be fair. In the exercise of its discretion, the Court will weigh considerations such as the balance of convenience and the competing rights of the parties before it: Attorney-General v Emerson (1889) 24 QBD 56. Where there is a risk that if a stay is granted, the assets of the applicant will be disposed of, the court may, in the exercise of its discretion, refuse to grant a stay: cf Clyne v Deputy Commissioner of Taxation (1982) 56 ALJR 857. Sometimes as a condition of the grant of a stay, where funds are available, a court will impose on the applicant the payment of the whole, or part, to the judgment creditor: Andrews v John Fairfax & Sons Ltd [1979] 2 NSWLR 184 ... Two further principles can be mentioned. The first is that where there is a risk that the appeal will prove abortive if the appellant succeeds and a stay is not granted, courts will normally exercise their discretion in favour of granting a stay ... Thus, where it is apparent that unless a stay is granted an appeal will be rendered nugatory, this will be a substantial factor in favour of the grant of a stay ... Secondly, although courts approaching applications for a stay will not generally speculate about the appellant's prospects of success, given that argument concerning the substance of the appeal is typically and necessarily attenuated, this does not prevent them considering the specific terms of the stay that will be appropriate fairly to adjust the interest of the parties, from making some preliminary assessment about whether the appellant has an arguable case. This consideration is protective of the position of a judgment creditor where it may be plain that an appeal, which does not require leave, has been lodged without any real prospect of success and simply in the hope of gaining a respite against immediate execution upon the judgment. [19] I consider that the following considerations derived from the discussion in the Cambridge Credit case are those relevant to apply in this matter: (1) The mere filing of an appeal will not of itself provide a reason or demonstrate an appropriate case nor will it discharge the onus which the applicant bears.

(2) A court has an appropriate discretion whether or not to grant the stay and as to the terms that would be fair if a stay be granted.

(3) The onus is upon the applicant for a stay to demonstrate a proper basis for a stay that will be fair to all the parties.

(4) In the exercise of its discretion all considerations including the balance of convenience and the competing rights of the parties need to be considered and weighed.

(5) Where there is a risk that the appeal will prove abortive or nugatory if the stay is not granted then the normal exercise of discretion will result in the grant of a stay.

(6) Although, generally speaking, it is inappropriate in relation to an application for a stay to speculate as to the appellant's prospects of success, this does not prevent a court, in the context of considering the specific terms of the stay that will appropriately and fairly adjust the interests of the parties, from making a preliminary assessment as to whether the appellant has an arguable case. 12 Mr Metcalfe submitted that the appellant had not "crossed the initial criteria" for the making of a stay order: ... He has not established, in my respectful submission, to the satisfaction of the Commission why there should be a grant of stay. As I said in my initial remarks, this is not a case where the orders of the trial Judge were to the effect of putting back into the employment of an employer someone who had allegedly misconducted themselves or who would cause industrial havoc if that were to be ordered. This is not a case, as was the case in this judgment and in other cases, where there was a common rule award and a variation to the rates of pay which would raise great difficulties with respect to the ability of employers to recoup amounts paid if the order was not stayed. This is a case, as your Honour said, about money. It is now a judgment of the Commission. That judgment has been taken out in the Registry and has been registered as a judgment debt in the District Court. It is no different from judgments that relate to money in any other court.

The process by which it may be a retrospective proposal of the contract of employment is moot. The relevant point is it is a judgment debt. There has been no advancement by the appellant as to why they would be prejudiced in a relevant sense other than they may have difficulty in meeting the judgment debt by the payment of that money in compliance with the orders. That is relevant to the initial test to be satisfied.

It is also relevant to the principles that his Honour Justice Wright enunciated at the bottom of p 199 to p 200 in para 19 of his judgment. In particular the terms that would be changed if the stay was granted. In my respectful submission, notwithstanding what my learned friend has said about the costs argument - an order that would leave no money in a controlled moneys account for the applicant's costs at first instance would not be fair to the applicant and in my respectful submission an order that would leave no more than half of the solicitor's client costs in a controlled moneys account would be fair. 13 In the event the Court was minded to order a stay, Mr Metcalfe proposed alternative terms: We are simply saying, at least an alternative position that your Honour would understand from my solicitor's affidavit - is that we wish to secure at least a sum commensurate with the fruits of the victory, bearing in mind that our solicitor's client costs as at the end of the hearing were $110,000. When you add that on to the judgment debt plus the accumulation of interest - we do not seek the entirety of that amount. We barely seek more than half that amount in toto [sic], which in our respectful submission is appropriate in the circumstances and, moreover, we want that to be done in a timely fashion, for obvious reasons. 14 The Court understands the judgment amount is $55,739.00, plus $7,264.34 in interest. The respondent's claimed costs (yet to be assessed) amount to $121,527.70. In total that is an amount of $184,531.04.

15 The power to stay decisions pending determination of an appeal is found in s 190 of the Act: If an appeal is made under this Part to a Full Bench of the Commission, the Full Bench or the Commission constituted by a Presidential Member may, on such terms as it considers appropriate, order that the decision concerned be wholly or partly stayed pending determination of the appeal or until further order of the Full Bench or Commission.

16 The relevant principles governing this discretionary power were set out by Wright J, President in Re Transport Industry - Waste Collection and Recycling (State) Award, and have been adopted in subsequent decisions of this jurisdiction: see Adams and anor v Noakes and anor [2005] NSWIRComm 170, Surfing Hardware International Holdings Pty Ltd v McCausland [2006] NSWIRComm 276; (2006) 156 IR 352, Broken Hill Chamber of Commerce and others v Construction, Forestry, Mining and Energy Union (New South Wales Branch) and others [2002] NSWIRComm 244; (2002) 118 IR 183. 17 It is clear that the Court in deciding whether to exercise its discretion and order a stay may have regard, in a preliminary way, to the appellant's prospects of success on appeal: Re Transport Industry - Waste Collection and Recycling (State) Award; Campbells Cash and Carry Pty Limited v National Union of Workers, New South Wales Branch [2001] NSWIRComm 79; (2001) 104 IR 400. In Campbells Cash and Carry, Walton J, Vice-President stated at [63]-[65]:

[63] The filing of an appeal per se does not provide a sufficient basis for the grant of a stay. The determination of whether a stay will be granted involves an exercise of the discretion of the Commission. Having regard to the discussion of the foregoing principles, the question is whether the appellant has demonstrated a proper basis for the grant of an application for a stay. In other words, the question is whether the applicant for a stay has demonstrated an adequate reason for, or an appropriate case to warrant, the exercise of the Commission's discretion to grant a stay of the decision at first instance.

[64] In the exercise of that discretion, the Commission will have regard to a variety of considerations, including the balance of convenience and the competing rights of the parties. In this matter, it is also appropriate to have regard, in a preliminary way, to the appellant's prospects of success. Both counsel argued the prospects of success of the appeal in relation to the application for a stay. The issues in the appeal proper are of narrow compass. It would also appear necessary to consider the prospects of success in order to properly assess the balance of convenience.

[65] The assessment of the Commission as to the prospects for success of the appeal must be necessarily preliminary. The Commission has not heard the appellant upon the question of leave to appeal and some grounds of the appeal were not fully developed. In these circumstances, I do not propose to come to any view as to the question of leave and make a purely preliminary assessment as to the strength of the appellant's case on the appeal.

18 In the present proceedings, the appellant's central contention was that as the appeal was, prima facie, meritorious it was appropriate for the Court to exercise its jurisdiction and order the stay. In support of this contention, Mr Austin provided extensive written submissions setting out the appellant's case on appeal. The submissions expanded on the grounds of appeal as set out above and challenged a number of findings within her Honour's judgment. From a preliminary viewpoint, having read these submissions and having heard from the parties, I am of the opinion that it is not a matter where there are no prospects of success on appeal; however, I would not rate those prospects as highly as Mr Austin asserts I should. Further, whilst certain grounds of the appeal such as the issue of mitigation and whether the parties should have been heard on costs may have some substance, I am not convinced that her Honour's decision and orders would necessarily be overturned or significantly altered. 19 I consider that it is appropriate in the circumstances of this case and on the balance of convenience to order the stay, but on terms that require the appellant to deposit $100,000 into a controlled account according to the timetable set out in the orders. Orders

20 The Court makes the following orders: (1) The decision and orders of Backman J given on 28 November 2008 and 2 February 2009 in Matter No IRC 5872 of 2003 be stayed pending the determination of the appeal; (2) That the appellant deposits the sum of $100,000 into a controlled monies account in the name of Barwick Legal by way of an initial payment of $20,000 within 14 days of this order and thereafter monthly payments of $20,000; (3) The costs of this motion are reserved.

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