Reich v Client Server Professionals of Australia Pty Ltd

APPLICANT Mr J V Murphy of counsel Solicitor: Mr J de Mestre John D Mestre & Co

LEGAL REPRESENTATIVES: RESPONDENT No appearance

RESPONDENTS TO MOTION Mr K D Petrat (in person) Mr D M Jones - no appearance

JUDGMENT:

• 5 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION

THOMAS REICH v CLIENT SERVER PROFESSIONALS OF AUSTRALIA PTY LIMITED (ADMINISTRATOR APPOINTED) (No 2)

Application for orders under s 106 of the Industrial Relations Act 1996 re unfair contract.

1 The Court has before it a notice of motion by the applicant, Thomas Reich, for orders to the effect that Klaus Dieter Petrat and David Michael Jones be joined to these proceedings as respondents. The application is opposed by Mr Petrat; Mr Jones has not entered an appearance. 2 The notice of motion arises in the special and particular circumstances of this case. The substantive proceedings were before Maidment J for orders under s 106 of the Industrial Relations Act 1996 in respect of an alleged unfair contract of employment and the sole respondent in those proceedings was Client Server Professionals of Australia Pty Limited. The persons sought to be joined to the proceedings, Mr Petrat and Mr Jones, were the directors and shareholders of the corporate respondent with Mr Petrat holding a 65 per cent interest and Mr Jones 35 per cent. Nevertheless, it is clear from the evidence that Mr Petrat and Mr Jones, as the only directors and shareholders, were the principals of the corporate entity. They managed, conducted and controlled the corporate entity, Mr Petrat being the Managing Director, and they were the persons directly involved in instructing solicitors and counsel to act on behalf of the corporate entity in the proceedings before Maidment J. In addition, Mr Petrat and Mr Jones gave evidence in those proceedings, both by affidavits and orally, for the corporate entity. 3 As it happened, they were successful before his Honour in defending the claims made against the corporate entity. However, the applicant appealed to a Full Bench of the Court and that appeal was recently upheld ([2000] NSWIRComm 143) and his Honour's judgment was quashed. The matter was remitted to me sitting alone to hear and determine the applicant's claims on their merits in accordance with the views expressed by the Full Bench. 4 Shortly before the appeal proceedings were heard, however, the corporate respondent was placed under administration and that led to an application by the applicant to join Mr Petrat and Mr Jones personally as parties to the appeal proceedings; the Full Bench dismissed that application, essentially, it would seem, because they were not respondents to the challenged first instance proceedings. It was thereupon foreshadowed that if the applicant was able to proceed with his claim after a successful appeal then orders would be sought to join the two natural persons as respondents to the substantive proceedings. And so it comes to be that that is the application presently before me. 5 Counsel for the applicant has indicated that if joinder be obtained then the applicant would seek leave to amend the summons under s 106 to obtain orders against both Mr Petrat and Mr Jones for the payment of money by them to the applicant pursuant to s 106(5) of the Industrial Relations Act on obtaining an order under s 106(1) avoiding or varying the impugned contract. Counsel conceded that before that could occur the process of conciliation under s 109 would be necessary. 6 It is not unusual in s 106 applications, where a contract is challenged, for persons not strictly parties to the contract to be made respondents so that they may be heard as to claims against them for the payment of money on the avoidance or variation of the subject contract once the grounds of unfairness had been made out. So much is clear from the very many occasions occurring in this Court on a regular basis, and as dealt with by the High Court in Brown v Rezitis (1970) 127 CLR 157; that is effectively the position here: see also Ace Business Brokers Pty Ltd v Phillips-Treby [2000] NSWIRComm 163. 7 I suppose it may be said that in a sense it is surprising Mr Petrat and Mr Jones were not made respondents in the initial proceedings before Maidment J against the corporate entity. However, as counsel for the applicant explained, it was not considered there were any difficulties and the problem only arose once the corporate entity was placed under administration. I do not think there is any doubt, on the evidence, that Mr Petrat and Mr Jones were the principals of the corporate entity; they were the persons who managed and controlled its affairs; they were the persons who were jointly concerned with offering the applicant employment and setting the terms and conditions of that employment; they were the persons who controlled the performance of the employment; and, significantly for present purposes, they were the persons involved in the discussions with the applicant which ultimately led to these proceedings, namely, the conduct of the respondent in reducing the applicant's remuneration under his contract of employment and as to which he made objection. That ultimate reduction in salary was a central feature of the proceedings before Maidment J and of the proceedings before the Full Bench on appeal. 8 Although it was clear from the evidence that both Mr Petrat and Mr Jones were closely associated with the central feature in this case, Mr Petrat opposed his joinder as a respondent. I observe that similar action has not been taken by Mr Jones so that, basically, as to him the case is made out by the applicant for his joinder; in my view, the evidence in that respect was compelling. 9 So far as Mr Petrat is concerned, he accepted that he personally acted on behalf of the corporate entity in relation to the various relevant transactions and events which occurred. However, he opposed his joinder on the basis that he acted as managing director at all times appropriately, diligently and honestly. So, he submitted, any liability should be limited to the corporate entity. In my view, on the evidence, the case for Mr Petrat's joinder as a respondent was also compelling. There is no doubt that he, like Mr Jones, was a controlling, if not the controlling, person as to the events which occurred while he was the managing director, principal and shareholder of the corporate entity. The fact he may have acted appropriately, diligently and honestly at all times, as to which I make no findings at this time, is a matter which may well arise for consideration at the appropriate time when the substantive proceedings under s 106 are dealt with on the merits. At this particular time, however, the question, indeed the only question, is whether Mr Petrat and Mr Jones should be joined as respondents. 10 I have concluded that I see no reason why they should not be joined. Indeed, on the case presented, I accept the submission put by the applicant's counsel that both Mr Petrat and Mr Jones were the natural persons who were the moving force to what transpired and were the persons with the controlling and managing interest in the conduct of the corporate respondent. They should properly be respondents to the present proceedings. 11 Accordingly, I make the following orders:

1. Klaus Dieter Petrat, of Unit 32 Meadow Peak, Palm Meadows Drive, Carrara in the State of Queensland, be joined as the second respondent to these proceedings. 2. David Michael Jones, of Unit 10, 29 Australia Avenue, Broadbeach in the State of Queensland, be joined as the third respondent to these proceedings. 3. The title of the proceedings and all process associated therewith is amended to show the names of the said persons as the second and third respondents respectively and the present respondent, Client Server Professionals of Australia Pty Limited (Administrator Appointed), to be shown as the first respondent.

4. The costs of the motion to be costs in the cause.

5. Leave is granted to the applicant to file and serve by 4.00 pm on Friday 6 October 2000 an amended summons in the terms foreshadowed and to be made returnable before the Court for conciliation on a date to be advised.

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