Rexam Australia Pty Limited v Optimum Metallising Pty Limited & Anor

Supreme Court of NSW|2002-09-30|Before: Einstein J, Santow J

CITATION : Rexam Australia Pty Limited v Optimum Metallising Pty Limited & Anor [2002] NSWSC 916 FILE NUMBER(S) : SC 50142/02 HEARING DATE(S) : 30/09/02 JUDGMENT DATE : 30 September 2002

Rexam Australia Pty Limited (Plaintiff) PARTIES : Optimum Metallising Pty Limited (First Defendant) Richard Harold Reid (Second Defendant) JUDGMENT OF : Einstein J

COUNSEL : Mr DR Pritchard (Plaintiff) Mr RB Ellicott QC, Mr Stack (Defendants) SOLICITORS : Corrs Chambers Westgarth (Plaintiff) Deacons (Defendants) CATCHWORDS : Practice - Stay of proceedings - Industrial Commission proceedings under S.106 of the Industrial Relations Act - Stay refused - Commercial imperatives involved in particular dispute require Commercial List proceedings to continue - Commercial List in place for expediting hearing and determination of commercial disputes LEGISLATION CITED : Industrial Relations Act 1996 Oshlack v Richmond River Council (1998) 193 CLR 72 CASES CITED : Production Spray Painting & Panel Beating Pty Limited v Newnham (1991) 27 NSWLR 644 RSL Com Personal Communications Pty Ltd v Mobile Tron Pty Ltd [2001] NSWSC 819 The Environmental Group Limited v Croudace (unreported, 7 August 1998, Santow J] DECISION : Defendants notice of motion dismissed with costs.

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

Monday 30 September 2002 ex tempore Revised Wednesday 2 October 2002

50142/02 REXAM AUSTRALIA PTY LIMITED v OPTIMUM METALLISING PTY LIMITED & ANOR JUDGMENT The Motion 1 There is before the court a notice of motion filed by the defendants seeking: · security for costs; · that these proceedings be stayed until the later determination of concurrent proceedings in the Industrial Relations Commission and the provision of security for the defendants costs in these proceedings 2 A chronology prepared by the plaintiff serves as a convenient source of reference to outline the relevant events. The chronology is appended to this Judgment.

The Commercial List proceedings 3 Rexam Australia Pty Ltd ["Rexam"] is the plaintiff in proceedings 50142 of 2002 against Optimum Metallising Pty Ltd ["Optimum"] as first defendant and Mr Richard Harold Reid ["Mr Reid"] as second defendant. 4 The proceedings concern what has been described as a "Business Asset Sale Agreement" made on 11 January 2002 upon the execution of what is described in the summons as "the First Deed" and on 6 March 2002 by what is described as "the Second Deed" between Rexam as seller and Optimum as purchaser, in respect of which Mr Reid is alleged to have been relevantly a guarantor of the obligations of Optimum, also providing a relevant indemnity. The summary given by Mr Flitcroft in his affidavit of 26 September 2002 was that under the first deed on the defined completion date, Rexam sold and Optimum bought as at and from completion, the business as a going concern and the assets for the purchase price on the terms set out in the first deed. 5 Mr Flitcroft then deposes in paragraphs 8, 9 and 10 as follows:

" One of the Conditions Precedent to Completion (being terms defined in the First Deed) included consent by the Lessor of the premises occupied by the Business to the assignment or the novation of the lease. This Condition Precedent was not satisfied by the 31 January 2002 Completion Date.

In March 2002, an investor in or financier of Optimum, European Holdings Pty Limited…and its director, Wayne Muddle…, put forward a proposal for completion of the sale of the Business in circumstances where European Holdings arranged for the Lessor to execute a new Lease, Surrender of Lease and Deed of Release. These arrangements between Optimum and the lessor were recorded in an Escrow Deed dated 4 March 2002. …

Rexam, Reid and Optimum entered into a deed on 6 March 2002 ("Second Deed")... At the same time, Rexam, Optimum and Rexam Asia Limited executed a Deed of Amendment and Novation…Rexam Speciality Food Packaging Limited, Rexam and Optimum also executed a Deed of Amendment and Novation…" 6 The Commercial List summons pleads inter alia: · At all material times up until 6 March 2002, Rexam was the owner of and carried on the business of manufacturing and distributing metallised paper, film and paperboard under the registered business name "Rexam Metallising" at and from premises occupied by Rexam located at 6-8 Garling Road, Kings Park in the State of New South Wales. · At all material times up until 30 June 2002:

(a) the Premises were leased by a company formerly related to Rexam, Envotec Pty Limited (formerly called Rexam Australia Pty Limited) as lessee from S. Murray Pty Limited as lessor (the " Business Premises Lease "); and (b) Rexam was liable to Envotec Pty Limited for the liabilities of Envotec Pty Limited as lessee under the Business Premises Lease. · Rexam agreed to sell and Optimum agreed to buy certain of the assets (the "Assets") of the Business (the "Agreement"). · It was a term of the Agreement that Mr Reid irrevocably and unconditionally: (a) guaranteed to Rexam the due and punctual observance and performance of all the obligations of Optimum under the Agreement; and (b) indemnified Rexam against the liability or loss which arose from and any cost, charges or expenses incurred by Rexam in connection with any default by Optimum in the performance of any obligations or from any such expenses or implied obligations being unenforceable.

· On 6 March 2002: completion of the sale and purchase of the Assets occurred in accordance with the terms of the Agreement; (a) Optimum went into occupation of the Premises; and (b) Optimum commenced to carry on the business of manufacturing and distributing metallised paper, film and paperboard under the business name "Optimet" making use of the Assets. · It was a term of the Agreement that with effect from 6 March 2002, Optimum accepted responsibility for the payment and discharge of all liabilities of Rexam under, inter alia:

(a) contracts, arrangements or commitments entered into by Rexam for the purposes of the business with its customers, from its suppliers or other persons which were not fully performed as at 6 March 2002 ("the Contracts"); and

as and when they fell due for payment. 7 The summons then pleads that from 6 March 2002 liabilities fell due for payment in respect of the contracts and in respect of the Business Premises Lease; that in breach of the agreement, Optimum has failed to pay and discharge the relevant liabilities as and when they fell due for payment; that in consequence upon the breach of the Agreement by Optimum and in circumstances where Rexam remained legally liable to the relevant creditors as between the relevant creditors and Rexam, Rexam has paid and discharged a number of such liabilities both in respect of the contracts and in respect of the Business Premises Lease. 8 Claims are then made that Mr Reid has failed to observe and perform all of the obligations of Optimum under the agreement or to indemnify Rexam pursuant to his obligations to do so. 9 A further and alternative claim based upon alleged unjust enrichment is made upon the basis that Rexam is said to have paid additional liabilities in respect of the business in the mistaken belief that it was liable to pay those liabilities and that Optimum has been unjustly enriched in that circumstance. 10 The orders sought in the summons included the following:

(1) Judgment against the first and second defendants in the sum of $460,450.84…

(2) Further, a declaration that the first defendant is obliged to pay and discharge all liabilities of the plaintiff under contracts, arrangements and commitments entered into by the plaintiff for the purposes of the business of the plaintiff of manufacturing and distributing metallised paper, film and paper board under the registered business name "Rexam Metallising" at and from premises occupied by the plaintiff located at 6-8 Garling Road, Kings Park in the State of New South Wales with customers of the plaintiff, from suppliers of the plaintiff or other persons which were not fully performed as at 6 March 2002 and which have not already been paid and discharged by the plaintiff.

(3) An order that the first defendant pay and discharge the said liabilities.

(4) A declaration that the second defendant is liable to indemnify the plaintiff in the event that the first defendant fails to comply with order 3.

(5) An order that the second defendant pay and discharge the said liabilities in the event that the first plaintiff fails to comply with order 3 or, alternatively, to the extent that the first plaintiff fails to comply with order 3.

(6) Further, judgment in the sum of $449,656.78 as against the first defendant (identified in paragraph 13 of the Contentions). 11 A mediation was apparently held between the parties on 15 July 2002 but the dispute was not resolved. The Industrial Relations Commission proceedings 12 The Summons for Relief in the Industrial Relations Commission of New South Wales in Court Session was filed on 19 August 2002 and seeks relief in respect of the 11 January 2002 and 6 March 2002 Deeds [referred to as "Contracts"]. 13 The relief sought in the summons is pursued under section 106 of the Industrial Relations Act 1996 and seeks various orders including orders for the variation of the subject contract to provide that the respondent pay to Optimum: · amounts due to suppliers in respect of supplies made or to be made under purchase orders placed by Rexam; · amounts claimed by customers of Rexam in respect of product defects prior to 6 March 2002

14 Further orders sought are: · for the variation of the contract to provide that Rexam forthwith account to Optimum for all payments received by it in purported payment of invoices issued by Optimum · an order that neither Mr Reid nor Optimum is obliged in the circumstances which have occurred to pay to Rexam any adjustment or to pay rent or reimburse rent or lease payments in respect of any period before 1 June 2002. 15 An order is sought that to the extent that it does not already provide as sought in Order 1, the contract between the parties under which the applicants performed work in an industry is unfair, harsh, unconscionable and contrary to the public interest. 16 An order is sought that Rexam pay to the applicants such amounts of money in connection with the contract as may appear to be just in the circumstances. The present position in each of the proceedings 17 On 4 September 2001 the plaintiff filed a notice of motion and an affidavit in support in the Industrial Relations Commission proceedings seeking summary disposal of the summons for relief in those proceedings. That notice of motion was on 13 September 2002 fixed to be heard on 28 February 2003. Rexam claims that the Commission lacks jurisdiction to exercise powers pursuant to Part 9 of Chapter 2 of the Industrial Relations Act with respect to the matters agitated in the Industrial Relations Commission proceedings because: · The summons for relief is said to seek to invoke the jurisdiction of the Commission in respect of a contract for a sale and purchase of a business · The contract is said not to be a contract "whereby a person performs work" in an industry in and of New South Wales · The contract is said not to be a contract as defined in Section 105 of the Industrial Relations Act and the Commission is said to be without jurisdiction to deal with the defendants claims in those proceedings 18 The Commercial List proceedings have only been before the court on one occasion, namely on 13 September 2002 when directions were given with respect to the bringing forward for hearing of the motion the subject of this judgment. In consequence no defence to the summons has been filed. 19 Mr Ball, a solicitor who acts on behalf of the plaintiff, has deposed as follows:

"If Rexam is unsuccessful in its Notice of Motion listed before Justice Haylen on 28 February 2003, I believe that it would be highly unlikely that the IRC Proceedings would receive a hearing date before 2004.

(a) It is the usual practice of the Commission not to give ex tempore judgments and therefore to reserve its decision and subsequently publish its reasons. In my experience the written decision would not be handed down any earlier than four weeks from he hearing (that is, 28 March 2003);

(b) Assuming a decision adverse to Rexam, the IRC Proceedings may remain with Justice Haylen for compulsory conciliation or be allocated to another judge of the Commission for conciliation;

(c) Pursuant to section 109(1) and (2) of the IR Act, the Commission must endeavour by all means it considers proper and necessary, to settle a matter by conciliation. When, in the opinion of the Commission, all reasonable attempts to settle the matter by conciliation have been made but have been unsuccessful, the Commission is to determine the matter in accordance with the Act, that is, arbitrate;

(d) Rule 18A of the Industrial Relations Commission Rules ("Rules") governs the procedure to be carried out prior to conciliation. In short, it requires Rexam to file and serve a Reply to the Summons for Relief and then require the Applicants to file a Response to Rexam's Reply. The time provided for filing and serving the Reply and Response are 21 days (18 April 2003) and 14 days (2 May 2003), respectively. At the earliest this time would run from the date of judgment of Justice Haylen if Justice Haylen was to retain and conciliate the matter;

(e) The matter would then, either by Justice Haylen or another judge, be set down for conciliation. Given the business of the Commission this could then take anywhere in the order of three months onwards to obtain a date. At the earliest this would be three months from the anticipated judgment date of Justice Haylen (27 June 2003) again, if Justice Haylen retained the matter;

(f) If conciliation is unsuccessful the matter is administratively allocated to another judge, or duty judge, to case manage prior to hearing. This means that there will be a directions hearing some four to six weeks after the failed conciliation date (25 July 2003) when a timetable will be entered into to progress the matter. Maters before the Commission proceed by way of affidavit and it is likely that the parties (at least Rexam would) would want discovery first. In these circumstances at a minimum the timetable would be as follows: (i) each party serve on the other party the class or classes of documents to be discovered within one week (1 August 2003);

(ii) each party serve on the other party a list of documents in accordance with rule 165(6) of the Rules within 28 days (29 August 2003);

(iii) each party produce the documents in the list within 21 days of service of the list of documents in accordance with rule 165(10) of the Rules (19 September 2003);

(iv) Applicants file and serve any affidavit material upon which they wish to rely within 28 days (17 October 2003);

(v) Rexam file and serve any affidavit in reply upon which it wishes to rely within 28 days (14 November 2003);

(vi) Applicants file and serve any affidavit in reply within 14 days (28 November 2003);

(vii) matter be relisted for further directions hearing (say 5 December 2003). (g) If the timetable had been adhered to the mater may be allocated for hearing at the next directions hearing (5 December 2003) if the judge did not require anything further from the parties. Assuming the matter would take at least two days (and more likely longer) and give the workload and business of the Commission, it is likely that the parties would not receive a hearing date for at least three months from 5 December 2003.

(h) It is the practise of some Commission judges, however, to adopt longer timetables if they prefer further matters to be attended to by the parties…." [paragraph 13 and 14 of Mr Ball's affidavit of 26 September 2002] The Principles 20 There have been a number of decisions generally dealing with the proper exercise of the court's discretion in circumstances where proceedings have been commenced before the Supreme Court and in the Industrial Relations Commission and where applications for a stay come to be before the Supreme Court. 21 There is no issue but that the court has power by reference to Part 13 Rule 5 (1) to stay the Supreme Court proceedings and that the court has general power, derived from its inherent jurisdiction, to stay the proceedings whether permanently or by a temporary stay, as in circumstances where proceedings are pending in another court and it is desirable that those proceedings should proceed to their conclusion. [cf generally the authorities cited in The Environmental Group Limited v Croudace, unreported, Santow J, 7 August 1998] 22 The court may take into account all relevant facts matters and circumstances in exercising its appropriate discretion including the following: · which proceeding was commenced first; · whether the termination of one proceeding is likely to have a material effect on the other; · the public interest; · the undesirability of two courts competing to see which of them determines, the suit first; · considerations of circumstances relating to witnesses; · whether work carried out on pleadings, particulars, discovery, interrogatories and preparation may be wasted; · the undesirability of substantial waste of time and effort if it becomes a common practice to bring actions into courts involving substantially the same issues; · how advanced the proceedings are in each court; · the court's endeavour to strive against permitting multiplicity of proceedings in relation to the same issues; · generally balancing the advantages and disadvantages to each party involved in staying the Supreme Court Proceedings or in refusing to so stay those proceedings. 23 These applications are always difficult. They are particularly difficult because there is no procedural mechanism by which proceedings in the Supreme Court and in the Commission may be amalgamated or cross-vested into the Supreme Court in such a way that, where common issues of law and fact concerning the same parties or some of them arise, they may be dealt with entirely by this Court. The co-relative holds true in that there is no procedure for the Commission to hear all issues. 24 To my mind the salient considerations in relation to the motion presently before the court at least include the following: · that there is at the very least some real question as to whether the jurisdiction of the Industrial Commission has been correctly invoked; · that these are quintessentially commercial proceedings of the type very commonly encountered in this Court and in respect of which it may be truly said that one is dealing with an arm's-length commercial contract which has no clearly apparent connection with the prevention or settlement of industrial disputes or with the regulation of industrial relations. 25 As counsel for Rexam has made plain, the fact that the Industrial Relations Commission proceedings will commence one day before the commencement of these proceedings has no special weight bearing in mind the terms of the anterior communications between the parties whereunder the solicitors for Optimum and Mr Reid had confirmed that they had instructions to accept service in relation to both proceedings for both defendants and had enquired of the plaintiffs solicitors as to whether they had instructions to accept services of cross claims. 26 The matter involves the construction of a commercial contract for the sale of an operating business apparently negotiated at arms length by parties represented by legal advisers. The vendor and purchaser of the business were corporate entities. 27 Importantly in terms of the balance of convenience one does have here the position that the effect of the ongoing current dispute in terms of the relevant positions of the parties is that on the case propounded by Rexam, Optimum has had the benefit of hundreds of thousands of dollars of trade creditors being paid by Rexam instead of by Optimum in accordance with the provisions of the Deed of Sale. The commercial advantage to the defendants by reason of the delay currently in place by the timetable, if the Supreme Court proceedings were stayed until the outcome of the early 2003 determination by the Industrial Relations Commission of the jurisdiction issue, is considerable indeed where Rexam will simply have to continue to pay creditors of the business, which upon its case, constitute a continued discharge of title obligations of Optimum. 28 Likewise presumably the interests of the defendants, at least insofar as the contracts currently on foot regulate the parties legal rights, is to have those contracts properly construed. 29 The Commercial List proceedings have comprised the regular invoking by parties to a commercial contract of the jurisdiction of the Commercial List which operates upon the basis of a speedy determination of commercial proceedings in the interests of the commercial community and of all parties to commercial contracts. Speed is very often of the essence in these proceedings and the Commercial List endeavours to case manage and determine proceedings in its list with the expedition necessary, but always consistent with the interests of justice, in order to ensure that no party to a commercial contract will, if this can be avoided, suffer by dint of delay in the fixing of a final hearing and in the production of a relatively speedy judgment. 30 Returning to the instant proceedings, the commercial imperatives in terms of the way in which each party stands to gain or lose if one takes as a given, the continued stay of the Commercial List proceedings over an extended period of time, comprise as it seems to me, an overwhelming consideration in favour of not justifying the stay. Whilst it is of course possible that prior to the determination of these proceedings, the Industrial Relations Commission proceedings could conceivably lead to orders setting aside or varying the very contract upon which these proceedings are based, in a case such as this that circumstances is only one of the circumstances to be taken into account. [cf the approach taken by Bryson J in RSL Com Personal Communications Pty Ltd v Mobile Tron Pty Ltd [2001] NSWSC 819] 31 The evidence from Mr Ball was that if Rexam is unsuccessful in its motion listed before the Industrial Relations Commission on 28 February 2003 it would be highly unlikely that the Industrial Relations Commission proceedings would receive a hearing date before 2004. 32 Whilst it has been put from the Bar table that applications for expedition before the Industrial Relations Commission may sometimes be successful, it is extremely difficult for the court on the basis of that form of submission to accommodate the balance of convenience in terms of being in a position to having any real adjectival knowledge as to when any such application before the Commission may be successful. I proceed on the basis of the evidence before the Court. 33 No doubt there will be a high contest before the Industrial Relations Commission as to whether or not the contracts the subject of the proceedings fall within the definition of "Contract" for the purpose of part 9 of the Industrial Relations Act raising questions as to the relevant connections, if any, of the current contracts and disputes with performance of work in industry or by reference to whether and if so how and why the contracts have an industrial colour or flavour. Those are matters which must abide the determination of the Industrial Relations Commission [see generally Production Spray Painting & Panel Beating Pty Ltd v Newnham (1991) 27 NSWLR 644 at 656 to 657 per Priestley and Handley JJA]. 34 In all of the circumstances and bearing in mind the, as it seems to me, commercial imperatives, states of the respective lists and the significance of a plaintiff having regularly invoked the jurisdiction of the Commercial List being entitled to have those proceedings brought on for hearing by the usual directions, in my view this is a case in which the application for stay should be refused in the proper exercise of the court's discretion. Costs 35 A question then arises in relation to costs of the motion which is to be dismissed. Mr Ellicott QC has on behalf of the applicants submitted that this is a circumstance in which costs should follow the event there being, so he submits, a public interest involved where one has two sets of proceedings in two different tribunals. 36 To my mind the position which should obtain in relation to the proper order in respect of costs is that the applicants on the motion should be ordered to pay the respondents' costs of the motion, the motion having been regularly brought forward, the decision of the High Court in Oshlack v Richmond River Council (1998) 193 CLR 72 making very plain the imperatives of the losing party paying the successful parties costs in relation to litigation and equally apply, albeit that on this particular interlocutory application difficulties have arisen in respect of the commencement of the Industrial Relations Commission proceedings. 37 The orders of the court are as follows:

I dismiss the defendants' notice of motion filed on 20 September 2002;

I order that the defendants pay the plaintiffs costs of and occasioned by that motion;

The proceedings are to stand over to Friday 4 October 2002 before the list judge for further directions;

I further make orders in terms of paragraphs 1, 2, 3, 4, 5 and 6 of the short minutes of order dealing with matters concerning security for costs, which I initial and date 30 September 2002. I note the terms of paragraphs 7 and 8 of those short minutes of order.

I certify that paragraphs 1 - 37 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on Monday 30 September 2002 ex tempore and revised 2 October 2002

      Susan Piggott
      Associate

Last Modified: 10/09/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

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