Sharbine v Harkham & Anor

CATCHWORDS: Stay of proceedings - Appeal - Application for leave to appeal and appeal - Stay application - Stay sought pending hearing of the appeal - Order for security of costs - Assumption in exercise of discretion by the Court at first instance - Respondents would not proceed with cross application - Respondents' undertaking not to proceed for two months - No basis for stay at present time - If respondents seek to have cross claim listed for hearing stay will issue

LEGISLATION CITED: Industrial Relations Act 1996

CASES CITED: Sharbine v Harkham and another [2007] NSWIRComm 177 Surfing Hardware International Holdings v William McCausland (2006) 156 IR 352

APPELLANT Mr P C Moorhouse of counsel Solicitor: Mr B Leitch Leitch Hasson Dent LEGAL REPRESENTATIVES: RESPONDENT Mr M J Moir of counsel Solicitor: Mr A Kalmath Kalmath Lawyers

Application by Samuel Sharbine for leave to appeal and appeal against a judgment and orders of Justice Backman given on 17 July 2007 in matter No IRC 7035 of 2003

1 On 7 August 2007, Samuel Sharbine lodged an application for leave to appeal and, if granted, appeal against a decision of her Honour Justice Backman given on 17 July 2007: Sharbine v Harkham and another [2007] NSWIRComm 177. 2 Her Honour, at [40] made the following orders: 1. The applicant provide security for costs to the respondents in the amount of $30,000 by 10am Monday 23 July, 2007.

2. The proceedings are stayed unless otherwise ordered by the Court in the event security for costs in the amount of $30,000 is not paid by 10am Monday 23 July, 2007.

3. Costs are reserved. Background 3 Mr Sharbine, the applicant in matter No IRC 7035 of 2003, claims that the arrangement with the respondents, Benjamin Harkham (first respondent) and J Hillyard Pty Ltd (formerly Aussie Sweets Pty Ltd, formerly Aussie Sweets & Chocolates Pty Limited), (the second respondent), or alternatively, the contract of employment with the second respondent, under which the applicant performed work in the confection manufacturing industry was unfair as defined in s 105 of the Industrial Relations Act 1996 ("the Act"). 4 On the day that the respondents filed their reply to the applicant's summons, they also filed a summons for relief nominating the applicant as respondent in those proceedings (matter No IRC 1893 of 2004). On 21 May 2004, Marks J, by consent, ordered that both sets of proceedings be consolidated and heard together and that at the trial of each proceedings, evidence suggesting one proceedings be evidence in the other proceedings. Both proceedings were set down for hearing for five days to commence on Monday 23 July 2007. 5 Shortly stated, the matters of fact relied upon by the applicant in matter No IRC 7035 of 2003 include:

The matters of fact relied upon in IRC 7035 of 2003 include: · the summary termination of the applicant's employment shortly prior to two years into the employment, despite an express term in the written contract providing for a fixed term of 3 years with no provision for early termination (B6 and B13 of the Amended Summons); · the fact that the first respondent provided all funds to purchase the confectionary manufacturing business and to establish the second respondent as the owner and operator of the business (B4 of the Amended Summons); · the fact that the applicant took no part in the control of the second respondent company, and the first respondent retained to himself the right to make decisions regarding the confectionary manufacturing business and the right to control the finances of the business (B10 of the Amended Summons; denied by the respondents); and · the fact that the second respondent has not traded since it ceased operating the business and holds no assets (B15 of the Amended Summons; admitted by the respondents). 6 In the summons filed in matter No IRC 1893 of 2004, Benjamin Harkham and J Hillyard Pty Ltd, assert that: (a) the arrangement between the parties under which work was performed in the confectionary manufacturing industry was (or should be treated by the Court as) a partnership arrangement, and that orders should be made so that the applicant holds, and is required to contribute on the basis of, a 25% ownership share in the partnership (see Os. 1 - 6 of the Summons); and (b) the contract of employment between the applicant and the second respondent was unfair and should be varied by, inter alia, deleting the clause of the contracting providing for a term of three years and inserting a clause requiring the applicant to compensate the second respondent for any loss it suffers as a result of his conduct or as a result of losing customers (see Os. 8 - 10 of the Summons). 7 The factual matters relied upon in matter No IRC 1893 of 2004 include: · the fact that the applicant and first respondent entered into a partnership arrangement under which they would invest in an any business equally, and the applicant would provide 50% of the monies required to buy the business (B8 of the Summons; the applicant denies that he ever entered into a partnership arrangement or that he ever agreed to contribute 50% of the monies); · the applicant subsequently advised the first respondent that he could not afford to fund 50% of the business, and it was then agreed that the applicant would fund 25% of the business and that he would subsequently purchase a further 10% of the business (B17 of the Summons; denied by the applicant); · subsequently the applicant informed the first respondent that he could not afford to fund 25% of the business, and it was then agreed that the applicant would pay off his share of the business out of the profits of the business (B22 of the Summons; denied by the applicant save to the extent that it is consistent with a term of his employment contract which provided for a 2% profit share bonus to be applied to the acquisition of 25% of the shares in the second respondent); · the applicant provided the first respondent with the employment contract, they discussed only some parts of that contract and the first respondent then signed the contract without further reading the contract (B23 and B24 of the Summons; the applicant provides a different version of these circumstances); · the applicant did not manage the business properly or perform his duties diligently, and caused the business to lose customers (B28 and B29 of the Summons; denied by the applicant); and · the sales of the business dropped, the business lost customers, and the business was ultimately sold at a loss (see B32, B33, B45 and B47 of the Summons; largely not admitted by the applicant). 8 The unfairness alleged in matter No IRC 1893 of 2004 includes: (a) in relation to the claim that the arrangement was (or should be treated by the Court as) a partnership arrangement, that it allowed the applicant to have a share in the business without making a financial contribution, and that it permitted the applicant to avoid his financial contributions under the business (B49 of the Summons); (b) in relation to the claim that the contract of employment between the applicant and the second respondent was unfair, (i) that it did not allow the second respondent to terminate the employment of the applicant without the payment of financial compensation in circumstances where the applicant was not performing his duties, and (ii) that it allowed the applicant to damage the financial viability of the second respondent and to negligently or deliberately cause the second respondent loss (B50 of the Summons). 9 Mr P C Moorhouse of counsel, who appeared for the appellant, tendered the initiating summons and reply in each matter to demonstrate that there is a very substantial overlap between the two sets of proceedings. For the purpose of determining this application, I am prepared to accept that this is the case and that the two sets of proceedings clearly arise out of the same circumstances. 10 On 3 July 2007, the respondents filed a notice of motion seeking an order that Mr Sharbine provide security for the respondents' costs by 18 July 2007. 11 Her Honour set out the relevant principles in respect of applications for security of costs and then at [6] examined the following factors, by reference to the evidence and material relied upon in the respondents' application and the parties submissions: The parties have raised the following factors for consideration on the application: (i) whether the applicant is unable to meet a costs order;

(ii) the merits of the applicant's case in the substantive proceedings;

(iii) the weight to be attributed to the fact that the applicant resides outside Australia in Dubai, United Arab Emirates (U.A.E.) and has no assets within Australia;

(iv) whether there is a correlation or relationship between the applicant's current financial situation and the subject matter of the s 106 application;

(v) whether the applicant would be stifled or "shut out" from pursuing his s 106 claim if the respondents' application was granted;

(vi) the proximity of the respondents' application to the date of the hearing of the substantive proceedings;

(vii) whether if the respondents' application is granted and the applicant is unable to pay the costs order he will be prejudiced on the ground that the respondents' claim will still proceed;

(viii) the quantum of costs if the order providing for security for costs is granted. 12 In considering a factor against the granting of the application, her Honour observed at [38] that the applicant had an arguable case, stating: ... At this stage I am unable, based on the material before me (which consists solely of the originating processes in both s 106 applications) to make a strong assessment. The applicant relied heavily in the present application on three factors, namely that an order for security would "stultify" his s 106 claim; the proximity in time between the respondents' application and his s 106 claim; and, in the event the order for security was made, the stay of his s 106 claim by reason of his inability to meet the order, with the result that the respondents' 106 claim would proceed alone. The impact that these three factors might otherwise have had as factors against the granting of the respondents' application for security has been significantly diminished by the respondents' undertaking that they would consent to any adjournment of the applicant's s 106 proceedings and would not seek to proceed on their own s 106 application.

13 However, the respondents' undertaking was that they would not prosecute their claim for a period of two months, which was designed to provide the applicant time to raise the security. The respondents did not agree to an indefinite adjournment of their application, a matter that I will return to shortly. Terms of the Stay 14 The appellant sought a conditional stay as follows: The judgment given and orders made by her Honour Justice Backman on 17 July 1007 in IRC 7035 of 2003 are stayed pending determination of the application for leave to appeal and appeal brought in relation to that judgment and those orders, such stay to have effect only if the respondents to this appeal proceeding seek to have matter IRC 1893 of 2004 set down for hearing. 15 The respondents opposed the stay. Relevant Principles 16 The principles applying to the grant of a stay were considered recently by the Full Bench in Surfing Hardware International Holdings v William McCausland (2006) 156 IR 352 at [14] where the Full Bench stated: The usual principles applying to the grant of a stay were conveniently summarised by Wright J in Re Transport Industry - Waste Collection and Recycling (State) Award (2000) 102 IR 192 at [19]: (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. Consideration 17 The appellant addressed the above principles in detailed and extensive submissions, however, the issue in this application for a stay came down to whether, in granting the order for security of costs, her Honour had assumed that the respondents would not proceed with their s 106 application. The respondents are only prepared to undertake not to proceed with their application for a period of two months from 23 July 2007. 18 In my view, the assumption that the respondents would not proceed with their application was implicit in her Honour's judgment and a key factor in her Honour's exercise of discretion in ultimately making the security for costs orders. 19 It follows that there is no basis to grant a stay at the present time but there would be if the respondents moved to have their application set down for hearing. 20 In these circumstances, I do not grant a stay. However, if the respondents seek to have matter No IRC 1893 of 2004, being in the nature of a cross-claim to the appellant's application, listed for hearing, then a stay will issue in respect of her Honour's judgment. 21 I direct the parties to bring in short minutes of order. I refer the appeal to the Acting-President for the fixing of a date for the hearing of the appeal. The appellant and respondents should assume that the time for the filing and serving of appeal books and written submissions will operate from the date of today's judgment.

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