Software Engineers Australia (NSW) Pty Ltd v Bonket Pty Ltd

ShouldtheTrade Practices Act claims be struck out on the basis that they are statute-barred? 5 The respondents submitted that the applicants had pleaded in pars 51 to 58 of the statement of claim that they had suffered loss and damage by reason of breaches of the Trade Practices Act, which loss and damage crystallised and manifested itself in February 1999 following Mr Bowker's resignation. They submitted further that at that date an action for damages under s 82(1) of the Trade Practices Act had to be commenced within three years after the date on which the cause of action accrued in accordance with s 82(2) of the Trade Practices Act. As the proceeding in this Court was not commenced until 3 April 2002 the actions under the Trade Practices Act were not commenced within three years after the causes of action accrued and were therefore statute‑barred. 6 That submission fails to take into account the transitional provisions which accompanied the amendment to s 82(2) by the Trade Practices Amendment Act (No 1) 2001 (Cth) ("Amendment Act"). Item 20 in Sch 1 to that Amendment Act provided that s 82(2) was amended so that an action under s 82(1) might be commenced at any time within six years after the date on which the cause of action accrued. That provision came into effect on 26 July 2001. Item 20 in Sch 1 to the Amendment Act provided: "(1) The amendment made by item 20 applies in relation to conduct engaged in on or after the commencement of that item. (2) The amendment made by item 20 also applies in relation to conduct engaged in before the commencement of that item, but only if the period that: (a) relates to the conduct; and (b) applied under subsection 82(2) of the Trade Practices Act 1974 before the commencement of that item; had not ended when that item commenced." 7 The conduct complained of in the statement of claim relates to a period which had not ended when the amendment in item 20 came into operation, (the end of that period being around 18 February 2002). Thus the limitation period applicable to the conduct alleged in pars 51 to 58 of the statement of claim is six years, not three years. 8 The respondents submitted that the three year period in respect of the causes of action based on the first employment agreement and the first consultancy agreement had expired prior to the coming into operation of the amendment to s 82(2) of the Trade Practices Act as the period of employment under the first employment agreement was expressed to last until June 1998 and the first consultancy agreement provided only for a trial period for June 1998 and that any extension was to be by mutual agreement. The difficulty with that submission is that the applicants pleaded in the statement of claim that the period of the first employment agreement was extended by mutual agreement to 31 December 1998 and that the first consultancy agreement contained a term that Mr Bowker would carry out his duties as the managing consultant in New South Wales of SEA from 1 July 1998 to 31 December 1998. Further the applicants allege breaches of, inter alia, the first employment agreement and the first consultancy agreement in around January and February 1999. If these allegations are sustained the causes of action based upon breach of the first employment agreement and the first consultancy agreement will not be statute‑barred by s 82(2) of the Trade Practices Act. 9 In any event, putting the matter at its highest for the respondents, the issue whether any of the claims made by the applicants are statute‑barred by s 82(2) of the Trade Practices Act is not clear. I therefore pay heed to the observation of the majority of the High Court (Mason CJ, Dawson, Gaudron and McHugh JJ) in Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514 at 533: "We should, however, state in the plainest of terms that we regard it as undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases. Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question." I therefore reject the submission that the claims based on alleged breaches of the Trade Practices Act should be struck out.

Should the proceeding be stayed pending determination of the proceeding before the IRC? 10 I turn to the submission that the proceeding is an abuse of process and should be stayed pending the determination of the proceeding before the IRC in Court Session. 11 In January 1999 Mr Bowker and Bonket commenced proceedings in the IRC under s 106 of the Industrial Relations Act 1996 (NSW) ("Industrial Relations Act") seeking relief against SEA (then known under a different name). Section 106 of the Industrial Relations Act provides: "(1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract. (2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason. (3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time. …" 12 On 26 May 1999 the IRC in Court Session granted an injunction restraining SEA from making certain statements, not relevant for present purposes, and giving Mr Bowker and Bonket leave to amend their summons for relief under s 106 of the Industrial Relations Act. The relief then sought by Mr Bowker and Bonket against SEA and the second applicant in this proceeding, Mr Timothy Arundell, was in the following terms: (a) an order declaring void ab initio the first employment agreement in certain specified respects and an order varying the first employment agreement in certain specified respects; (b) an order declaring the first consultancy agreement void ab initio or at some other time insofar as it required Mr Bowker to sign a consultancy confidentiality agreement without having sighted the agreement; (c) an order declaring the further employment agreement void ab initio or from some other time and, apparently in the alternative, orders varying the further employment agreement in certain specified respects; (d) an order declaring the release void ab initio or from some other time and, apparently in the alternative, orders varying the release in certain specified respects; (e) an order declaring the consultancy deed void ab initio or at some other time in certain specified respects. 13 The hearing commenced in the IRC in Court Session and on 4 December 2000 Schmidt J asked counsel for Mr Bowker and Bonket to put the orders they were actually seeking in written form. On 6 December 2000, the further hearing of the matter was adjourned to 16 August 2001. In fact the hearing resumed on 13 August 2001 and on that date counsel for Mr Bowker and Bonket tendered short minutes of the orders which they were seeking. At that time counsel for SEA and Mr Arundell reserved their position in relation to the orders sought. 14 The short minutes of orders tendered sought the following relief: (a) that the first employment agreement be varied so that SEA and Mr Arundell, and another company, not engage in any conduct that had certain specified consequences; (b) that the first employment agreement be varied ab initio in the terms set out in Annexure 1 to the short minutes. Annexure 1 set out the particular clauses in respect of which variation was sought and the terms of the variation. For present purposes the only relevant variation which needs to be identified is the variation in cl 4.1 of the first employment agreement after the heading "Conflict of Interest", which read: "The Employee may not be directly or indirectly engaged or concerned in any other business that competes directly or indirectly in any respect with the Company, or with any Related Company, except as consented to or condoned by the Company. The Employee may continue to do work organised by the University of Technology, Sydney, or Insearch Pty Ltd". (c) that an agreement signed on 27 November 1998, the further employment agreement, the release and the consultancy deed are harsh, unjust and unfair within the meaning of s 106 of the Industrial Relations Act and are void; (d) that SEA and Mr Arundell pay Mr Bowker and Bonket certain sums withheld from them and also pay compensation. 15 The IRC in Court Session has not yet made a formal order confirming that the orders and relief sought in the short minutes are to be substituted for the relief claimed in the amended summons filed in May 1999. The applicants submitted that I should proceed on the basis of the summons before the IRC in Court Session (par [12] above) as that was the present basis on which that Court was proceeding. However, it is apparent from the transcript of the proceeding before the IRC in Court Session that a number of matters have been raised bearing upon the orders sought in the short minutes which were tendered. Further, the matter has proceeded for some further period during which no complaint has been made by the respondents in the IRC proceeding about the orders sought, notwithstanding that they have reserved their position in relation to those orders. I consider that it is more probable than not that Schmidt J will proceed on the basis that the orders sought, and on which her Honour is asked to rule, are the orders sought in the short minutes. I therefore accept for the purpose of this hearing that the parties in the proceeding before the IRC and the IRC in Court Session itself have proceeded on the basis that the orders sought in the short minutes reflect the orders which the IRC in Court Session is being asked to make. 16 The proceeding in the IRC in Court Session has been running since 25 January 1999. On 26 May 1999 Marks J rejected, and dismissed, a motion by SEA that the IRC had no jurisdiction to entertain the proceeding before it. 17 The trial of the proceeding in the IRC in Court Session has progressed on eleven days between 4 December 2000 and 2 April 2002. Witnesses have been examined and cross‑examined and the hearing of evidence from relevant witnesses has been substantially completed. Of the witnesses called to date the only evidence remaining is the re‑examination of Mr Arundell. On 11 June 2002 two companies associated with SEA and Mr Arundell were joined in the proceeding, but it is not clear from the material before me as to what impact this joinder will have on the time it will take to complete the proceeding in the IRC. I was informed on 27 August 2002 that the proceeding is to be the subject of mediation on 18 September 2002. 18 What is significant, for present purposes, is that four of the agreements upon which the claims by SEA and Mr Arundell in this proceeding are based are the subject of relief sought in the IRC, which relief claims declarations that those agreements are void. In this respect I refer to the further employment agreement, the release and the consultancy deed all dated 24 December 1998. In relation to the first employment agreement dated 31 March 1998 the particular relief sought, referred to in par [14] above, bears upon issues in this proceeding. Allegations of breach are raised in the present proceeding, which relate to the conduct of Mr Bowker and Bonket in relation to Compaq, the University of Technology Sydney and Insearch Pty Ltd. 19 Until the proceeding in the IRC in Court Session is determined and the decision of that Court is announced in relation to the claims that the agreements and documents to which I have referred are void or to be varied in the manner to which reference has been made, it is not possible to ascertain with any certainty what is the content of the agreements and documents upon which SEA and Mr Arundell rely in this proceeding and what is the content of the substantive provisions in respect of which allegations of contravention are made. 20 The respondents submitted that an abuse of process arises where proceedings are well advanced in another court and it is desirable that those proceedings should proceed to their conclusion first. I doubt that it is appropriate to describe, as an abuse of process, a situation which occurs when a party wishes to proceed with a proceeding in one court and there is another proceeding pending in another court which is more advanced that the first proceeding and where the second proceeding will have, or may have, an impact on the outcome of the first proceeding. 21 Whether or not such a situation be an abuse of process, I am satisfied that the Court has an inherent power to control and manage its own proceedings to the extent that it can stay the proceeding before it for a period of time in order for the outcome of a proceeding in another court to be determined where that outcome may have an impact on issues to be resolved in the proceeding before it or may affect the proceeding in some other way. 22 This issue was the subject of consideration in Sterling Pharmaceuticals Pty Ltd v The Boots Company (Australia) Pty Limited (1992) 34 FCR 287. Lockhart J said at 290‑291: "The court has a general power to control its own proceedings, and that power extends to enable it to order a temporary stay of proceedings in various circumstances including the case where proceedings are pending in another court and it is desirable that those proceedings should proceed to their conclusion first: see L Grollo Darwin Management Pty Ltd v Victor Plaster Products Pty Ltd (1978) 33 FLR 170 at 177; Hughes Motor Service Pty Ltd v Wang Computer Pty Ltd (1978) 35 FLR 346 at 351‑354, per Bowen CJ; Muller v Fencott (1981) 53 FLR 184 at 189, per Toohey J; Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd(1987) 14 FCR 193 at 203, per French J. The court has power specifically conferred by O 20, r 2 to order that a proceeding in the court be stayed or dismissed generally, where no reasonable cause of action is disclosed or the proceeding is frivolous or vexatious or an abuse of the process of the court; but this power is not the court's sole source of power to stay proceedings in the court. The court is a superior court of record and obviously may control its own proceedings including, where appropriate, the exercise of a power to grant a stay. Lockhart J at 291‑292 then set out the considerations which he regarded as relevant to be taken into account in the case before him. They included 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 common facts first. · Consideration of circumstances relating to witnesses. · Whether work done on pleadings, particulars, discovery, interrogatories and preparation might be wasted. · The undesirability of substantial waste of time and effort if it becomes a common practice to bring actions in two courts involving substantially the same issues. · How far advanced the proceedings are in each court. · The law should strive against permitting multiplicity of proceedings in relation to similar issues. · Generally balancing the advantages and disadvantages to each party." 23 Lockhart J applied these considerations to the circumstances before him and adjourned the proceeding before him for eight months. 24 The observations of Lockhart J were adopted and applied by Santow J in The Environmental Group Ltd v Croudace (Santow J, 7 August 1998, unreported). Santow J was faced with the issue of a related proceeding being commenced in the IRC in Court Session after the proceeding before him in the Supreme Court of New South Wales was commenced. The proceeding in the IRC in Court Session covered some, but not all, of the issues in the Supreme Court proceeding such as breach of warranties, false, misleading and deceptive representations, reckless indifference and negligence and breach of director's duties. Santow J granted a stay of the proceeding in the Supreme Court in the following terms at 41: "On balance, I consider that the requirements of justice require an exercise of discretion in favour of a stay of the Plaintiffs' Supreme Court proceedings and that the Defendants have satisfied the onus upon them in that regard. The factor which weighs heaviest in that result is the potential impact of the IRC proceedings on the Supreme Court proceedings. The contentions of the Defendants, if upheld in the Industrial Relations Commission, will, it is true, not resolve all the issues between the parties - but neither would the Supreme Court proceedings if heard first. However the IRC proceedings have the potential to result in avoidance or variation of two of the agreements the subject of the Supreme Court proceedings, namely the Sale Agreement and Licence Agreement, with consequential fundamental effect on those latter proceedings" These observations are relevant to the facts and circumstances present in this proceeding. 25 I consider that I should take into account the considerations referred to by Lockhart J (par [22]). An application of these considerations leads me to the conclusion that I should exercise my discretion and stay the present proceeding before me pending a final determination of the proceeding before the IRC in Court Session. I am satisfied that the determination of that proceeding may well have a material effect on this proceeding. If the further employment agreement, release and the consultancy deed are declared void then the causes of action based upon breaches of those agreements and documents will lapse. If the first employment agreement is varied, in particular in the manner sought in relation to cl 4.1, then such variation will have significance in relation to a number of the particulars which are relied upon as constituting breaches of the first employment agreement. If those agreements and documents are not avoided or varied as sought, then a range of defences to the claims under those agreements and documents by the respondents will not be available to them. 26 It is also relevant to take into account the fact that the proceeding in the IRC was commenced first in January 1999 and, notwithstanding the recent joinder of two other respondents, is well advanced to a stage where almost all the evidence to be called has been called. 27 It is in the public interest that there should not be a multiplicity of proceedings in relation to similar issues and I am satisfied that there are a number of issues which are common to both proceedings. If the present proceeding before me is allowed to progress there is a risk that a significant amount of preparatory and interlocutory work carried out in this proceeding would be wasted or rendered abortive if the IRC in Court Session grants the applicants before it significant parts of the relief which they are currently seeking. 28 I take into account the fact that although Mr Bowker and Bonket terminated their relationship with the applicants in February 1999 it was well over three years, and not until April 2002, that the applicants commenced this proceeding. I am taking this factor into account, not on the basis of any finding the applicants are not genuine in pursuing their claims in this Court, but rather on the basis that it does not appear that there is any urgency or need for expedition to be attached to the progress of the proceeding in this Court which will be interfered with by a stay pending the determination of the outcome of the proceeding in the IRC. 29 I also take into account the possibility that the determination of the proceeding in the IRC may give rise to issues estoppel in relation to factual matters and conduct of the parties the subject of the proceeding in this Court. Although the claims brought in this Court may not be determined in any formal sense by the outcome and determination of the proceeding in the IRC, it is undesirable that there be parallel proceedings in relation to the determination of issues of common fact. 30 The respondents submitted that the applicants could have brought the claims made in this proceeding by way of counterclaim in the IRC. That proposition is contested by the applicants but I do not find it necessary to reach any conclusion on this aspect of the matter having regard to the view I have reached that the determination of the proceeding before the IRC may well have a material effect on this proceeding. 31 The applicants submitted that the causes of action relied upon in this Court were different causes of action from those in the IRC in Court Session and the relief sought in that Court. That may be so, but I am satisfied that the avoidance and variation of the various agreements and documents to which I have referred which has been sought in the IRC, if ordered by that Court, will alter the contractual basis upon which the applicant's causes of action are based in this Court. Although those contractual causes of action are separate from the causes of action based on s 52 and s 53 of the Trade Practices Act, the representations relied upon as constituting the breaches of those sections are contained in the various agreements and contractual documents. This may well have an impact on the extent to which the representations can be relied upon if the contractual basis for them is either removed or varied in a significant respect. This matter was not canvassed in any detail in argument before me but I am satisfied that it is desirable that the contractual basis which is said to exist between the parties be finally determined before any causes of action based on representations to be found in those agreements and the documents constituting them is litigated. 32 Counsel for the applicants presented a table setting out the causes of action relied upon in this proceeding and the conduct and events upon which those causes of action were based. Counsel sought to demonstrate that those causes of action would not be affected by the outcome of the proceedings in the IRC in Court Session. However I am satisfied that a significant number of the causes of action in contract may well be affected by the outcome of the proceedings in the IRC in Court Session. For example, at least two of the causes of action based on the first employment agreement would be affected by the variation to cl 4.1 of the first employment agreement sought in Annexure 1 to the short minutes. An order declaring void ab initio the release, the first consultancy agreement and the further employment agreement would remove the basis for the causes of action in contract based on those agreements and documents. 33 I accept, as the applicants submitted, that not all the causes of action in this Court will be affected by the outcome of the proceeding in the IRC in Court Session. However a sufficient number of them will be affected, such as to warrant the exercise of my discretion in favour of granting a stay of this proceeding pending the outcome of that other proceeding. 34 The applicants submitted that the jurisdiction of the Federal Court of Australia is properly invoked by reason of the claims made under the Trade Practices Act and the Corporations Act. I accept that proposition but am satisfied that notwithstanding the proper invoking of the Court's jurisdiction, the Court has an inherent power to stay a proceeding before it pending an outcome of a proceeding in another court if it is in the interests of justice that such a stay be granted. 35 I accept that the IRC in Court Session may not have jurisdiction to determine all matters which are the subject of the present proceeding such as, for example, the causes of action based on breaches of obligations and duties owed by Mr Bowker to SEA under the Corporations Act. Nevertheless a substantial part of the factual basis underlying a number of causes of action relied upon by the applicants may well be affected by the determination of the matters presently before the IRC. 36 In all the circumstances the present proceeding should be stayed until the final determination of the proceeding presently before the IRC in Court Session. However, for case management purposes, I propose to stay the matter until 5 February 2003 or further order. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg.

Date of Hearing: 19 June, 27 August 2002