Bannon v Nauru Phosphate Royalties Trust (No 3)
[2017] VSC 214
•26 April 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
EMPLOYMENT AND INDUSTRIAL LIST
S CI 2015 03354
BETWEEN
| PAUL BANNON | Plaintiff |
| v | |
| NAURU PHOSPHATE ROYALTIES TRUST | Defendant |
| AND BETWEEN | |
| NAURU PHOSPHATE ROYALTIES TRUST | Plaintiff by Counterclaim |
| - and - | |
| PAUL BANNON | Defendant by Counterclaim |
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JUDGE: | Ierodiaconou AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 27 February 2017 |
DATE OF RULING: | 26 April 2017 |
CASE MAY BE CITED AS: | Bannon v Nauru Phosphate Royalties Trust (No 3) |
MEDIUM NEUTRAL CITATION: | [2017] VSC 214 |
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PRACTICE AND PROCEDURE – Further and better particulars required – Particulars served one week late – Whether order requiring particulars related to timing or to adequacy of particulars – Whether counterclaim should be struck out or summary judgment awarded for failure to provide adequate particulars – Civil Procedure Act 2010 (Vic) ss 51, 62, 63
PRACTICE AND PROCEDURE – Whether defence ought to be limited to non-admissions and denials – Civil Procedure Act 2010 (Vic) s 51
PRACTICE AND PROCEDURE – Summary dismissal – Whether claim has no reasonable prospects of success – Whether questions are matters for trial
PRACTICE AND PROCEDURE – Plaintiff (employee) retained documents belonging to defendant (employer) after end of employment – Whether delivery up should be ordered – Whether necessary for discovery – Civil Procedure Act 2010 (Vic) ss 9, 55
LIMITATION OF ACTIONS – Limitation of Actions Act 1958 (Vic) ss 5, 27 – Claim for payment of fees owing under contract of employment – When cause of action accrued – Whether payment for work done is owing at completion of work or when a demand for payment is made – Coburn v Colledge [1897] 1 QB 702 – Whether limitation period postponed – Whether limitation question is appropriately determined at interlocutory stage – Whether loss was ‘contingent’ – Wardley Australia Ltd v Western Australia (1992) 175 CLR 514
EMPLOYMENT – Long Service Leave Act 1992 (Vic) ss 57, 72, 153, 154, 160, 168 – Whether Supreme Court has jurisdiction over claims for unpaid long service leave – Whether jurisdiction conferred on Magistrates’ Court is exclusive – Constitution Act 1975 (Vic) s 85
EMPLOYMENT – Whether private individual may seek imposition of a penalty under Long Service Leave Act 1992 (Vic) s 72 – Whether penalty a ‘prosecution’ for an ‘offence’ under that Act – Action sought penalty in excess of amount owing and motivated by punishment
WORDS AND PHRASES – ‘Prosecution’ – ‘Offence’
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr T North QC with Mr M Rinaldi | Lander & Rogers |
| For the Defendant | Mr R A Millar with Mr J Hooper | SCL Law Pty Ltd Lawyers |
TABLE OF CONTENTS
1. . What are the consequences of the late or purportedly inadequate particulars?.............. 3
2. Should there be summary dismissal of the amended counterclaim?.................................. 9
Paragraphs 41 and 43 of the counterclaim – director/secretary fees, receiver/agent fees and electricity charges................................................................................................................................... 9
Paragraphs 42C and 42D of the counterclaim – back-pay.................................................... 17
3. Should the Trust’s claim for repayment of unauthorised back pay be summarily dismissed on the basis it is statute-barred?........................................................................................................... 18
4. Should Mr Bannon’s claim for director/secretary fees (and superannuation on them) for any period before 1 July 2009 be struck out on the basis it is statute-barred?.................................... 19
5. Should Mr Bannon’s claim for GST on director/secretary fees be struck out on the basis that GST is not payable on remuneration for employment?................................................................... 23
6. Should Mr Bannon’s claim for unpaid and accrued long service leave be struck out on the basis that this Court has no jurisdiction to hear such a claim?............................................................ 24
7. Should Mr Bannon’s claim for a civil penalty to be imposed on the Trust be struck out on the basis he has no standing under the Long Service Leave Act to seek that relief?...................... 26
8. Should Mr Bannon be required to deliver up documents that are owned by the Trust and that he has in his possession, custody or control?............................................................................. 29
Conclusion......................................................................................................................................... 32
HER HONOUR:
Mr Bannon was employed by the Nauru Phosphate Royalties Trust (‘the Trust’) for almost twenty years. During that time, he was also the secretary of the Trust and held the corporate office as director / secretary with 19 of the Trust’s Australian subsidiaries. In 2014, the Trust terminated his employment. He brings these proceedings seeking monies allegedly owing to him pursuant to his contract of employment, including his accrued and untaken long service leave.
Mr Bannon’s claim is for approximately $4.2 million. Of this amount, approximately $3.1 million is for alleged unpaid fees (plus superannuation). He says the Trust owes him the unpaid fees as a result of his director/secretary roles. Mr Bannon says that this entitlement arises from a schedule to his employment contract, pursuant to which the Trust promised to pay him $1,500 per month for each corporate office he held.
The Trust says that it does not owe Mr Bannon the unpaid fees. The subsidiaries were in receivership and the Trust says that Mr Bannon unnecessarily prolonged those receiverships. It brings a counterclaim against Mr Bannon alleging that he failed to comply with his obligations to it, and caused it loss and damage. It claims set-off in respect of any director/secretary fees it is required to pay to Mr Bannon. The Trust counterclaims for fees paid to receivers/agents in respect of the subsidiaries, repayment of unauthorised payments it says Mr Bannon made to himself and to the Australian Taxation Office, and loss and damage Mr Bannon caused in the failure to follow up electricity charges payable on a property the Trust rented out in Texas, United States.
These proceedings were brought in June 2015 but have been mired in interlocutory issues. Consequently, the parties have not proceeded to trial for determination of the real issues in dispute. This ruling concerns multiple interlocutory issues agitated by both parties.[1]
[1]Mr Bannon made his applications by summons filed 28 October 2016. The Trust made its applications by summons filed 23 January 2017.
The questions to be determined in this ruling and their answers may be summarised as follows:
(a) The Trust’s further and better particulars were served one week late. Mr Bannon says they are inadequate. Should this have the consequence that:
(i) the Trust’s amended counterclaim be struck out? No.
(ii) the amended counterclaim be summarily dismissed? No.
(iii) the amended defence be limited in its non-admissions and denials and judgment be entered in respect of admissions? No.
(b) Should there be summary dismissal of the Trust’s amended counterclaim because there is no real prospect of it succeeding in its claims for payment (or re-payment) of the director/secretary fees, receiver/agent fees, electricity charges and for unauthorised back pay? No.
(c) On the basis it is statute-barred, should the Trust’s claim for repayment of unauthorised back-pay be summarily dismissed? No.
(d) On the basis it is statute-barred, should Mr Bannon’s claim for director/secretary fees (and superannuation on them) for any period before 1 July 2009 be struck out? No.
(e) Should Mr Bannon’s claim for GST on director/secretary fees be struck out on the basis that GST is not payable on remuneration for employment? No.
(f) Should Mr Bannon’s claim for unpaid and accrued long service leave pursuant to the Long Service Leave Act 1992 (Vic) be struck out on the basis that this Court has no jurisdiction to hear such a claim? No.
(g) Should Mr Bannon’s claim for a civil penalty to be imposed on the Trust be struck out on the basis that he has no standing under the Long Service Leave Act to seek that relief? Yes.
(h) Should Mr Bannon be required to deliver up documents that are owned by the Trust and that he has in his possession, custody or control? Yes.
I will now turn to each of the questions above, and the reasons for the answers to them.
1. What are the consequences of the late or purportedly inadequate particulars?
Orders made on 28 September 2016 provided: ‘By 4.00pm on 21 October 2016, the parties file and serve any further and better particulars requested.’
It is common ground between the parties that the Trust served its further and better particulars seven days late, on 28 October 2016.
Mr Bannon makes three central submissions concerning the particulars. These will each be considered in turn. The first is that the Trust’s amended counterclaim should be struck out in accordance with s 51(b) of the Civil Procedure Act 2010 (Vic) (‘CPA’) because of the ongoing inadequacy of the particulars. His overwhelming concern is that the counterclaim states that the particulars are to be provided after discovery or the retrieval of documents, or that they will be provided prior to trial.
Section 51(b) of the CPA provides:
51.If a person to whom a direction has been given or to whom an order made under this Part applies contravenes the direction or order, the court may do any one or more of the following—
…
(b) strike out or limit any claim made by a plaintiff…
The power to strike out pursuant to s 51 should be exercised cautiously. In Hodgson v Amcor Ltd, Vickery J stated:[2]
Given the gravity and effect of a striking out order, it should only be made in a clear case where the exercise of the discretion properly calls for this to occur and when the sanction ordered is the least that is necessary to achieve the ends of appropriate case management. Further, as observed in Lenijamar,[3] the power conferred on the court must be ‘administered sensibly and with an appreciation both of the fact that some delays are unavoidable, and unpredictable … and of the likely serious consequences to [the party in default]’.
[2](2011) 32 VR 495, 525.
[3]Lenijimar Pty Ltd v AGC (Advances) Limited (1990) 27 FCR 388, 396.
Vickery J held that there is no ‘overriding formula’ for how the discretion given by s 51 should be exercised; all matters relevant should be weighed:[4]
[4]Hodgson v Amcor Ltd (2011) 32 VR 495, 524-5.
[99] All matters relevant to the exercise of the power should be weighed. In different cases, the factors may assume greater or lesser significance. Such factors may include the following considerations, which are examples derived from the case law examined:
(a) the effect of the contravening conduct on the just resolution of the real issues in the proceeding in an efficient, timely and cost-effective manner;
(b) the extent of any delay caused by the contravening conduct and the prejudice associated with it, and whether the delay was inordinate and inexcusable;
(c) whether the history of non-compliance by a party is such as to indicate an unwillingness or inability to co-operate with the court and the other party or parties in having the matter ready for trial within an acceptable period. In determining whether the defaulting party is either subjectively unwilling to cooperate or, for some reason, is unable to do so, the cumulative effect of the party’s defaults may be taken into account;
(d) whether the non-compliance is continuing and is continuing to occasion unnecessary delay, expense or other prejudice to the other party (that is, a significant continuing default which continues to impose an unacceptable burden on another party);
(e) the prejudice which might reasonably be assumed to follow for the other party arising from the contravening conduct, and that which is shown to have arisen;
(f) the extent to which the achievement of efficiency in the conduct of proceedings by other parties in other cases before the court have been compromised;
(g) the veracity and reasonableness of any explanation given for the contravening conduct;
(h) whether the default was intentional or the product of contumelious conduct;
(i) whether any alternative remedy by way of a lesser, but equally efficient, sanction is available;
(j) whether the contravening conduct has rendered it impossible to conduct a fair trial, or would make any judgment in favour of the offending party unsafe, or which would render any further proceedings unsatisfactory and prevent the court from doing justice, or there is a real risk of any of these things happening; and
(k) whether the object of the order which has been contravened is ultimately secured (for example, the late production of a document which has been withheld on discovery).
In relation to the adequacy of particulars, where an order requires the provision of information within a specified time, ‘a document filed within that time and which constitutes a good faith attempt to provide that information will comply with the order’.[5]
[5]Ridge Lane Pty Ltd v Gadzhis [2007] VSC 212 at [39] (per Hargrave J) (‘Ridge Lane’).
The order for particulars was in relation to timing. Beyond the requirement imposed by Hargrave J in Ridge Lane and quoted above, it did not relate to the adequacy of the particulars. It cannot be said that deficient particulars are no particulars at all. Particulars were served in the form of a document fairly described as such. There is no basis for striking out the amended defence and counterclaim pursuant to s 51(b) of the CPA on the ground that there has been a contravention of the order to serve particulars because of their inadequacy.
The question then is whether the timing, being one week late, justifies an order for striking out the amended counterclaim.
By letter dated 24 October 2016, Mr Bannon’s solicitors wrote to the Trust’s solicitors indicating that they were in breach of the orders to file particulars by 21 October 2016. They requested advice as to when the further and better particulars could be provided so that they could seek instructions as to whether to agree to a time extension or not.[6] The letter was sent by email at 10.14am. That afternoon, the Trust’s solicitor replied, indicating that she was expecting further and better particulars from counsel that day.[7] The following day, on 25 October 2016, Mr Bannon’s solicitors wrote again noting that they had not been provided with the further and better particulars and that if they were not provided by 4.00pm the following day, they were instructed to make an application to the Court for appropriate orders without further notice.[8] The next day, 26 October 2016, Mr Bannon’s solicitors wrote an 11-page letter to the Trust’s solicitors concerning omissions in the amended defence.[9] That letter did not refer to the particulars.
[6]Exhibit ‘KLW-57’ to the affidavit of Kate Wilkinson sworn 28 October 2016 (‘the fourth Wilkinson affidavit’).
[7]Exhibit ‘KLW-58’ to the fourth Wilkinson affidavit.
[8]Exhibit ‘KLW-59’ to the fourth Wilkinson affidavit.
[9]Exhibit ‘KLW-60’ to the fourth Wilkinson affidavit.
On 27 October 2016, the Trust’s solicitors wrote again to Mr Bannon’s solicitors indicating, amongst other things, that they were in the process of finalising the particulars which would be provided in the course of that day.[10] Mr Bannon’s solicitor received this letter at 8.10am.[11]
[10]Exhibit ‘KLW-61’ to the fourth Wilkinson affidavit.
[11]Fourth Wilkinson affidavit and affidavit of Kate Wilkinson sworn on 7 December 2016 (‘the fifth Wilkinson affidavit’).
On 28 October 2016, the further and better particulars of the amended defence and counterclaim were served (‘the particulars’).[12]
[12]Exhibit ‘KLW-64’ to the fifth Wilkinson affidavit.
On the same day as being served with the particulars, Mr Bannon’s solicitor deposes that she attempted to file the summons and her affidavit at 8.30am.[13] She had some difficulty doing so and deposes that she contacted chambers to obtain a listing date for the summons. As the Trust points out, her affidavit[14] is then out of chronological order. It indicates that at approximately 2.45pm, the solicitor had communications with the Court and was advised the summons could be filed with an amendment stating the application would be heard on a date to be fixed. She then amended the summons and caused it to be filed. It was accepted for filing at 3.22pm. However, crucially, in the meantime, at 1.53pm, the solicitor had received the particulars.[15] It is surprising that, given the particulars had been received at that point, Mr Bannon persisted with the summons.
[13]Fifth Wilkinson affidavit.
[14]Fifth Wilkinson affidavit.
[15]Fifth Wilkinson affidavit.
Mr Bannon’s solicitors raised issues concerning the adequacy of the particulars by letter to the Trust’s solicitors dated 2 November 2016.[16] This was a number of days after service of the particulars. This fact, together with the short time between receiving the particulars and the filing of the summons (approximately 90 minutes), indicates that the summons was filed in relation to the failure to comply with the order for particulars, rather than their adequacy, even though the particulars had been received by the time of filing.
[16]Exhibit ‘KLW-65’ to the fifth Wilkinson affidavit.
Given the gravity and effect of a striking out order, it should not be exercised in circumstances such as these. The Trust’s particulars were one week late, the Trust’s solicitors responded to communications with Mr Bannon’s solicitors concerning the delay, and explained that the particulars were with counsel. Mr Bannon has not identified any prejudice by the lateness. It cannot be said that the Trust has been unwilling to co‑operate. It responded to correspondence on the issue. It is disappointing that the Trust was in breach of the orders by the late serving of the particulars, and that it was Mr Bannon’s solicitor who had to follow up the Trust rather than the Trust proactively obtaining an extension of time by way of a consent order. However, in all the circumstances, a striking-out order is unnecessary for appropriate case management. It would be a disproportionate response rather than a sensible administration of the power given by s 51(b) of the CPA.
Accordingly, Mr Bannon’s application to strike out the amended counterclaim pursuant to s 51(b) of the CPA will be dismissed.
Mr Bannon’s second submission is that the inadequacy of the particulars to paragraphs 42, 42A, 42B and 43 of the counterclaim means that those claims have no real prospect of success and should be struck out in accordance with ss 62 and 63 of the CPA.
Sections 62 and 63 of the CPA give the Court power to give summary judgment in a civil proceeding if it is satisfied that a claim has no real prospect of success. The power in s 63 is subject to s 64, which provides that the Court may nevertheless allow a trial to proceed if summary disposal is not in the interests of justice, or the dispute is of such a nature that a full merits hearing is appropriate.
The applicable principles are well established and were not in contention. The Court of Appeal outlined the test for summary judgment in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd and it is adopted here.[17]
[17](2013) 42 VR 27, 40 [35] (‘Lysaght’).
The claim that the particulars in paragraphs 42, 42A, 42B and 43 of the counterclaim are inadequate and so there is no real prospect of success must fail. The adequacy of particulars is an interlocutory matter that can be dealt with prior to trial. Applying Lysaght, there should not be summary judgment in respect of matters that can be cured by amendment. Now that Mr Bannon has made discovery, and that orders for delivery up will be made (see below), there should be no impediment to the Trust providing some of the particulars it indicated it would provide after discovery.
In addition, Mr Bannon’s amended reply filed 15 November 2016 evidences that he has been able to reply to these paragraphs. He understands the case he needs to meet. The replies, save for the reply to paragraph 43, are very detailed.[18]
[18]See the replies to paragraph 42 (which repeats the reply to paragraphs 28A, 28B and 41(b)), paragraph 42A and 42B (which includes a repeat of the reply to 42A).
Accordingly, Mr Bannon’s application for summary dismissal of paragraphs 42, 42A, 42B and 43 of the counterclaim on the ground of inadequate particulars will be dismissed.
Mr Bannon’s third submission concerning particulars is that ‘the amended defence be limited to its non-admissions and denials and judgment be entered in respect of admissions pursuant to s 51(c) of the CPA’. He relied on a document titled ‘Attachment B’ to his submissions. That document summarises the admissions made in the amended defence. Mr Bannon says that an order under s 51(c) of the CPA will save a trial judge months of work.
Section 51(c) of the CPA provides:
51 Contravention of orders or directions under this Part
If a person to whom a direction has been given or to whom an order made under this Part applies contravenes the direction or order, the court may do any one or more of the following—
…
(c)strike out or limit any defence or part of a defence filed by a defendant, and give judgment accordingly;
…
The Trust’s submissions on this issue are accepted. That is, it would be a piecemeal approach to this litigation to make findings on the basis of the admissions at this interlocutory stage of the proceedings. It would involve extracting out parts of the defence to craft a judgment. Mr Bannon’s submission that it would save a judge months of work is categorically rejected. Key issues remain in dispute.
Applying Hodgson v Amcor (referred to above), an order giving judgment is unnecessary for appropriate case management in all the circumstances. It would be a disproportionate response rather than a sensible administration of the power given by s 51(c) of the CPA.
Accordingly, Mr Bannon’s application for judgment pursuant to s 51(c) of the CPA will be dismissed.
2. Should there be summary dismissal of the amended counterclaim?
Paragraphs 41 and 43 of the counterclaim – director/secretary fees, receiver/agent fees and electricity charges
Mr Bannon seeks summary dismissal of paragraphs 41 and 43 of the counterclaim. Those paragraphs relate to the set-off claim for director/secretary fees for the subsidiary companies, a claim for receiver/agent fees concerning the subsidiary companies and a claim in respect of loss and damage concerning electricity charges he allegedly did not require a tenant (Jacobs Technology) to pay in a building in Texas.
Before extracting paragraphs 41 and 43 of the counterclaim below and setting out the issues, it is necessary to put those paragraphs in context. By paragraph 5 of the defence, the Trust claims that Mr Bannon owed it the following obligations, which it defines as ‘the Fiduciary Obligations’:
(a) not to act in a position of conflict between the interests of the defendant and the plaintiff’s interests, without the prior informed consent of the defendant; and
(b) not to make unauthorised profit from or incidental to the plaintiff’s performance of the role of Secretary to the defendant.
At paragraph 10 of the defence, the defendant admits the terms of the employment contract enumerated in the statement of claim, and adds that there were further express terms, which it defines as ‘the Integrity Terms’, requiring the plaintiff to:
(a) act honestly and always in the best interests of the Employer (Clause 2(a));
(b) refrain from doing any act or think [sic] that will or may adversely affect the present or future interests of the Employer (Clause 2(c));
(c) at all times use the Employee’s best endeavours to promote the aims of the Employer (Clause 2(d));
(d) carry out all duties carefully, responsibly and competently (Clause 2(l));
(e) avoid all conflicts between the Employee’s interests and those of the Employer (Clause 2(n)).
The impugned paragraphs of the counterclaim also refer to paragraphs 15, 28C and 28D of the amended defence. Paragraph 15 of Mr Bannon’s statement of claim sets out the director / secretary services which, Mr Bannon claims, he performed for subsidiaries of the Trust. Paragraph 11(d) of the statement of claim alleges an entitlement (under the contract of employment) for Mr Bannon to be paid a monthly entitlement of $1,500 in respect of each subsidiary company of the Trust for which he acted as a director or secretary. Paragraph 6 lists 22 such subsidiaries. The fees are said (in paragraph 16) to total $3,111,000.00 plus GST. Paragraph 20 claims a further $282,028.13 by way of superannuation alleged to be payable in respect of these fees.
Together with leave entitlements and redundancy pay, Mr Bannon ultimately claims (in paragraph 29) the amount of $4,235,801.12 in loss and damage by reason of the Trust’s failure to pay these entitlements. Paragraph B of Mr Bannon’s prayer for relief makes a claim further or alternatively for $4,185,262.65 as a debt. Paragraphs 23 to 26 plead Mr Bannon’s prior demands for payment from the Trust.
In answer to Mr Bannon’s claim for the fees in paragraph 15 of the amended defence and counter claim, the Trust pleads as follows:
15. As to paragraph 15 the defendant:
(a)does not admit that the plaintiff performed the director and/or secretarial services alleged, or any such services, and says that any duties performed were as an employee of the defendant and in so doing did not “act as” a director or secretary for any or all of the periods alleged; and
(b)says further that if (which is not admitted) the plaintiff performed any of the said services the plaintiff:
(i)knew or ought to have reasonably to have known by not later than about 2004 that the services:
A.served no useful function; and/or
B.were not in the interests of the defendant;
Particulars
In 2004 the defendant was unable to make repayments of loans to its creditor GE Finance. Consequently, in 2004 GE Finance caused receivers to be appointed over the Australian assets of the defendant and the assets of the Australian Subsidiaries (“the receivership”) and most or all of the subsidies [sic] were stripped of the assets or investments that were on their books.
The Subsidiaries or most of them were substantially dormant from not later than about 2003 and ought reasonably to have been wound up by about 2004.
The plaintiff failed to act reasonably, competently and in the best interests of the defendant by failing to take any adequate step to terminate the receivership and retrieve surplus funds held by the receivers or cause the receivers and their agents to cease accruing fees and charges in the administration of the receivership. Further, the plaintiff took no adequate step at any time between 2003 and about September 2014 to inform the defendant that the plaintiff claimed any of the fees alleged.
Further particulars will be provided prior to trial.
(ii)did so in the knowledge that he was prolonging the plaintiff’s accrual of the director/secretarial fees claimed in the Statement of Claim (“Fees”);
(iii)did so without prior disclosure to the defendant that the plaintiff would or might claim Fees in respect of the alleged services;
(iv)failed to act in the best interests of the defendant by bringing to the attention of the board of the defendant the actual or prospective liability for the Fees and the substantial quantum of that liability;
(v) in the premises in (i) to (iv) above, breached:
A. the Fiduciary Obligations; and further or alternatively
B. the Integrity Terms and each of them; and
(c) in the premises in (b):
(i) the plaintiff’s claim for the Fees is:
A.unconscionable within the meaning of equity; and in the premises
B.barred in equity; alternatively
(ii)the defendant is entitled to set off, against any debt or damages claimed by the plaintiff in respect of the Fees, the whole of the amount of the said debt or damages.
Paragraph 28C reads as follows:
28C.The defendant further says in answer to the whole of the plaintiff’s claim that:
(a)by reason of the conduct alleged in paragraph 15, the plaintiff caused or allowed:
(i) the receiverships of the Australian Subsidiaries to continue past 2004 and until around June 2014;
(ii) fees and charges associated with the said receiverships to continue to accrue;
(iii) the fees and charges to accrue at a rate which substantially eroded the interest otherwise receivable by the defendant in respect of the funds held by the receivers;
(b) in the premises in (a), by reason of the plaintiff’s breaches of:
(i) the Fiduciary Obligations; and
(ii) the Integrity Terms
as alleged in paragraph 15, the defendant has suffered loss and damage.
Particulars
Particulars of fees and charges included by the defendant will be provided prior to trial.
Paragraph 28D, in turn, alleges that Mr Bannon directed agents acting on behalf of the Trust or its subsidiaries to not recover electricity expenses otherwise properly payable in relation to a building tenanted in Texas, United States of America. This is said to be in breach of the Fiduciary Obligations and Integrity Terms, resulting in loss and damage to the defendant.
Looking now to the impugned parts of the counterclaim, paragraphs 41 and 43 read as follows:
41. The defendant:
(a)refers and repeats paragraphs 15 and 17 above [the latter admitting the plaintiff’s entitlement to superannuation under the employment contract]; and
(b)says that if the defendant is obligated in law to pay the Fees as alleged then, in the premises in (a), the defendant has suffered and will suffer loss and damage by reason of the plaintiff’s breaches of:
(i)the Fiduciary Obligations; and
(ii)the Integrity Terms;
Particulars
The defendant will suffer loss and damages to the amount of the fees required to be paid.
…
43. The defendant:
(a) refers and repeats paragraphs 15(b), 28C and 28D above; and
(b)says that in the premises in (a) the defendant has suffered and will suffer loss and damage.
Particulars
The defendant will provide details of the fees and charges of the receivers and agents prior to trial.
The counterclaim in paragraphs 41 and 43 is therefore based, essentially, on the conduct alleged in paragraph 15: the unnecessary prolongation of the subsidiaries’ receiverships which resulted in further fees and expenses being incurred.
Mr Bannon made three key submissions as to why paragraphs 41 and 43 of the counterclaim have no real prospect of success. His first and central submission is that the Trust has no standing to bring claims on behalf of subsidiary companies, and no standing to bring the claim for electricity charges. The Trust concedes that there is no evidence that it paid the receivers’ fees in respect of the subsidiary companies. Mr Bannon therefore says that the Trust cannot make a set‑off and damages claim for breach of the implied duties. That is, they cannot make the claim for fees and charges enumerated above, because the Trust has suffered no loss.
Secondly, Mr Bannon says that there is no real prospect of success because he denies liability for the fees: he says that he did not cause the receiverships and could not terminate them. It cannot be said that one director, Mr Bannon, was responsible when there were many directors. Mr Bannon refers to his second affidavit, which evidences the directors and secretaries of each of the Australian subsidiaries and states whether they were a trustee of the Trust. Mr Bannon says that there is evidence that trustees of the Trust were directors or secretaries of the subsidiaries at the times when receivers were appointed. The receivers were appointed pursuant to loan agreements that were in place before Mr Bannon was a director or secretary of the associated companies and before he was a secretary of the Trust. He could not have resigned from his position until the determination of the receiverships, and nor could he prolong those receiverships. Mr Bannon was, at all times, acting as secretary of the Trust, and took instruction from the trustees and other company officers of the associated companies in receivership.
Thirdly, in respect of paragraph 41 of the counterclaim, Mr Bannon says it has no real prospects of success by virtue of the deficiencies in paragraphs 15(a) and (b) of the defence. Mr Bannon submits that paragraph 15(a) is nonsensical because the Trust admits that Mr Bannon was appointed as secretary/director of the Australian subsidiaries and was performing the duties of that role, and yet says that he did not ‘act as’ director / secretary for any or all of the periods alleged. Further, paragraph 4 of the Trust’s particulars says that if Mr Bannon performed the duties, he did so as secretary of the Trust itself rather than acting as director / secretary of the Australian subsidiaries.
In respect of paragraph 15(b) of the amended defence, Mr Bannon says that when a receiver is appointed, the roles of director and secretary within a company do not cease, and Mr Bannon was required to continue acting in those positions to fulfil his statutory requirements. Therefore, the Trust’s allegation that Mr Bannon knew or ought to have known that his director/secretary services served no useful function, and were not in the interests of the Trust, has no real prospect of success. Mr Bannon’s second affidavit evidences his role during the receiverships and so there can be no argument that he unnecessarily prolonged them. Mr Bannon also says that the evidence shows the subsidiaries not to have been ‘dormant’, as the Trust alleges.
Mr Bannon’s own pleadings suggest that he fulfilled his duties as director/secretary of the Australian subsidiaries as part of the duties under his employment contract. Mr Bannon pleads that he was required to, and did, fulfil his duties as identified in schedule 1 to the employment contract. This included compliance with statutory requirements and statutory record keeping. For these duties, Mr Bannon says he was entitled to be paid the director/secretary fees set out in schedule 2 to the employment contract.[19]
[19]Paragraph 10(c) of the Amended Reply to Amended Defence and Defence to Amended Counterclaim filed 15 November 2016.
The pleadings above also indicate that Mr Bannon’s claim for director/secretary fees plus superannuation is made on the basis of his employment contract.
By way of counterclaim in paragraphs 41 and 43 of the amended defence, the Trust says it suffered (or will suffer, if required to pay the director/secretary fees) loss and damage as a result of having to pay the fees, when they are alleged to have been accrued in breach of Mr Bannon’s fiduciary obligations and the ‘integrity terms’. Those terms and obligations required Mr Bannon not to act in a position of conflict with it without prior consent and not to make unauthorised profit from, or incidental to, his performance in the role of its secretary.[20]
[20]See paragraphs 5, 9 and 10 of the amended defence.
While the Trust acknowledges that there is currently no evidence before the Court that it paid the relevant fees, it says that those fees were nevertheless incurred in breach of the employment contract. The elements of breach of contract are in place and the question of loss is one for trial. In any event, a failure to demonstrate loss will still result in an entitlement to nominal damages. The Trust bases its claim on the employment contract and says it is not attempting to blur the distinction between the Trust and the subsidiaries.
Mr Bannon’s submission that the Trust’s counterclaim has no reasonable prospects of success must be rejected. The counterclaim involves factual and legal issues that are more appropriately determined at trial. These issues include, importantly, the scope of Mr Bannon’s employment obligations, whether they were breached and, if so, whether the Trust is entitled to claim the relief it seeks. This is not an exhaustive list. Further issues may include whether the Trust is entitled to seek nominal damages. The same analysis applies to the electricity charges claimed in paragraph 43.
Mr Bannon submits that paragraphs 41 and 43 of the amended counterclaim have no reasonable prospect of success because of the deficiencies in paragraphs 15(a) and (b) of the amended defence. As seen above, those paragraphs allege that the duties were performed as the Trust’s employee rather than the subsidiaries’ secretary or director, and that Mr Bannon ought to have known that his accrual of fees was not in the interests of the Trust, yet he nevertheless failed to terminate the receiverships.
As to Mr Bannon’s submission that paragraph 15(a) of the amended defence is nonsensical, this is an issue for trial. What is in dispute by way of the amended defence and counterclaim is whether Mr Bannon performed the duties in the director/secretary roles to which he was appointed for the Australian subsidiaries and, if so, whether he did so in his capacity as an employee or as an officer of the Trust.
As to Mr Bannon’s submission concerning paragraph 15(b) of the amended defence, this concerns the appointment and performance of his role of director/secretary of the Australian subsidiaries, the role of other directors, and the receiverships of those subsidiaries. These are also issues more appropriate for determination at trial.
Consequently, Mr Bannon’s submission that deficiencies in paragraphs 15(a) and 15(b) of the amended defence mean paragraphs 41 and 43 of the counterclaim have no reasonable prospect of success is rejected.
Paragraphs 42C and 42D of the counterclaim – back-pay
Paragraphs 42C and 42D of the counterclaim are as follows:
42CAfter the plaintiff received the 2007 [salary] increase and in the 2007/08 financial year, as admitted in paragraph 12(a) above:
(a)he caused an unauthorised backpayment by the defendant to himself of the difference between his pre and post 2007 increase salary for the period April 2003 to 17 October 2007 in the amount of $271,077.70; and
(b)further to the backpayment referred to above he caused the defendant to remit to the Australian Taxation Office to his benefit the additional sum of $28,126.77 from the defendant’s funds as tax on the backpayment, rather than have that tax component deducted from the gross backpayment of $271,077.70.
Particulars
The defendant refers to an undated memorandum from the plaintiff to Romys Eobob, Finance Manager, to the effect of the above pleading. A copy of the memorandum is available for inspection at the offices of the defendant’s solicitors by prior appointment. The defendant will provide further evidence of the payments at discovery.
42DThe payments referred to in paragraph 42C were paid without a lawful basis, and further were in breach of the Fiduciary Obligations and the Integrity Terms, by reason of which the defendant has suffered loss and damage of $271,077.70 and $28,126.77.
Mr Bannon also says that the Trust’s board expressly approved a retrospective payment, which the Trust denies (in paragraph 12 of the defence). Paragraphs 42C and 42D of the counterclaim also raise issues more appropriate for determination at trial. It cannot be said they have no real prospect of success. There will need to be consideration of the board minute dated 18 October 2007 that Mr Bannon relies upon.[21] That minute certainly indicates an agreement to increase salary ‘since April 2003 up to present’. A question for the trial judge is whether the amounts claimed by the Trust were in fact amounts paid pursuant to that minute or not. In other words, whether or not the amounts paid were authorised. There will need to be evidence of the relevant calculations to determine whether, if authorised, the correct amounts were paid.
3. Should the Trust’s claim for repayment of unauthorised back pay be summarily dismissed on the basis it is statute-barred?
[21]Exhibit ‘KLW-45’ to the affidavit of Kate Wilkinson sworn 11 August 2016 (‘first Wilkinson affidavit’).
Mr Bannon submits that paragraphs 42C and 42D have no real prospects of success and should be struck out on the basis that they are statute-barred. The payments were made in about June 2008. Mr Bannon did not make a submission as to which section of the Limitation of Actions Act 1958 (Vic) (‘LAA’) he relies upon.
In response to Mr Bannon’s contention that paragraphs 42C and 42D of the counterclaim are statute-barred, the Trust relies on s 27 of the LAA,[22] which provides:
[22]Paragraph 3 of the Reply to Defence and Amended Counterclaim filed 21 November 2016.
27 Postponement of limitation periods in case of fraud or mistake
Where, in the case of any action for which a period of limitation is prescribed by this Act—
(a)the action is based upon the fraud of the defendant or his agent or of any person through whom he claims or his agent; or
(b)the right of action is concealed by the fraud of any such person as aforesaid; or
(c) the action is for relief from the consequences of a mistake—
the period of limitation shall not begin to run until the plaintiff has discovered the fraud or the mistake, as the case may be, or could with reasonable diligence have discovered it:
Provided that nothing in this section shall enable any action to be brought to recover or enforce any charge against or set aside any transaction affecting any property which—
(i)in the case of fraud, has been purchased for valuable consideration by a person who was not a party to the fraud and did not at the time of the purchase know or have reason to believe that any fraud had been committed; or
(ii)in the case of mistake, has been purchased for valuable consideration, subsequently to the transaction in which the mistake was made by a person who did not know or have reason to believe that the mistake had been made.
In Wardley Australia Ltd v Western Australia (‘Wardley’),[23] the High Court considered when time began to run in circumstances where a party was induced to enter into a guarantee on the basis of misleading statements, but only suffered loss when the guarantee was called upon. The Court held:[24]
We should … 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.
[23](1992) 175 CLR 514.
[24](1992) 175 CLR 514, 533 (Mason CJ, Dawson, Gaudron and McHugh JJ) (emphasis added).
Wardley does not prevent all interlocutory considerations of limitations questions.[25]
[25]Waller v Waller [2009] WASCA 61, [87].
Applying the principle expressed in Wardley, this is not the ‘clearest of cases’. The application of the LAA, and whether s 27 is applicable, is an issue more appropriate for determination by the trial judge than at interlocutory stage.
4. Should Mr Bannon’s claim for director/secretary fees (and superannuation on them) for any period before 1 July 2009 be struck out on the basis it is statute-barred?
The Trust’s application for strike-out was made pursuant to r 23.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘the Rules’), which provides:
23.02 Striking out pleading
Where an indorsement of claim on a writ or originating motion or a pleading or any part of an indorsement of claim or pleading—
(a) does not disclose a cause of action or defence;
(b) is scandalous, frivolous or vexatious;
(c) may prejudice, embarrass or delay the fair trial of the proceeding; or
(d) is otherwise an abuse of the process of the Court—
the Court may order that the whole or part of the indorsement or pleading be struck out or amended.
The principles concerning r 23.02 are clearly established and were not in dispute.[26]
[26]Vo v Nguyen [2013] VSC 304, [31]-[37],[41].
The Trust says that Mr Bannon’s claim for director/secretary fees should be limited to six years before the proceedings were issued (30 June 2015). That is, it should exclude periods before 30 June 2009. The Trust says that this is a claim in simple contract and s 5(1)(a) of the LAA is applicable. Section 5(1)(a) of the LAA provides:
5Contracts and torts
(1)The following actions shall not be brought after the expiration of six years from the date on which the cause of action accrued—
(a)Subject to subsections (1AAA), (1AA) and (1A) [which are not relevant here], actions founded on simple contract (including contract implied in law) or actions founded on tort including actions for damages for breach of a statutory duty;
…
Mr Bannon makes five key submissions in response and some in the alternative. Firstly, he rejects the Trust’s submission that this is a claim brought in simple contract and says, relying on Wardley, that it is inappropriate to deal with the questions of limitations at an interlocutory stage. Not all the evidence is before the Court. For instance, there is no accounting evidence.[27]
[27]The plaintiff relies on Wardley (1992) 175 CLR 514, 533 and TimbercorpFinance Pty Ltd (in liq) v Vivian (2016) 114 ACSR 198, 223 [77] (Derham AsJ).
Secondly, Mr Bannon says that the ‘monthly entitlement’ to director/secretary fees is not payable until a demand for payment is made. Mr Bannon says that the schedule to the employment contract does not stipulate that the monthly entitlement was payable on any particular date¾it does not provide for the timing of payment. Therefore, time did not begin to run until a demand was made on 25 September 2014.
The Trust rejects this argument: the contract schedule does not provide for amounts payable to be contingent upon making a demand. Rather, the right to payment is the same as the right to receive salary. Thus, the cause of action accrues upon the performance of work (each month when the services were provided). It says that new life cannot be breathed into a limitation period by a demand for payment which makes reference to stale causes of action.
I do not accept Mr Bannon’s submission that payment is not due until a demand is made. The cause of action accrues when work is done.[28] In Coburn v Colledge Lord Esher MR considered when time runs for payment of a solicitor. In the course of his decision, his Lordship stated:[29]
In the case of a person who is not a solicitor, and who does work for another person at his request on the terms that he is to be paid for it, unless there is some special term of the agreement to the contrary, his right to payment arises as soon as the work is done; and thereupon he can at once bring his action.
[28]Coburn v Colledge; Emery v Day [1834] ER 96.
[29][1897] 1 QB 703, 705. Lord Esher MR went on to note that solicitors stand in the same position: 706-7.
Coburn v Colledge has been cited with approval a number of times in Australian case law in support of the proposition that solicitors are entitled to payment when the work is done, rather than when a demand for payment is made.[30] The authors of Preston and Newsom on Limitation of Actions treat both Coburn and Emery v Day (dealing with payment for building works) as species of the same rule:[31] the cause of action accrues when the work is done, whether solicitor or not.
[30]Cockburn v Shehadie [2013] NSWSC 758, [39]; Batrouney v Foster [2015] VSC 230, [219], [226], [228].
[31]G H Newsom and Lionel Abel-Smith, Preston and Newsom on Limitation of Actions (3rd ed, 1953), 32.
The same proposition has been accepted in relation to building works in the Queensland District Court.[32]
[32]Foyle Enterprises Pty Ltd v Steve Parcell Building Services Pty Ltd [2015] QDC 225.
Similarly, in the UK Court of Appeal, Taylor LJ cited Coburn v Colledge in finding that a local council was entitled to payment for building works when it completed those works, rather than when it later issued a demand for payment.[33] Interestingly, his Honour noted that if the demand for payment was the relevant time, the plaintiff ‘could delay service of a demand indefinitely’ and then have a further six years in which to bring the action, potentially extending the limitation period greatly.[34]
[33]Swansea City Council v Glass [1992] QB 844.
[34][1992] QB 844, 853.
Thirdly, Mr Bannon submits that the Trust suffered no loss until a contingency was fulfilled and the loss crystallised.[35] The relevant contingency is said to be the financial viability of the Trust. Time started to run only at that point. Prior to this time, Mr Bannon says that there was no utility in seeking to recover sums when assets are seized and sold. It is unjust and unreasonable to expect Mr Bannon to commence proceedings before the Trust became financially viable. This contingency was satisfied, at the earliest, when the Trust received surplus funds from the receivers in late 2013.
[35]The defendant relies on Hardcastle v Mitch Enterprises Pty Ltd [2016] FCA 1569, [32] and Wardley (1992) 175 CLR 514, 532-3.
Four members of the High Court described the rationale of the rule as to contingent loss as follows:[36]
It is unjust and unreasonable to expect the plaintiff to commence proceedings before the contingency is fulfilled. If an action is commenced before that date, it will fail if the events so transpire that it becomes clear that no loss is, or will be, incurred. Moreover, the plaintiff will run the risk that damages will be estimated on a contingency basis, in which event the compensation awarded may not fully compensate the plaintiff for the loss ultimately suffered.
[36]Wardley (1992) 175 CLR 514, 533 (Mason CJ, Dawson, Gaudron and McHugh JJ).
So much is not in doubt. The real question here is whether, as the plaintiff contends, the loss in this case is properly to be characterised as ‘contingent’. There is authority that weighs against such an approach.[37] However, there is dicta from Gaudron J in the High Court which is potentially in Mr Bannon’s favour.[38] This is a question for the trial judge to determine.
[37]Emery v Day [1834] ER 96.
[38]Hawkins v Clayton (1988) 164 CLR 539, 601 (Gaudron J).
Fourthly, Mr Bannon submits that the entitlement to reimbursement arises under clause 13 (expenses) of the employment contract,[39] and that the cause of action arose when he demanded payment by invoice. He says that the accrued entitlements were carried forward until such a demand was made or the employment was terminated.
[39]The contract of employment is contained in Exhibit ‘KLW-44’ to the first Wilkinson affidavit.
I do not accept Mr Bannon’s submission concerning clause 13 of the employment contract. It allows for reimbursement of moneys expended, to be repaid upon Mr Bannon proffering an invoice or receipt. This is not relevant: Mr Bannon’s claim is not for reimbursement of moneys expended, but for director/secretary fees.
Fifthly, Mr Bannon claims that the director’s fees were ‘entitlements’ which ‘accrued and, if unpaid, are payable on termination of employment, or on demand subsequent upon breach’. Immediately above this passage, Mr Bannon’s submissions cite clauses 5 and 6 of Schedule 2 of the employment contract, but these do not appear to support the claim made in any rational way. Rather, they provide for certain entitlements, but do not say anything about when these are payable.
Nevertheless, given Mr Bannon’s submissions concerning contingency and loss, Wardley is applicable – this is not the ‘clearest of cases’. The Trust’s application to strike out paragraphs 15, 16 and 20 of the statement of claim must be dismissed.
5. Should Mr Bannon’s claim for GST on director/secretary fees be struck out on the basis that GST is not payable on remuneration for employment?
An issue concerning GST arose during submissions. GST appears in a single line entry in paragraph 16 of the statement of claim, which otherwise enumerates the director / secretary fees claimed by Mr Bannon. The Trust says that GST is not payable on remuneration. The Trust raised this in the affidavit of Sarina Lea Cowle sworn on 10 February 2017 (‘the first Cowle affidavit’) as part of its strike-out application, although it was not raised specifically in the summons.
Mr Bannon says that the claim for GST was made on work performed as a service – namely, acting as a director and secretary of companies, this being separate to his duties as employee and secretary of the Trust. The services arguably give rise to the claim for GST.
The GST issue is not one appropriate for a strike out application. It would be premature to decide that separately to the substantive issue of whether the director / secretary fees are payable and if so, how they should be categorised. Further, there were no submissions by either party concerning applicable taxation legislation. The Court declines to make orders striking out the GST component of the claim.
6. Should Mr Bannon’s claim for unpaid and accrued long service leave be struck out on the basis that this Court has no jurisdiction to hear such a claim?
The Trust says that Mr Bannon is wrongly pursuing an application for breach of the Long Service Leave Act 1992 (Vic) (‘LSL Act’) seeking orders under ss 57 and 160. Section 57 of the LSL Act provides for an employee’s entitlement to long service leave after 15 years. Section 72(2) of the LSL Act provides that an employee with accrued long service leave at the time his or her employment ends must be paid the amount of the entitlement.
Section 160(1) of the LSL Act then provides as follows:
(1) An employee who is owed any money by an employer under this Act or any other Act, or under any employment agreement or order made under this Act or any other Act, may take proceedings in the Industrial Division of the Magistrates' Court to recover the money owing. The debt must arise out of the employment relationship.
The Trust relies on Finch v The Heat Group Pty Ltd(No 5)[40] (‘Finch’) as authority for the proposition that such claims may only be brought in the Magistrates’ Court.
[40][2016] FCA 191, [85].
Mr Bannon submits that he is entitled to bring a long service leave claim in this Court. LSL Act s 160 is permissive (‘may’), not mandatory (‘must’). He agrees that the Court cannot hear prosecutions under LSL Act ss 153 and 168 (dealt with below), but it can hear recovery proceedings under s 160, which are not exclusive to the Industrial Division of the Magistrates’ Court. Mr Bannon says that Finch is wrong as it refers to Houston v Dewi Thomas Pty Ltd (‘Houston’),[41] which pre‑dates amendments to s 85 of the Victorian Constitution dealing with this Court’s jurisdiction.
[41][1967] VR 300.
I find that this Court has jurisdiction to hear Mr Bannon’s for payment of his long service leave entitlements.
Section 85 of the Constitution Act 1975 (Vic) provides:
(1)Subject to this Act the Court shall have jurisdiction in or in relation to Victoria its dependencies and the areas adjacent thereto in all cases whatsoever and shall be the superior Court of Victoria with unlimited jurisdiction.
…
(5)A provision of an Act, other than a provision which directly repeals or directly amends any part of this section, is not to be taken to repeal, alter or vary this section unless —
(a)the Act expressly refers to this section in, or in relation to, that provision and expressly, and not merely by implication, states an intention to repeal, alter or vary this section; and
(b)the member of the Parliament who introduces the Bill for the Act or, if the provision is inserted in the Act by another Act, the Bill for that other Act, or a person acting on his or her behalf, makes a statement to the Council or the Assembly, as the case requires, of the reasons for repealing, altering or varying this section; and
(c) the statement is so made—
(i) during the member's second reading speech; or
(ii)after not less than 24 hours' notice is given of the intention to make the statement but before the third reading of the Bill; or
(iii)with the leave of the Council or the Assembly, as the case requires, at any time before the third reading of the Bill.
…
(8)A provision of an Act that confers jurisdiction on a court, tribunal, body or person which would otherwise be exercisable by the Supreme Court, or which augments any such jurisdiction conferred on a court, tribunal, body or person, does not exclude the jurisdiction of the Supreme Court except as provided in subsection (5) .
Section 85(1) gives prima facie jurisdiction to this Court. That jurisdiction can only be removed in accordance with s 85(5). The legislature has done so expressly in relation to s 168 claims (dealt with below), but not claims under ss 72(2) and 160.
Section 85(8) of the Constitution also indicates that conferral of power on the Magistrates’ Court ought not to be taken to imply a removal of that jurisdiction from this Court. It is a grant to the Magistrates’ Court rather than a removal from this Court.
As to Finch, it relies upon Houston. Houston pre‑dates ss 85(5) and 85(8) of the Constitution, which were introduced in 1991.[42] Accordingly, the Court rejects the Trust’s submission that Finch is applicable here. It will make orders dismissing the Trust’s application to strike out paragraph 39 of the statement of claim and paragraph F of the prayer for relief.
7. Should Mr Bannon’s claim for a civil penalty to be imposed on the Trust be struck out on the basis he has no standing under the Long Service Leave Act to seek that relief?
[42]Constitution (Jurisdiction of Supreme Court) Act 1991 (No 35 of 1991) s 4.
Turning now to Mr Bannon’s application that a civil penalty be imposed on the Trust.
The Trust says that Mr Bannon seeks the imposition of a fine under s 72(2) of the LSL Act which is not available. Section 72 provides as follows:
72 What is to happen if employment ends before leave taken
(1)If the employment of an employee ends before he or she has taken all the long service leave to which he or she is entitled, the employee is to be regarded as having started to take his or her leave on the day the employment ended.
(2)On that day the employee’s employer must pay the employee the full amount of the employee’s long service leave entitlement as at that day.
Penalty: 20 penalty units.
(3)An employee's long service leave entitlement under this section includes any entitlement that accrued as a result of the ending of the employee's employment.
I have found above that a claim for payment of the outstanding leave under ss 72(2) and 160 is not barred. The further question here is whether s 72(2) also allows Mr Bannon to seek the imposition of a penalty on the Trust in this Court.
The Trust says that to seek a fine under s 72 is a ‘prosecution’ and that s 154 of the LSL Act prevents Mr Bannon from bringing a prosecution. Section 154 provides that only the Minister, Chief Administrator or a departmental officer with written authorisation may authorise the bringing of a prosecution. The Court also lacks jurisdiction by virtue of s 153, which provides as follows:
153Proceedings for offences to be brought in Industrial Division of the Magistrates' Court
(1)If a person is charged with an offence against this Act, the charge must be heard, and all penalties recovered, before the Magistrates' Court sitting as the Industrial Division.
(2)Despite anything to the contrary in any Act, the jurisdiction of the Industrial Division of the Magistrates' Court in relation to any matter referred to in subsection (1) is exclusive.
Section 168(a) of the LSL Act prevents a ‘proceeding or matter of a kind referred to in section 153(1)’ from being brought in this Court.
The Trust says that s 92 of the LSL Act is the only provision contemplating recovery of a fine by an employee, but it has no application here and has not been pleaded.
Mr Bannon agrees that LSL Act s 92 is not relevant to the proceeding. Mr Bannon states, at paragraph 50 of his written submissions that he has not sought that penalty units be paid to him but simply sought the recovery of his LSL entitlements under s 160 of the Act. That is, he relies on s 160 of the LSL Act. However, he pleads reliance in paragraph 40 of the statement of claim on s 72(2) in the seeking of the penalty, though not an order that the penalty imposed be paid to him.
The question, then, is whether Mr Bannon’s claim for a penalty to be imposed on the Trust is a ‘prosecution’ for an ‘offence’, such that ss 153, 154 and 168 prevent Mr Bannon from bringing such an action in this Court. I find that to seek to impose such a penalty is a ‘prosecution’ for an ‘offence’ within the meaning of the LSL Act and, as such, is not available to Mr Bannon.
The Act contains four penalty provisions in Part 5 (including ss 72 and 73), none of which exceeds 20 penalty units and none of which are expressly said to be offences. Parts 8 and 9 contain provisions (ss 87, 88 and 92) which allow for the imposition of larger penalties, but are expressly stated not to be offences. Section 164, in Part 16, provides that:
164 Attempting, aiding, inducing etc. offences
A person who—
(a) attempts to contravene; or
(b) aids, abets, counsels or procures a person to contravene; or
(c)induces, or attempts to induce, a person whether by threats or promises or otherwise to contravene—
a provision of this Act for which a penalty is specified is guilty of an offence against that provision and is liable to the penalty specified for a contravention of that provision.
It is evident that the LSL Act considers s 72(2) to create an offence within the meaning of ss 153 and 154 because, if it did not, s 153 would be deprived of any operation. Sections 153 and 154 restrict prosecution for offences, so the Act must create some offences. What are these offences? The provisions dealing with penalties imposed under Parts 8 and 9 are said by the Act not to constitute offences. This leaves only those in Part 5 (including ss 72 and 73) and s 164. These must be considered ‘offences’ as that term is used in the LSL Act.
The conclusion that s 72(2) creates an offence is also strengthened by s 164. As quoted above, that section provides that a person is ‘guilty of an offence’ for aiding or abetting contravention of a provision including s 72(2). It would be absurd for s 164 to create an offence for a secondary wrongdoer, but for a primary wrongdoer not to be guilty of an offence.
Section 72(2) therefore creates an offence. It is now necessary to answer the second question posed above: is Mr Bannon’s pursuit of a penalty under s 72(2) a ‘prosecution’ for that offence?
I consider that it is. According to Mr Bannon’s own submissions, the penalty imposed will go to the State rather than to him. The penalty sought is in excess of that which may be owing under s 160 – this is not mere ‘recovery’. It is, rather, an attempt to punish. The seeking of a monetary penalty exceeding that available as recovery of debt and motivated by punishment is a prosecution. Section 159 also treats the imposition of a penalty under s 73 as a ‘prosecution’, and the latter provision is substantially similar to s 72.[43]
[43]Out of an abundance of caution, I would reject an argument that the express reference to ‘prosecution’ in s 159 in relation to s 73 indicates an intention, by contrast, not to treat s 72 penalties as a prosecution. Rather, that difference is explained by the fact that there is simply no need for an equivalent to s 159 (which reverses the onus of proof after the death of the employee) in relation to s 72.
To allow Mr Bannon to bring such an action would entirely circumvent the restrictions put in place by s 154.
Accordingly, paragraph 40 of the statement of claim and paragraph G of the prayer for relief will be struck out on the basis that Mr Bannon does not have a cause of action available to him.
8. Should Mr Bannon be required to deliver up documents that are owned by the Trust and that he has in his possession, custody or control?
The Trust submits that Mr Bannon is holding a large quantity of its property and that it should be returned forthwith. The first Cowle affidavit deposes that Mr Bannon has retained its confidential and sensitive information. This came to light in the discovery process. The Trust relies upon Mr Bannon’s affidavit of documents sworn on 30 January 2017 and a letter from Mr Bannon’s solicitors dated 30 January 2017.[44] That affidavit deposes that Mr Bannon has:
[44]Exhibit ‘KLW-88’ to the affidavit of Kate Wilkinson sworn 20 February 2017 (‘the sixth Wilkinson affidavit’).
(a) a 2011 back up of the Trust’s computer server;
(b) 14 floppy disks of information;
(c) red and white USB sticks of information; and
(d) a bundle of original documents of the Trust.
Mr Bannon’s affidavit of documents lists the documents he considers to be relevant to the current litigation. The Trust is not able to discern for itself what electronic records or original documents in the ‘bundle’ are relevant.
The first Cowle affidavit and the affidavit of Sarina Lea Cowle sworn on 24 February 2017 (‘the second Cowle affidavit’) depose that Mr Bannon emailed, to his personal email address, documents which are its property. A sample of emails are exhibited.[45]
[45]Exhibit ‘SLC-2’ to the second Cowle affidavit.
The Trust says it demanded return of the property by letter dated 11 August 2016.[46]
[46]Exhibit ‘SLC-1’ to the second Cowle affidavit.
The Trust says it is no answer to say that the documents cannot be given back unless the property is particularised. That is entirely evasive.
The Trust has no objection to Mr Bannon retaining copies of the documents necessary for protection of lawful interests, but originals must be returned. It says that the Court has the power to return of the property under its general supervisory jurisdiction or as part of the discovery process.
Mr Bannon submits that this is an issue for trial. It is not addressed in the pleadings. There is no counterclaim for delivery up. He also says that the documents have not been identified with any particularity, precision or certainty. It is necessary to specify the allegations regarding confidential information and provide proper particularisation.
Mr Bannon believes that he correctly retains the documents listed in the affidavit of documents. He has the right to inspect and take copies of them as a former director. It is appropriate to retain the documents when the Trust has not yet discovered them. The Trust caused documents to be shipped to Nauru in mid-2015. He says he has photographs of boxes of these documents. Further, the claim that Mr Bannon emailed documents to his personal email address has no consequence. Mr Bannon was asked to do work after his employment.[47]
[47]Fourth Affidavit of Paul Bannon sworn on 27 February 2017.
Mr Bannon says that the first Cowle affidavit is not admissible. The Trust’s solicitor does not act for the subsidiary companies; the solicitor cannot say that she is authorised to claim the return of the documents.
The CPA is relevant to the application for delivery up. Section 9(1)(e)(i) of the CPA provides:
Court's powers to further the overarching purpose
(1)In making any order or giving any direction in a civil proceeding, a court shall further the overarching purpose by having regard to the following objects—
…
(e)minimising any delay between the commencement of a civil proceeding and its listing for trial beyond that reasonably required for any interlocutory steps that are necessary for—
(i)the fair and just determination of the real issues in dispute; and …
Section 55 of the CPA provides:
Court orders for discovery
(1)A court may make any order or give any directions in relation to discovery that it considers necessary or appropriate.
As a preliminary issue, the first Cowle affidavit is admissible. Rule 43.03 provides that an interlocutory affidavit based on information and belief must state the grounds for that information or belief. Ms Cowle does not purport to act for the subsidiary companies and nor does she claim the property belongs to them. Indeed, she deposes that the property belongs to the Trust.[48] She deposes to her affidavit as the Trust’s solicitor.
[48]At paragraph 13 of the first Cowle affidavit and it’) paragraphs 2 and 3 of the second Cowle affidavit.
On the substantive question, Mr Bannon does not deny that he has the Trust’s property in his power, possession or custody.[49] His affidavit of documents deposes that he does have certain property. During submissions it was indicated that the documents are in his solicitor’s possession.[50]
[49]Exhibit KLW-88 to the sixth Wilkinson affidavit and Mr Bannon’s affidavit of documents.
[50]Transcript of proceedings, 27 February 2017, p 108.
The Trust has not raised the proper possession of the documents in the proceedings.
Section 9(1)(e)(i) of the CPA indicates the Court must minimise delay beyond that reasonably required for any interlocutory steps that are necessary for, amongst other things, the fair and just determination of the real issues in dispute and the preparation of the case for trial. If the real issues in dispute are those defined by the pleadings, then interlocutory applications going beyond those issues frustrate the overarching purpose.
The Trust says that the documents are needed for discovery. Some have been discovered, but perhaps others have not. The Trust should be in the position of being able to make its own assessment as to which of its own documents are, or are not, relevant to the proceeding. This is particularly the case in circumstances where Mr Bannon has deposed that: ‘The electronic drives described above contain documents that are both relevant and not relevant to the proceeding. Save for the documents that I intend to rely on in the proceeding, I have not discovered the documents referred to above because I verily believe that all of those documents are, or should be, in the possession of NPRT.’[51]
[51]Mr Bannon’s affidavit of documents.
The consequence of this is that without the delivery up orders, documents which are relevant to the proceeding may not be discovered.
It is necessary to grant the orders for delivery up for discovery purposes. Orders will be made to deliver up the documents specified in paragraph 3 of Mr Bannon’s affidavit of documents. Such orders will made pursuant to s 55 of the CPA.
Conclusion
The short answers to the questions posed in this case are outlined at the beginning of this judgment. The parties are requested to confer as to the appropriate form of orders.
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