Combined Insurance Company of America trading as Combined Insurance Company of Australia v Trifunovski (No 2)

[2009] FCA 1093

FEDERAL COURT OF AUSTRALIA

Combined Insurance Company of America trading as Combined Insurance Company of Australia v Trifunovski (No 2) [2009] FCA 1093

COMBINED INSURANCE COMPANY OF AMERICA T/AS COMBINED INSURANCE COMPANY OF AUSTRALIA v BLAGOJA TRIFUNOVSKI, HERACLEA PTY LIMITED, ROGER COLIN HASLER, R & L TRAINING SERVICES PTY LIMITED, JOSEPH VIVIL RIENZIE PERIES, SHANE PEREZ, STEPHEN WILSON, WILLIAM DICINOSKI and FETIE VICKI DICINOSKI

NSD 1860 of 2008

PERRAM J
10 SEPTEMBER 2009
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1860 of 2008

BETWEEN:

COMBINED INSURANCE COMPANY OF AMERICA T/AS COMBINED INSURANCE COMPANY OF AUSTRALIA
Applicant

AND:

BLAGOJA TRIFUNOVSKI
First Respondent

HERACLEA PTY LIMITED
Second Respondent

ROGER COLIN HASLER
Third Respondent

R & L TRAINING SERVICES PTY LIMITED
Fourth Respondent

JOSEPH VIVIL RIENZIE PERIES
Fifth Respondent

SHANE PEREZ
Sixth Respondent

STEPHEN WILSON
Seventh Respondent

WILLIAM DICINOSKI
Eighth Respondent

FETIE VICKI DICINOSKI
Ninth Respondent

JUDGE:	PERRAM J
DATE OF ORDER:	10 SEPTEMBER 2009
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.The section of the cross-claim headed “Details of Claim” be struck out.

2.Declarations 1 and 2 of the cross-claim be struck out.

3.Paragraphs 11 and 13 of the cross-claim be struck out.

4.The cross-claimants are to pay the applicant’s costs of the notice of motion.

5.Paragraph 11 of the amended defence be struck out.

6.Leave be granted to each agent to re-plead paragraphs 11 and 13 to raise the matter which was formerly in declarations 1 and 2 of the cross-claim.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

The text of entered orders can be located using eSearch on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1860 of 2008

BETWEEN:

COMBINED INSURANCE COMPANY OF AMERICA T/AS COMBINED INSURANCE COMPANY OF AUSTRALIA
Applicant

AND:

BLAGOJA TRIFUNOVSKI
First Respondent

HERACLEA PTY LIMITED
Second Respondent

ROGER COLIN HASLER
Third Respondent

R & L TRAINING SERVICES PTY LIMITED
Fourth Respondent

JOSEPH VIVIL RIENZIE PERIES
Fifth Respondent

SHANE PEREZ
Sixth Respondent

STEPHEN WILSON
Seventh Respondent

WILLIAM DICINOSKI
Eighth Respondent

FETIE VICKI DICINOSKI
Ninth Respondent

JUDGE:	PERRAM J
DATE:	10 SEPTEMBER 2009
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. By a notice of motion dated 20 August 2009, the applicant, Combined Insurance Company of America trading as Combined Insurance Company of Australia, (“Combined”), seeks to strike out the cross-claims which have been filed on behalf of the first to the seventh cross-claimants.  The first to seventh cross-claimants were formerly agents of the applicant and on their behalf, as I understand it, marketed insurance.  The basic issue between the parties in the proceedings is whether the agents were in a relationship of employment with Combined.  The agents contend that they were employees;  Combined denies this proposition. 

2. To vindicate the agents’ position they commenced proceedings before the Chief Industrial Magistrates Court of New South Wales in 2007, claiming the entitlements alleged to be due to them as employees under the Insurance Industry Award 1998 (Cth).  In those proceedings, they claimed annual leave loading, sick leave, long service leave and entitlements to certain public holidays. The contracts between the parties were written. Each contained a stipulation that the relationship between Combined and each of them was that of independent contractors, rather than employment. 

3. Confronted with the proceedings in the Chief Industrial Magistrates Court, Combined then commenced proceedings in this Court contending that each of the agents has misled it by agreeing to the inclusion in the contractual arrangements of that clause. That misleading conduct was said to give rise to estoppels and, in relation to the agents’ corporate vehicles (who are also parties to these proceedings), also a breach of s 52 of the Trade Practices Act 1974 (Cth) (“the TPA”). The agents contested the jurisdiction of this Court which was rejected by me: Combined Insurance Co of America t/as Combined Insurance Co of Australia v Trifunovski (2009) 256 ALR 25.

4. Subsequent to that decision, the proceedings before the Chief Industrial Magistrates Court have successively been transferred first to the Supreme Court and then to this Court so that there is now pending before this Court the original claims of each of the agents, the main claim brought by Combined and now, additionally, the cross-claims which are the subject of this application.  Additionally, the agents have cross-claimed in Combined’s proceedings, making essentially the same allegation as that which is made by Combined,  for they allege that they were misled by Combined into thinking that they were independent contractors when they say that they were, in fact, employees. 

5. The difference between the case brought by Combined and the case brought by its agents differs at the level of what each says it would have done but for the alleged representations. For its part, Combined says had it known that the true relationship was that of employment, it would have terminated that employment. For their part, the agents say that had they known that they were actually employees then they would have insisted on formally becoming or being treated as employees.  It is those cross-claims which Combined now seeks to strike out.  As the matter was argued, there were five issues. 

6. These were: first, whether paragraph 11 should be struck out; secondly, whether prayers 1 and 2 of the claims relief should be struck out; thirdly, whether a section of the pleading headed “Details of the Claim” should be struck out; fourthly, whether paragraph 13 should be struck out; and, finally the question of costs.

   Paragraph 11

7. Paragraph 11 of the cross-claim provides as follows:

   The conduct of the Cross-Respondent has caused the First Cross-Claimant to suffer a loss by it not being treated as an employee. 

8. Appended to that claim are a series of particulars which set out allegations about forgone sick leave for the years 1998 to 2005, together with cumulative allegations relating to superannuation and annual leave.  Combined’s complaint about paragraph 11 is that it does not plead the material facts establishing causation.  It is established that such an allegation must be made.  French J in Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 said this at 222:

   The material facts establishing the necessary causal link should be pleaded. In cases of contravention of s 52 said to be constituted by misrepresentation this will generally require more than appears in the opening words of para 50 “by reason of such conduct.

9. It was ultimately accepted, as I think it had to be, that paragraph 11 of the cross-claim was an allegation of foregone employment.  So much, I think, follows inevitably from the words “by not being treated as an employee”.  The gravamen of Combined’s complaint was not so much that that allegation was missing, but rather that it was not made clear, or at all, who the alleged hypothetical employer would be or upon what terms that employment might take place.  It seems to me that that allegation is a well-founded one, although it was tolerably clear from Mr Britt’s oral submissions that the allegation is likely to be that the foregone employment was with Combined itself. The fact, however, is that the pleading does not say that and, as it stands, one simply does not know what the terms of the employment would be. 

10. This matters because in truth the allegation which needs to be in paragraph 11 is an allegation of what each applicant would have done if the alleged misrepresentations had not been made.  It follows that there needs to be an allegation of the events which would have happened (absent the representations) and that, inevitably, requires an allegation which identifies the employer and the terms of the employment.  It follows that paragraph 11 must be struck out.  There were a series of other complaints made about the level of particularisation which accompanied paragraph 11. In the circumstances which obtain, where paragraph 11 has been struck out, it is not necessary to deal with those. 

11. I note that the claim for superannuation was not pressed before me and that it is accepted that the only entitlement to sick leave that each applicant will have is in respect of days for which the applicant was, in fact, sick.  I make those remarks to reduce the scope of any further debate between the parties.  I then turn to the second matter.

    Prayers 1 and 2

12. The cross-claim contains, in the section dealing with relief, a claim for two declarations.  It is accepted that those declarations bear no relationship to the cross-claim.  It follows that those two paragraphs must be struck out.  It was clear that they were not, however, merely a frolic.  Paragraph 15 of the amended statement of claim alleges that had the agent not made the representations to Combined about their status as independent contractors that it would have, presumably forthwith, terminated the contracts of employment. 

13. Mr Britt made plain that part of the defences which each agent wished to articulate to that claim was an allegation that any such act of termination would have been contrary to section 298K of the Workplace Relations Act 1996 (Cth) (“ the WR Act”), in that that reason for terminating the employment would have been a prohibited reason within the meaning of section 298L(1)(xiii) of the WR Act. The current form of the defence to paragraph 15 is a mere denial which does not make plain that those provisions of the WR Act are relied upon.

14. Mr Britt indicated, and I accept, that that which is presently part of the relief claimed in the cross-claim really should be part of the denial to paragraph 15 of the amended statement of claim. That denial is presently contained in paragraph 11 of the defence. It seems to me that must be right.  Although it is not sought by Combined, I therefore strike out paragraph 11 to the defence and I grant leave to each agent to re-plead that paragraph in accordance with the remarks I have just made.

15. I move to the third matter, which is headed Paragraph 13.

    Paragraph 13

16. Paragraph 13 of the cross-claim provides as follows:

    The Cross-Respondent made the representations set out in paragraphs 4, 6, 7, 8, 9 and 10 of the First Cross-Claim with the intention that the First Cross-Claimant would act upon the representations. 

17. Mr Saunders, who appears for Combined, submits that that allegation is irrelevant to a claim under s 52 of the TPA. In Fraser v NRMA Holdings Ltd (1995) 55 FCR 452, the Full Court of this Court said (at 565):

    For the purposes of s 52, if by reason of what was said and what was left unsaid the conduct of the corporation is misleading and deceptive or likely to mislead or deceive, a contravention would occur even if the corporation through its directors and officers did not have knowledge of the undisclosed facts which rendered the conduct in breach of s 52. A contravention of s 52 may occur without knowledge or fault on the part of the corporation, and notwithstanding the exercise of reasonable care.

18. Generally speaking, that is no doubt a correct proposition.  Mr Britt pointed, however, to a decision of French J in Johnson Tiles Pty Ltd v Esso Australia Ltd (2000) 104 FCR 564 at 591 [66] where his Honour, having just referred to the passage in Fraser v NRMA Holdings Ltd I have set out above, went on to say:

    That is not to say that knowledge may not be a relevant circumstance. For in a case where disclosure would reasonably be expected of a fact if that fact were known to the corporation, failure to make disclosure may convey the implication that that fact is not known.

19. Johnson Tiles was a case which was concerned with pleading.  However, it is apparent that the passage to which I was taken was concerned with the question of the impact of knowledge in a misrepresentation by silence case.  It may be accepted, I think, that in such a circumstance knowledge is part of the material facts.  In a case such as the present where the representation is an express one, however, I do not think that knowledge is one of the material facts.  I accept that forensically at the trial evidence may be led to prove that Combined had a particular intention. 

20. If that evidence is led, it will not be led to prove a material fact; rather, it will be led for the purpose of allowing an inference to be drawn that that which was intended to be done was in fact done. That fact may well be a relevant fact to the proceedings but it is not one of the material facts.  O 11 r 2 requires that a pleading:

    … shall contain, and contain only, a statement in a summary form of the material facts on which the party relies…

21. Having concluded that the allegation is, at least in this proceeding, not an allegation about a material fact, it follows that it fails to comply with O 11 r 2 and must be struck out.

    Details of Claim

22. Another part of the pleading is headed Details of Claim.  It was accepted that this should not be in the cross-claim.  I understand that it has been done on a misapprehension of what was required by the rules.  It is not required and since Combined is asking for it to be struck out, I will strike it out.

    Costs

23. I turn then to the question of costs. The cross-claim in respect of which the applicant was brought is a cross-claim which arose wholly under the TPA. That is, there is no allegation in it which in any way called in aid of the provisions of the WR Act or in any way gives rise to an issue about them. It is true that there were two declarations sought, which did raise an issue under s 298K of the WR Act, but it was accepted that they should not be there and I have struck them out.

24. I do not think that their temporary presence is sufficient to transform this cross-claim into a matter which arises under the WR Act.  Accordingly, the cross-claim is not a case to which s 824 of the former WR Act would have applied.  It is permissible to award costs in a proceeding in which one part of a case arises under the WR Act, but a separate part does not.  See Bahonko v Sterjov (2008) 166 FCR 415 at 424 [31]-[32] per Gyles, Stone and Buchanan JJ. It follows that I have the power to make a costs order on this application.

25. Mr Britt submitted that I should not make such an order and that the order should be costs in the cause. The basis upon which that submission was put was that the agents had had some success and that the correspondence showed that they had made some efforts to address the issues which arise.  I do not think that the first submission should be accepted.  Combined has substantively succeeded on the application. It is true that I have not, as it sought, struck out the entire cross-claim, but I have struck out critical parts of it and I have shorn the cross-claim of parts which should not be there and of allegations which should not have been made. 

26. In those circumstances, I see no reason to depart from the ordinary rule which is that costs follow the event.  Mr Saunders applied that those costs be payable forthwith.  Ordinarily, an order that costs be payable forthwith may be made where there is some suggestion that a party may be in need of the funds in order to continue the litigation.  It is also, on occasion, ordered in the same way that indemnity costs are sometimes ordered, that is, to mark some element of disapprobation towards particular conduct.

27. Whatever the basis on which one approaches that question, I do not think that the conduct in question approaches the threshold for the making of that kind of order and I decline so to order.

I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.

Associate:

Dated:       10 September 2009

Counsel for the Applicant:	Mr T. Saunders
Counsel for the Respondents:	Mr A. Britt

Date of Hearing:	10 September 2009
Date of Judgment:	10 September 2009