Dove v Everforex Financial Pty Ltd
[2022] FedCFamC2G 752
Federal Circuit and Family Court of Australia
(DIVISION 2)
Dove v Everforex Financial Pty Ltd [2022] FedCFamC2G 752
File number: SYG 2413 of 2020 Judgment of: JUDGE CAmERON Date of judgment: 9 September 2022 Catchwords: PRACTICE & PROCEDURE – late amendment of pleading – relevant considerations.
PRACTICE & PROCEDURE – application for transfer of matter to the Federal Court of Australia – relevant considerations.
Legislation: Fair Work Act 2009 (Cth) s 570
Competition and Consumer Act 2010 (Cth) sch 2 ss 18, 31
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 143, 153, 190
Corporations Act 2001 (Cth)
Federal Court of Australia Act 1976 (Cth) s 32AD
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) rr 1.04, 7.01, 8.02, sch 1 item 4
Federal Court Rules 2011 (Cth) r 16.21
Cases cited: Commonwealth v Verwayen (1990) 170 CLR 394
SZSRR v Minister for Immigration and Border Protection [2017] FCA 328
Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175
Imobilari Pty Ltd v Opes Prime Stockbroking Ltd (2008) 252 ALR 41
J & A Vaughan Super Pty Ltd (Trustee) v Becton Property Group Limited [2014] FCA 581
Australian Securities and Investments Commission v Cassimatis (2013) 220 FCR 256
Bradken Resources Pty Ltd v Lynx Engineering Consultants Pty Ltd (2008) 78 IPR 586
Stanley v Service to Youth Council Inc (No 3) (2014) 225 FCR 357
Melbourne Stadiums Ltd v Sautner (2015) 229 FCR 221
Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v ALS Industrial Australia Pty Ltd (No 2) (2015) 235 FCR 366
Carr v Empirical Works Pty Ltd & Anor [2019] FCCA 1114
Rakic v Johns Lyng Insurance Building Solutions (Victoria) Pty Ltd (Trustee) (2016) 259 IR 47
Division: Fair Work Division Number of paragraphs: 39 Date of hearing: 18 August 2022 Place: Sydney Counsel for the Applicant: Mr C. Lambert Solicitors for the Applicant: Cohen & Krass Counsel for the Respondent: Mr I. Neil SC and Mr I. Leong Solicitors for the Respondent: SHL & Associates Lawyers ORDERS
SYG 2413 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: CHRISTIAN CHARLES DOVE
First Applicant
GFY MARKETS PTY LTD
ACN 629 248 031
Second ApplicantAND: EVERFOREX FINANCIAL PTY LTD (ACN 115 459 124)
Respondent
AND BETWEEN: EVERFOREX FINANCIAL PTY LTD (ACN 115 459 124)
Cross-ClaimantAND: CHRISTIAN CHARLES DOVE
First Cross RespondentDK INTERNATIONAL PTY LTD ACN 632 006 494
Second Cross RespondentGFY MARKETS PTY LTD ACN 629 248 031
Third Cross Respondent
order made by:
JUDGE CAMERON
DATE OF ORDER:
9 SEPTEMBER 2022
THE COURT ORDERS THAT:
1.The respondent/cross-claimant have leave to file within 14 days a further amended statement of cross claim in the form of the draft document annexed to the affidavit of Jonathan Lu affirmed 29 July 2022 and filed on 1 August 2022.
2.Following compliance with order 1, the proceeding be transferred to the Federal Court of Australia at Sydney.
3.The respondent/cross-claimant pay the costs of the first applicant/first cross-respondent, the second cross-respondent and the second applicant/third cross respondent thrown away by reason of the further amendment of the statement of cross claim and that in default of agreement those costs be taxed in accordance with the Federal Court Rules 2011 (Cth).
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE CAMERON:
Introduction
The first applicant, Mr Dove, alleges that he was employed by the respondent, Everforex Financial Pty Ltd (“Everforex”), as its chief executive officer from 14 January 2019 until 5 February 2020. On 23 October 2020 he commenced this proceeding alleging that he had been constructively dismissed and that Everforex had breached a number of provisions of the Fair Work Act 2009 (Cth) (“FW Act”), the Banking, Finance and Insurance Award 2020 (“Award”), sch.2 to the Competition and Consumer Act 2010 (Cth) (“ACL”) and his employment contract. Mr Dove’s application seeks declarations, compensation, damages, interest and costs.
On 28 January 2021 Everforex filed a cross-claim against Mr Dove and DK International Pty Ltd as first and second cross-respondents respectively, alleging breaches by Mr Dove of contractual, fiduciary and statutory duties he owed it and alleging the knowing involvement of DK International Pty Ltd in that conduct. It also seeks declarations, compensation, damages, interest and costs.
On 16 July 2021 GFY Markets Pty Ltd (“GFY Markets”) was granted leave to join the proceeding as the second applicant. On 21 July 2021 it filed a statement of claim seeking damages, interest and costs and a declaration that Everforex held the amount of $403,991.24 on constructive trust for and to the benefit of it, GFY Markets.
On 1 October 2021 Everforex filed an amended cross-claim joining GFY Markets as the third cross-respondent.
On 1 August 2022 Everforex filed an application in a proceeding in which it sought the following interlocutory orders:
1.An order that these proceedings SYG2413/2020 be transferred to the Federal Court of Australia pursuant to Rule 8.02 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 or otherwise.
2.An order granting leave to Everforex Financial Pty Ltd now known as Xmeta Pty Ltd ACN 115 459 124 (“Everforex”) to further amend its amended Cross Claim filed on 5 October 2021 in the form annexed to the affidavit of Jonathan Lu filed in support of this Application in a Proceeding.
3.An order that Everforex file and serve its further amended Cross Claim within 14 days of the orders made.
4.An order that all issues of and concerning liability be heard and determined prior to and separately from all issues of and concerning damages.
5.An order that the first to third cross respondents to the further amended cross claim, jointly and severally, pay Everforex’s costs of and incidental to this application in a proceeding forthwith.
…
These reasons concern that application.
Cross Claim
The amended cross claim alleges that Mr Dove is:
(a)a director and shareholder of GFY Markets;
(b)the sole director of and joint shareholder in DK International Pty Ltd;
(c)a shareholder in Merchant FX Pty Ltd (“Merchant FX”).
It also alleged that:
(a)contrary to equitable and statutory duties he owed Everforex, Mr Dove directed Everforex funds:
(i)to himself as additional but unauthorised salary;
(ii)to a personal secretary who was not an Everforex employee;
(iii)to five further identified individuals; and
(iv)to the following companies or businesses: FX Support Limited; Forex Kings Pty Ltd; Prime XM Technologies Ltd; DK International (presumably the second cross respondent); Forex Store AU; GFY Markets; Merchant FX; Milling Store; Forex Global Pty Limited; and Stripe Payment Platform;
(b)GFY Markets was unjustly enriched at the expense of Everforex by the payments to it authorised by Mr Dove;
(c)alternatively, Mr Dove’s knowledge that he had caused payments to be made to GFY Markets pursuant to a purported introducing broker agreement, he thereby being in breach of his duties to Everforex, was imputed to GFY Markets or alternatively GFY Markets knew of Mr Dove’s breaches of duty, such that the Introducing Broker Agreement, if validly entered into, was voidable and was avoided and GFY Markets was liable to make restitution to Everforex of payments made under the contract;
(d)DK International Pty Ltd knew that Mr Dove had breached his fiduciary duty to Everforex by setting up a Stripe Payment Platform account in its name and directing funds to that account for the benefit of DK International Pty Ltd and to the detriment of Everforex, so held that account with the Stripe Payment Platform on a constructive trust for the benefit of Everforex;
(e)DK International Pty Ltd knew that Mr Dove had breached his fiduciary duty to Everforex by causing it, DK International Pty Ltd, to purchase an MT5 platform/server and rent it to Everforex, causing Everforex loss and damage, such that DK International Pty Ltd holds the MT5 trading platform/server on constructive trust for the benefit of Everforex;
(f)following the termination of Mr Dove’s employment with Everforex, Everforex has been denied access to the MT5 trading platform/server preventing it from operating its business and so causing a loss of profits; and
(g)at the conclusion of his employment Mr Dove took, but was obliged to return, certain items of Everforex’s property.
Everforex seeks by its proposed amendment to allege additionally that:
(a)Mr Dove breached his duties to Everforex by causing it to make payments to KAF Company Pty Ltd, Original Bull Pty Ltd and to him, for the benefit of GFY Markets, which it had no obligation to make and which it never consented to or authorised, preferring the interests of those other companies to Everforex’s interests and causing it loss and damage;
(b)Mr Dove and Everforex negotiated Messrs Dove and Starkey’s potential employment in Everforex’s proposed new “margin forex exchange business” when Mr Dove made various representations in trade or commerce about:
(i)his and Mr Starkey’s qualifications and experience;
(ii)him favouring Everforex when conflicts of interest arose;
(iii)the projected success under his management and control;
(iv)the business’s likely monthly cash flow and profits;
(v)his and Mr Starkey’s ability and willingness to select and train new staff; and
(vi)the completeness and acceptability of his draft employment contract;
(c)Mr Dove made further representations in trade or commerce by not warning Everforex that periodically it would need to provide significant sums for operating expenses beyond the $1.850 million he said was required, and by not explaining or mentioning:
(i)the differences between introducing brokers, corporate authorised representatives and growing sales organically, and the implications for profitability if the marketing team failed to grow sales organically;
(ii)whether Everforex needed to rely on introducing brokers and corporate representatives and if so for how long;
(iii)the possibility that Mr Starkey might fail as head of sales and marketing;
(iv)the funding potentially needed by the sales and marketing team if Mr Starkey was not its head; and
(v)the risk of loss and of failure and how the latter could be managed;
(d)it relied on those representations in entering into the employment agreement with Mr Dove;
(e)it would not have signed the employment agreement with Mr Dove but for his representations that its terms were acceptable and it would suffer detriment if he were permitted to resile from those representations with the result that he is “estopped from suing contrary” to them;
(f)under Mr Dove’s management and control the new margin forex business was not successful, did not deliver on the representations made, lost the money which Everforex had provided to it and ultimately collapsed as a business when GFY Markets cut off access to the MT4/MT5 server;
(g)Mr Dove admitted that Mr Starkey was unable to manage the sales team and that that was the reason Everforex had no clients;
(h)Mr Dove’s pre-contractual representations had been misleading and deceptive or likely to mislead or deceive and caused Everforex to suffer loss and damage;
(i)while working for Everforex, Mr Dove represented in trade or commerce that he would cause it to use the services of Prime XM for the MT4/MT5 trading platform and would personally pay his personal assistant’s salary, but soon after caused Everforex to switch to DK International Pty Ltd and he never personally paid his personal assistant’s salary. The representations were misleading or deceptive and Everforex relied on them, suffering loss as a result;
(j)Mr Dove failed to conduct or record any analysis into whether DK International Pty Ltd, GFY Markets, Merchant FX or KAF Company were the best service providers for Everforex or to disclose that he was:
(i)a shareholder or an indirect shareholder in DK International Pty Ltd, GFY Markets and Merchant FX; and
(ii)friends and associated with KAF Company Pty Ltd’s director, Mr Khalaf;
breaching his fiduciary duties to Everforex in relation to Merchant FX and KAF Company because using their services was not in Everforex’s interests and/or was detrimental to it;
(k)without the knowledge of some of Everforex’s directors, Mr Dove proposed to wind down the new margin forex business and, to his benefit and to the detriment of himself [recte: Everforex], transfer its clients to a new company in Vanuatu also to be called Everforex. Mr Dove sought and received authority from Mr Qu to start the process;
(l)on behalf of Everforex and purportedly as one of its directors, Mr Dove signed an introducing broker agreement with Forex Kings Pty Ltd and permitted Mr Starkey to sign a corporate authorised representative agreement on the same basis although neither was a director and Everforex’s board had not authorised either to sign anything as director;
(m)the failure to analyse and disclose the commerciality of the relationship with DK International Pty Ltd, GFY Markets, Merchant FX and Mr Khalaf, as well as the Vanuatu plan and signing as Everforex’s director, constituted breaches by Mr Dove of express and implied contractual duties and fiduciary and statutory duties he owed to Everforex;
(n)DK International Pty Ltd and GFY Markets aided, abetted or procured those breaches of duty by Mr Dove because, as a result of his directorship of and shareholding in them, they were imputed with his knowledge. They also knew or ought to have known that Everforex’s payments to them were made in breach of Mr Dove’s fiduciary duties to it and were manifestations of a dishonest and fraudulent design that caused it loss and damage for which DK International Pty Ltd and GFY Markets were liable to provide equitable compensation;
(o)Mr Starkey has been a director of GFY Markets since October 2018 and joined Everforex at the same time as Mr Dove in January 2019. Mr Starkey’s employment agreement required him to act in Everforex’s best interests, carry out his duties with care and diligence and exercise powers in good faith. He was to notify Everforex if any conflicts of interests arose and was not to perform services for others unless agreed by Everforex;
(p)Mr Starkey:
(i)owed Everforex a duty of fidelity under his employment agreement;
(ii)was in a fiduciary relationship with Everforex;
(iii)had a statutory duty not to use Everforex’s information to gain an advantage for himself or someone else or to cause detriment to Everforex;
(q)Mr Starkey made pre-contractual representations directly, or by not contradicting representations made by Mr Dove, concerning what he could and would do for Everforex if hired, which were misleading or deceptive and on which Everforex relied, causing it to suffer loss and damage;
(r)if Everforex is held to have entered into an introducing broker agreement with GFY Markets, Mr Starkey’s requisitions on Everforex to make payments to GFY Markets in circumstances where he was a director and 50% shareholder in that company constituted breaches of his contractual, fiduciary and statutory duties to Everforex, causing it to suffer loss and damage;
(s)the signing by Mr Starkey of the corporate authorised representative agreement with Forex Kings Pty Ltd as a director of Everforex constituted a breach of his contractual, fiduciary and statutory duties to Everforex causing it to suffer loss and damage; and
(t)Mr Starkey also breached his duties to Everforex causing it to suffer loss and damage by taking a job with and working for a separate company without telling Everforex and while still employed by it.
Various other minor additions and corrections are also proposed.
Legislation and Rules
The Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (“Rules”) relevantly provide:
7.01Power to amend
(1)At any stage in a proceeding, the Court or a Registrar may allow or direct a party to amend a document (other than an affidavit) in the way and on the conditions the Court or the Registrar thinks fit.
(2)Subject to rule 7.03, the Court or a Registrar may allow an amendment even if the effect would be to include a cause of action arising after the proceeding was started.
…
8.02 Transfer to Federal Court
(1) The Court may, at the request of a party or on its own initiative, transfer a proceeding to the Federal Court.
(2) Unless the Court otherwise orders, a request for transfer must be made on or before the first court date for the proceeding.
(3) Unless the Court otherwise orders, the request must be included in a response or made by application supported by an affidavit.
(4) In addition to the factors to which the Court must have regard under subsection 153(3) of the Act in deciding whether to transfer a proceeding to the Federal Court, the Court must take the following factors into account:
(a) whether the proceeding is likely to involve questions of general importance, such that it would be desirable for there to be a decision of the Federal Court on one or more of the points in issue;
(b) whether, if the proceeding is transferred, it is likely to be heard and determined at less cost and more convenience to the parties than if the proceeding were not transferred;
(c) whether the proceeding will be heard earlier in the Court;
(d) the availability of particular procedures appropriate for the class of proceeding;
(e) the wishes of the parties.
The Federal Circuit and Family Court of Australia Act 2021 (Cth) (“FCFCOA Act”) relevantly provides:
143Summary judgment
…
(2)The Federal Circuit and Family Court of Australia (Division 2) may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is defending the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.
(3)For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:
(a) hopeless; or
(b) bound to fail;
for it to have no reasonable prospect of success.
…
153Discretionary transfer of proceedings
(1)If:
(a) a proceeding is pending in the Federal Circuit and Family Court of Australia (Division 2); and
(b) the proceeding is not a family law or child support proceeding;
the Court may, by order, transfer the proceeding from the Court to the Federal Court.
(2)The Federal Circuit and Family Court of Australia (Division 2) may transfer a proceeding:
(a) on the application of a party to the proceeding; or
(b) on its own initiative.
(3)In deciding whether to transfer a proceeding to the Federal Court, the Federal Circuit and Family Court of Australia (Division 2) must have regard to:
(a) any Rules of Court made for the purposes of subsection 154(2); and
(b) whether proceedings in respect of an associated matter are pending in the Federal Court; and
(c) whether the resources of the Federal Circuit and Family Court of Australia (Division 2) are sufficient to hear and determine the proceeding; and
(d) the interests of the administration of justice.
Evidence
Jonathan Lu, the solicitor for Everforex, filed an affidavit affirmed on 29 July 2022 in support of the various orders sought in the application in a proceeding.
Proposed amendment
With respect to the application for leave to file a further amended statement of cross-claim, Mr Lu gave the following evidence:
(a)counsel had initially been instructed to advise and to draft and settle pleadings, including the statement of cross-claim and the amended statement of cross-claim;
(b)on or about 17 December 2021, counsel returned his brief because of other commitments;
(c)Everforex’s evidence was served on 1 and 3 June 2022 (“June 2022 evidence”);
(d)new counsel was engaged to assist Mr Lu with finalising Everforex’s evidence during which time causes of action that had not been pleaded were identified and considered; and
(e)senior counsel, recently briefed in this matter, has now settled the proposed further amended statement of cross-claim, a copy of which was annexed to Mr Lu’s affidavit.
Supplementary evidence
Mr Lu also deposed that in light of the urgency with which the June 2022 evidence was prepared and served, Everforex sought leave to file and serve “some minor correcting or supplementary affidavits”.
Application for separate hearing of liability and damages
Mr Lu deposed that during Mr Dove’s employment, a significant amount of money was injected to meet a regulatory requirement that it keep its net tangible assets at $1.1 million. He deposed that those funds were additional to significant sums initially provided at the start of the business and Mr Dove’s employment.
Mr Lu deposed that Everforex’s alleged total loss was estimated to be between $1.4 million - $1.8 million, and was probably about $1.7 million. His evidence was that Everforex is still ascertaining whether its primary accounting records are available and that, although Everforex has access to its bank statements and audits from 2020 and 2021, it is not yet possible to determine definitively where the initial and later funding went, how the funds were mixed and how, ultimately, they were allegedly lost.
Mr Lu deposed that if such primary accounting records were available, it would take several weeks to engage a forensic accountant to “resolve the various data sources including primary accounting records bank statements and audit reports”. He deposed that if such records were not available, it would still take several weeks for a forensic accountant “to resolve the bank statements and audits”.
Consideration
Amendment
Principles
Pleadings should be in a form that permits the real issues between the parties to be ventilated and decided, the rules of court having always provided that amendments to pleadings may be allowed for that purpose: Commonwealth v Verwayen (1990) 170 CLR 394 per Dawson J at 456. However, under item 14 of sch.1 to the Rules and r.16.21 of the Federal Court Rules 2011 (Cth) (“FCA Rules”), a pleading may be struck out because fails to disclose a reasonable case of action and, under s.143 of the FCFCOA Act, all or part of a pleading may be dismissed if it lacks reasonable prospects of success, so there is no point in permitting an amendment if it is deficient in either of those ways: SZSRR v Minister for Immigration and Border Protection [2017] FCA 328 at [47]-[52].
Principles relevant to the present interlocutory application are found in the High Court’s decision in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175. The leading judgment is that of Gummow, Hayne, Crennan, Kiefel and Bell JJ, who highlighted a number of issues appropriate to be taken into account in situations such as the present. Their Honours made a number of points:
(a)the conduct of litigation is not merely a matter for the parties but is also one for the Court. The need to avoid disruptions in the Court’s lists, with consequent inconvenience to the Court and prejudice to the interests of other litigants waiting to be heard, is a relevant matter (at 211 [93]);
(b)the courts are concerned to do justice to all litigants. When considering an application for amendment, it may be just that the Court take account of other litigants, not just the parties to the litigation in question (at 212 [94]-[95]);
(c)the fact that costs are not always a sufficient compensation for a late amendment should be taken into account and the Court is entitled to weigh in the balance, for instance, the strain which litigation imposes upon litigants (at 213-214 [99]-[100]);
(d)much may depend upon the point the litigation has reached, relative to a trial, when the application for an amendment is made. There may be cases where it may properly be concluded that a party has had sufficient opportunity to make their case and that it is too late for a further amendment, having regard to the other party and the other litigants awaiting trial dates (at 214-215 [102]);
(e)the fact that an explanation has been offered for the delay in raising the issue is relevant, as will be whatever explanation may be given (at 215 [103]); and
(f)all the matters relevant to the exercise of the power should be weighed. The fact of substantial delay, wasted costs and the concerns of case management will assume importance on an application for leave to amend (at 217 [111]).
Some important statements were made in Aon v ANU that are, with respect, worth quoting in full. The plurality said:
Where a party had had a sufficient opportunity to plead his or her case, it may be necessary for the court to make a decision which may produce a sense of injustice in that party, for the sake of doing justice to the opponent and to other litigants. (at 212 [94])
And:
In the past it has been left largely to the parties to prepare for trial and to seek the court's assistance as required. Those times are long gone. The allocation of power, between litigants and the courts arises from tradition and from principle and policy. It is recognised by the courts that the resolution of disputes serves the public as a whole, not merely the parties to the proceedings. (at 217 [113]) (references omitted)
In the context of those statements, the Court’s statute is relevant. Section 190(1) of the FCFCOA Act states in relation to this Court that:
190Overarching purpose of civil practice and procedure provisions
(1)The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes:
(a) according to law; and
(b) as quickly, inexpensively and efficiently as possible.
Those objects are repeated in r.1.04 of the Rules where it is relevant to observe that r.1.04(2), provides:
1.04 Overarching purpose
…
(2) To assist the Court, the parties must:
(a) avoid undue delay, expense and technicality …
Merits of amendment
Other than to question whether the proposed amendments’ allegations of misleading conduct were maintainable as a matter of law, to which I will return, Mr Dove did not suggest that the new allegations now sought to be made by way of the proposed amendment lacked reasonable prospects of success. His critique of the allegations concerning the Vanuatuan entity did not go so far and a glancing submission that an amendment could not introduce a new cause of action was not correct, as r.7.01(2) of the Rules makes clear.
As noted earlier, there is no point in permitting an amendment if it fails to disclose a reasonable cause of action or lacks reasonable prospects of success. When considering whether the merits of a proposed pleading justify it being allowed, the Court is concerned with whether, as a matter of form, it discloses a reasonable cause of action and whether, as a matter of substance, it raises a real or genuine dispute as to any material fact that might reasonably be resolved in the applicant’s favour: cf Imobilari Pty Ltd v Opes Prime Stockbroking Ltd (2008) 252 ALR 41 at 43-44 [4]-[6]; J & A Vaughan Super Pty Ltd (Trustee) v Becton Property Group Limited [2014] FCA 581 at [6]; Australian Securities and Investments Commission v Cassimatis (2013) 220 FCR 256 at 272 [447]-[48]; Bradken Resources Pty Ltd v Lynx Engineering Consultants Pty Ltd (2008) 78 IPR 586 at 593 [28]. I am satisfied that the new allegations contained in the proposed amendment do meet those tests.
I do not overlook Mr Dove’s arguments that the application in a proceeding and the proposed amendments have not been made for a proper purpose but are intended to gain a tactical advantage by prolonging and making the proceeding more technical and more expensive with a view to exhausting the applicants’ resources and forcing them to discontinue. No real basis for that submission was identified and I do not accept it.
Prejudice caused by delay in seeking the amendments
Mr Dove’s unhappiness at the proposed amendment is understandable. In his written submissions he has particularised the various occasions on which Everforex’s deficient attention to the preparation of its case, which he characterises as “habitual non-compliance”, delayed the progress of the matter, meaning that Everforex failed to meet its obligations to avoid undue delay and expense. Further in that connection, Everforex’s argument in support of the proposed amendment does not go much beyond a narrative of its briefing of counsel and the statement that, nearly two years after the proceeding commenced and a year and a half after it filed its cross-claim, it has finally identified what it wants to allege by way of cross-claim. It is also to be noted that although the cross-claim in its original form made allegations concerning certain particularised payments, it is now submitted that what are called “primary accounting records” are being sought, apparently for the first time, with no explanation as to why they were not sought earlier or why it is apparently only now that forensic accountancy evidence is being contemplated.
The explanation provided for only propounding the amendments to the cross claim at this stage is unimpressive. Even so, having regard to considerations referred to earlier, the discretion should be exercised in Everforex’s favour. In that regard, it is to be noted that the matter has not yet been listed for trial and so, were the amendments allowed, the only inconvenience that is likely to be caused would be to the parties and, in particular, to the applicants and DK International Pty Ltd, the present cross-respondents. Mr Dove submitted that the proposed amendments would cause undue prejudice by rendering his filed reply, the amended cross response and the cross respondents’ evidence in chief otiose. However, it seems more likely that the inconvenience caused by the amendments will be the filing of evidence additional to whatever has been filed to this point and additions to the response to the cross-claim, rather than the large scale wastage of work already done.
As a general rule, if amendments waste some of a party’s preparation, that party would usually be entitled to a compensating costs order, although costs are not always a sufficient compensation and in this case they are not as freely available as they are in other cases. This proceeding, which includes the cross-action, is a proceeding “in relation to a matter arising” under the FW Act and so the availability of costs is regulated by s.570 of that Act: Stanley v Service to Youth Council Inc (No 3) (2014) 225 FCR 357 at 363-364 [25]-[36]; Melbourne Stadiums Ltd v Sautner (2015) 229 FCR 221 at 253-254 [155]-[158]; Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v ALS Industrial Australia Pty Ltd (No 2) (2015) 235 FCR 366 at 369 [16]. That section relevantly states:
570Costs only if proceedings instituted vexatiously etc.
(1)A party to proceedings (including an appeal) in a court (including a court of a State or Territory) in relation to a matter arising under this Act may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with subsection (2) …
(2)The party may be ordered to pay the costs only if:
(a) the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause; or
(b) the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs; …
…
On balance, I do think that the delay in seeking the amendment is unreasonable and, to the extent that it has caused the applicants to incur costs that will be wasted, they should be compensated by an order for costs, which I find will be sufficient compensation in the circumstances. The Court’s scale costs do not accommodate orders for costs thrown away and so, in default of agreement, the costs ordered are to be taxed in accordance with the FCA Rules.
Finally, on the question of prejudice, I was very much concerned that granting the amendment would delay the trial. This is because, apart from a quite limited period in June 2023, I have no availability to hear the matter in 2023 and so a lengthier hearing would necessarily be listed in 2024. I sought the parties’ estimates of the number of witnesses and hearing days that the matter would involve if the proposed amendment were to be refused or to be allowed. They provided significantly different estimates concerning the former circumstances but, on the basis that the correct figure is likely to sit somewhere between the relevant estimates, it appears that allowing or refusing the amendment would make no difference to when the trial would be listed and that a trial of this matter in this Court will not take place until 2024 whether or not the amendments are allowed.
Application for transfer
Everforex submitted that the proposed amendments raised matters that would be a better fit with the Federal Court’s skills and experience than with those of this Court and argued that the proceeding should be transferred there. Mr Dove opposed that application, arguing that there was no justification for a transfer if the Court were to dismiss the application in a proceeding or, alternatively, strike out the proposed amendments that would allege against him and the proposed fourth cross respondent, Mr Starkey, misleading and deceptive conduct in the course of pre-employment negotiations. As that is not the outcome of the application for leave to amend, that argument need not be considered further.
To the extent that the proposed amendments would allege constructive trusts, breaches of fiduciary duty and breaches of duties under the Corporations Act 2001 (Cth), in respect of which latter this Court can have at best associated jurisdiction and so the lesser experience, I agree with Everforex’s submission. I note in that regard that the proposed allegations on those topics are new or much more expansive than the allegations made to date.
There is also a question raised by the proposed amendments concerning whether Everforex has against Messrs Dove and Starkey pre-contractual misrepresentation causes of action of the sort alleged. In brief, Mr Dove contended that, as between employer and employee, s.31 of the ACL covers the field and does not permit employers to sue employees for pre-employment misrepresentations or permit s.18 of the ACL to operate in the context of those pre-employment representations. Section 31 of the ACL relevantly states:
31Misleading conduct relating to employment
A person must not, in relation to employment that is to be, or may be, offered by the person or by another person, engage in conduct that is liable to mislead persons seeking the employment …
Section 18(1) states:
18Misleading or deceptive conduct
(1)A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
In Carr v Empirical Works Pty Ltd & Anor [2019] FCCA 1114 at [275]ff, Judge Nicholls held that s.31 operated to the exclusion of s.18. Justice Bromberg expressed a different view in Rakic v Johns Lyng Insurance Building Solutions (Victoria) Pty Ltd (Trustee) (2016) 259 IR 47 at 65 [62]. Everforex submitted that arriving at the proper understanding of how ss.31 and 18 of the ACL operate, particularly with respect to each other, presented complex issues of statutory interpretation with the potential to have national implications in employment law which were, for that reason, better determined in the Federal Court. I agree that whether an employer can sue an employee for the employee’s pre-employment misrepresentations is a matter of general commercial importance and that a decision of the Federal Court on that question would, with respect, be more authoritative than a decision of this Court.
I suspect it is also likely that the Federal Court would be able to accommodate a hearing before 2024.
Having considered those matters, as well as having had regard to the other considerations referred to in the FCFCOA Act and the Rules, including the fact that no issue was specifically taken that the application for transfer was not made in accordance with rule 8.02(2) or (3), I conclude that it is in the interests of the administration of justice that the proceeding be transferred to the Federal Court at Sydney.
Other orders
As recorded earlier, the application in a proceeding and Mr Lu in his affidavit sought orders additional to those concerning transfer and amendment. In the circumstances of a transfer order having been made, and pending any decision of the Federal Court under s.32AD of the Federal Court of Australia Act 1976 (Cth) to confirm or not confirm the transfer of the matter, it would not presently be appropriate for this Court to make further procedural orders in this proceeding.
The remaining question is Everforex’s application for costs of this interlocutory dispute. No argument was put that the applicants’ conduct engaged s.570 of the FW Act and so no costs order is appropriate.
Conclusion
Everforex will have leave to file within 14 days a further amended statement of cross claim in the form of the document annexed to Mr Lu’s affidavit. There will also be an order that following the filing of that document the proceeding be transferred to the Federal Court of Australia at Sydney and an order that Everforex pay the cross respondents’ costs thrown away by reason of the amendment.
I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Cameron. Associate:
Dated: 9 September 2022
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