Fair Work Ombudsman v Safecorp Security Group Pty Ltd and Anor (No.2)
[2018] FCCA 611
•16 March 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v SAFECORP SECURITY GROUP PTY LTD & ANOR (No.2) | [2018] FCCA 611 |
| Catchwords: PRACTICE AND PROCEDURE – Declarations made by default against one of two respondents – at trial of proceeding against the non-defaulting respondent it was held that the declarations made against the defaulting respondent were not binding on the non-defaulting respondent – on appeal held that the declarations made against defaulting respondent were binding on non-defaulting respondent – whether on remittal the declarations should be set aside on the ground that, given the appeal court’s conclusion that the declarations granted by default against the defaulting respondent also bound the non-defaulting respondent, the declarations were granted on the basis of an erroneous understanding of the law – whether the declarations should be set aside because, although the non-defaulting respondent received notice of the application for default judgment against the defaulting respondent the non-defaulting respondent was not given notice that the effect of the granting of default judgment against the defaulting respondent would prevent the non-defaulting respondent from having determined at trial the allegations of fact the non-defaulting respondent put in issue by filing a defence - declarations set aside. |
| Legislation: Fair Work Act 2009 (Cth), s.45 |
| Cases cited: Autodesk Inc v Dyason (No.2) (1993) 176 CLR 300 Banque Commerciale SA v Akhil Holdings Ltd [1990] HCA 11 Cameron v Cole (1944) 68 CLR 571 Fair Work Ombudsman v Lohr [2018] FCA 5 Otkritie International Investment Management Ltd v Urumov & Others [2012] EWHC 890 (Comm) |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | SAFECORP SECURITY GROUP PTY LTD (ACN 153 771 898) |
| Second Respondent: | JOHN LOHR |
| File Number: | SYG 2379 of 2013 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 20 February 2018 |
| Date of Last Submission: | 20 February 2018 |
| Delivered at: | Sydney |
| Delivered on: | 16 March 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr J Darams |
| Solicitors for the Applicant: | Office of the Fair Work Ombudsman |
| No appearance by or on behalf of the First Respondent |
| Second Respondent in person |
ORDERS
Pursuant to r.16.05(2)(a) and (c) of the Federal Circuit Court Rules 2001 (Cth) the declarations made on 14 November 2014 against the first respondent are set aside.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 2379 of 2013
| FAIR WORK OMBUDSMAN |
Applicant
And
| SAFECORP SECURITY GROUP PTY LTD (ACN 153 771 898) |
First Respondent
| JOHN LOHR |
Second Respondent
REASONS FOR JUDGMENT
Introduction
In Fair Work Ombudsman v Lohr[1] Bromwich J set aside orders I made on 28 February 2017, [2] and ordered that the matter be remitted to me for rehearing in accordance with his Honour’s reasons. One of the orders his Honour set aside was an order refusing the applicant (FWO) leave to reopen her case against the second respondent, Mr Lohr. The evidence the FWO intended to adduce if leave to reopen were granted related to contraventions by the first respondent (SSG) of s.45 of the Fair Work Act 2009 (Cth) (FW Act). The FWO claims Mr Lohr was involved in SSG’s contraventions of s.45 of the FW Act.
[1] [2018] FCA 5
[2] Fair Work Ombudsman v Safecorp Security Group Pty Ltd & Anor [2017] FCCA 348
As Bromwich J found, a necessary premise on which I relied for not allowing the FWO leave to reopen her case was my opinion about the effect of the declarations (Declarations) I made against SSG on 7 November 2014. I made the Declarations on the application of the FWO pursuant to r.13.03B(2)(c) of the Federal Circuit Court Rules 2001 (Cth) (FCC Rules) because SSG had not filed a defence to the statement of claim. At the time I made the Declarations, however, Mr Lohr was not “in default” for the purposes of that rule; he had filed a defence in which he put in issue allegations of fact on which the FWO relied in her statement of claim for alleging SSG had contravened s.45 of the FW Act and that Mr Lohr was involved in those contraventions. I was of the opinion that the Declarations were not binding on Mr Lohr because Mr Lohr was not “in default” for the purposes of r.13.03B(2)(c) of the FCC Rules.
In Lohr Bromwich J upheld the FWO’s submission that, contrary to what I had concluded, the Declarations were binding on Mr Lohr. His Honour did so even though Mr Lohr was not in default; and even though Mr Lohr had filed a defence in which he put in issue material facts on which the FWO relied for claiming SSG contravened s.45 of the FW Act and that Mr Lohr was involved in those contraventions. His Honour appears to have upheld the FWO’s submission for two reasons. One was that Mr Lohr had been given notice that the FWO intended to apply for default judgment against SSG, which made clear that the FWO sought declarations against SSG.[3] This was important because, according to his Honour, that put Mr Lohr on notice, and thus “was given the opportunity to appear and oppose the making of declarations that were plainly against his interests”. His Honour further concluded Mr Lohr “was therefore a contradictor in the sense necessary for the lawful making of the declarations”.[4]
[3] [2018] FCA 5 at [21]
[4] [2018] FCA 5 at [21]
The second, and perhaps paramount, reason on which Bromwich J relied for accepting the FWO’s submission that the Declarations bound Mr Lohr is his Honour’s view of the effect of the Declarations. His Honour appears to have been of the view that, because by their terms they declared rights that were relevant to Mr Lohr’s interests, the Declarations, unless set aside, must be given effect according to their terms, whether or not there was a determination by the Court after a trial of the allegations of facts contained in the statement of claim Mr Lohr put in issue by filing a defence. That is apparent from the following passage from his Honour’s reasons for judgment:[5]
The trigger mechanism for making such declarations [in this case, r.13.03B(2)(c) of the FCC Rules] does not and cannot operate to confine their legal effect and impact. That will always turn on the face of the order or declaration that has been made, and is sometimes a reason for varying or setting aside such an order or declaration because of a failure to properly reflect the intention of the Court. To operate otherwise would be to introduce uncertainty as to the meaning of an order or declaration once made.
[5] [2018] FCA 5 at [21]
Notwithstanding his Honour’s conclusions that the Declarations were binding on Mr Lohr, Bromwich J recognised that this conclusion might operate injustice on Mr Lohr, and that the injustice may be remedied by the Declarations being set aside. That, at any rate, is what I infer from the following passage from his Honour’s reasons (emphasis added):[6]
The scope for error or injustice is an important part of the reason why rules of procedural fairness, and other rules relating to the process leading to the making of declarations, must be carefully observed. A problem of the kind that arose in this case may be a potent reason for declining to make such declarations, or for setting them aside once made. However, the rules of Court relied upon by the primary judge are incapable of limiting the scope of such declarations once made. Very clear language would be required to change, in such a fundamental way, the law relating to declarations. The rules of Court relied upon by his Honour to imply a limitation foreign to the law of declarations do not meet that description.
[6] [2018] FCA 5 at [23]
After the matter was remitted to me I arranged for my associate to send to the parties the following email:
The matter has been listed for directions at 9.30 on 20 February 2018.
Subject to anything the parties may wish to submit, his Honour proposes to invite the parties to make submissions on why the orders made by default on 7 November 2014 against the first respondent (Default Orders) should not be set aside. Such submissions may be made at the directions hearing or on some other occasion convenient to the parties.
The following are the matters which, in his Honour’s view, give rise to the question whether the Default Orders should be set aside.(a)At [22] of Fair Work Ombudsman v Lohr [2018] FCA 5 Bromwich J said that a “problem of the kind that arose in this case may be a potent reason for declining to make such declarations, or for setting them aside once made”. That might suggest his Honour was of the view that the declarations made by default on 7 November 2014 (Declarations) should not have been sought or granted in the first place and, for that reason, the Declarations (and perhaps all of the other Default Orders) may be liable to be set aside.
(b)In Page v Champion Financial Management Limited & Ors [2014] EWHC 1778 (QB), Mr Simon Picken QC (now Justice Picken), sitting as a deputy judge of the High Court of Justice, held that it was open to the fifth defendant to defend the claim made against it notwithstanding that default judgment was entered against the first defendant and that the defence the fifth defendant wished to raise, if upheld, would give rise to a judgment that would be inconsistent with the default judgment. The source of the potentially inconsistent judgments was that the cause of action asserted against the fifth defendant relied on factual allegations that overlapped with factual allegations made in the cause of action against the first defendant against whom default judgment had been obtained (see at [25]). Mr Simon Picken QC also held that, had he decided that it was not open to the fifth defendant to defend the proceedings because that could give rise to inconsistent judgments, he would have acceded to the fifth defendant’s application to set aside the default judgment.
(c)Unless the Declarations, and perhaps the other Default Orders, are set aside, Mr Lohr will be taken to have admitted allegations of fact made in the statement of claim which, in his defence, he has put in issue in circumstances where it has not been alleged that Mr Lohr was privy in interest with the first respondent. (As to privity of interest, see, for example, Tomlinson v Ramsay Food Processing Pty Ltd [2015] HCA 28.) That might raise the question of whether, by proceeding to determine the claims against Mr Lohr based on a default judgment entered against a party with whom it is not said Mr Lohr was privy in interest, the Court would be acting contrary to “a principle at the core of our legal system that a party claiming or denying the existence of a legal right or obligation should have an opportunity to present evidence and arguments to establish the facts and law on which the claim or denial is founded” (Tomlinson at [38]).
At the directions hearing on 20 February 2018 I heard submissions on whether I should set aside the Declarations. Counsel for the FWO made the following submissions. First, the Declarations were properly made and, for that reason, they should not be set aside. Second, Mr Lohr will suffer no prejudice if the Declarations are not set aside because Mr Lohr in his defence went no further than putting in issue material facts, that he did so because he claimed he did not have access to the relevant records of SSG, and, given the FWO is now in a position to tender the relevant evidence, it is inevitable the FWO will prove the allegations of fact Mr Lohr has put in issue. Third, whether or not the Declarations are set aside will make no practical difference because the FWO is in a position to tender evidence to prove SSG’s contraventions of s.45 of the FW Act. Counsel for the FWO also submitted it was not necessary that I set aside the other orders I made against SSG, and in particular, the orders for the payment of money (Payment Orders), because those orders did not make binding on Mr Lohr the material facts alleged in the statement of claim on the basis of the deemed admissions of which the Payment Orders were made (Material Facts).
In these reasons for judgment, therefore, I consider whether I should set aside the Declarations. I also say something about the FWO’s submissions that the Material Facts are not binding on Mr Lohr. That is so because that submission appears to me to be inconsistent with Bromwich J’s conclusion that the Declarations, unless set aside, are binding on Mr Lohr.
Setting aside of orders - principles
This Court has power to set aside orders after they have been entered in the circumstances stated in r.16.05(2) of the FCC Rules. Two circumstances are relevant. The first is that identified in r.16.05(2)(a), namely, where the order was made in the absence of a party; and the second is that identified in r.16.05(2)(c), namely, where the order is interlocutory. These provisions, however, do no more than confer on the Court power to set aside orders; they do not identify the principles by reference to which the Court may exercise the power.
There are two principles that are relevant to these reasons for judgment. The first is the principle that an order may be set aside against the party against whom it was made if the party was not given a reasonable opportunity of appearing and presenting his case. This principle was stated by Rich J in Cameron v Cole:[7]
It is a fundamental principle of natural justice, applicable to all courts whether superior or inferior, that a person against whom a claim or charge is made must be given a reasonable opportunity of appearing and presenting his case. If this principle be not observed, the person affected is entitled, ex debito justitiae, to have any determination which affects him set aside; and a court which finds that it has been led to purport to determine a matter in which there has been a failure to observe the principle has inherent jurisdiction to set its determination aside . . . . In such a case there has been no valid trial at all. The setting aside of the invalid determination lays the ghost of the simulacrum of a trial, and leaves the field open for a real trial . . . .
[7] (1944) 68 CLR 571 at page 589
The second principle is that stated by Mason CJ in Autodesk Inc v Dyason (No.2) that “the public interest in the finality of litigation will not preclude the exceptional step of reviewing or rehearing an issue when a court has good reason to consider that, in its earlier judgment, it has proceeded on a misapprehension as to the facts or the law”.[8] This principle was also stated by the plurality in De L v Director-General, NSW Department of Community Services (No.2):[9]
The power of this Court to reopen its judgments or orders is not in doubt. The Court may do so if it is convinced that, in its earlier consideration of the point, it has proceeded “on a misapprehension as to the facts or the law”, where “there is some matter calling for review” or where “the interests of justice so require”. It has been said repeatedly that a heavy burden is cast upon the applicant for reopening to show that such an exceptional course is required “without fault on his part”, ie without the attribution of neglect or default to the party seeking reopening.
[8] (1993) 176 CLR 300 at page 302
[9] (1997) 190 CLR 207 at page 215
Should the Declarations be set aside?
In my opinion there are three reasons why I should set aside the Declarations. The first relies on the principle that, where parties have filed pleadings, a court must decide the case by determining the issues that arise on the pleadings. That is so whether or not a defendant appears at the trial. The relevant principles were stated in the judgments of the majority of the High Court in Banque Commerciale SA v Akhil Holdings Ltd.[10]
[10] [1990] HCA 11
The issue before the High Court in Banque Commerciale was whether, at the hearing of an action in which the defendant who filed a defence did not appear, the plaintiff was entitled to rely on the Limitation Act 1969 (NSW) to extend the limitation period provided by that Act on which the defendant in its defence relied in circumstances where the plaintiff had not filed a reply to the defence to allege facts that, if accepted, would have extended the limitation period. The plaintiff submitted, among other things, that it was not required to file a reply because the defendant did not appear at the hearing. Four of the five justices rejected that submission. Mason CJ and Gaudron J said:[11]
The filing of a defence is a formal step in proceedings. The defence is part of the pleadings which identify the issue for decision. More significantly in the present case, it is a step which precludes a plaintiff from entering default judgment. . . .
. . . . A defence having been filed (or verified, if that is required), there is no default and the plaintiff is in no position to obtain judgment by default. Any judgment which the plaintiff might thereafter obtain necessarily depends upon the plaintiff's establishing entitlement to relief, albeit that some part of his or her case might be established by the pleadings or that, in certain circumstances, he or she might be entitled to summary judgment.
The filed defence of the [defendant] put [the plaintiff] to proof of its entitlement to the relief claimed against the Bank.
[11] [1990] HCA 11, at [7]-[9]
Toohey J said:[12]
So long as it had a defence on the record (as it did at all times), there could be no entry of default against the [defendant]. There is nothing in . . . the default provisions, which relieved [the plaintiff] of the obligation to make good its case against the [the defendant]. No doubt that task was made easier by the absence of cross-examination and contrary testimony.
[12] [1990] HCA 11, at [19]
At the time the FWO applied for default judgment against SSG, I assumed that my granting the Declarations and making the other orders would have no binding effect on Mr Lohr. My assumption was based on Mr Lohr having filed a defence in which he put in issue material facts alleged in the statement of claim on which the FWO relied for claiming SSG contravened s.45 of the FW Act; and that those issues would be determined only after a trial of those issues. Given Bromwich J’s decision in Lohr, however, these assumptions were clearly incorrect; and my mistaken assumptions cannot be attributed to the manner in which Mr Lohr conducted his case.
Thus, if at the time the FWO applied for the default judgment against SSG I was aware that, as found by Bromwich J in Lohr, my granting the Declarations under r.13.03B(2)(c) of the FCC Rules would have been binding on Mr Lohr, even though Mr Lohr was not in default and had filed a defence, I would not have granted the Declarations. That is because that would have been contrary to the principle that issues raised on the pleadings – in this case, the issues that arose from Mr Lohr filing his defence – could only be determined by a trial of those issues, not by the making of a default judgment against SSG because SSG had failed to comply with the FCC Rules.
The second reason the Declarations should be set aside is related to the first. Mr Lohr had filed a defence. For reasons discussed in the majority judgments in Banque Commerciale, Mr Lohr was therefore entitled to assume the FWO’s claims against him would be determined after a trial of the matters he put in issue by filing his defence, whether or not Mr Lohr were to attend the trial. In those circumstances, the FWO’s having notified Mr Lohr of nothing more than that she intended to apply for default judgment against SSG did not fairly put Mr Lohr on notice that the issues he had raised in his defence would be determined by the Court in a manner different from that which he was entitled to assume they would be determined, namely, by a trial of those issues. The granting of the Declarations, therefore, occurred in circumstances where Mr Lohr was not given a reasonable opportunity to appear and present a case to the effect that the Declarations should not be granted against SSG because that would deny him the right to having the issues raised by his defence being determined at a trial.
It is true Bromwich J found that Mr Lohr “was given the opportunity to appear and oppose the making of declarations that were plainly against his interests”, and that Mr Lohr “was therefore a contradictor in the sense necessary for the lawful making of the declarations”.[13] It is necessary, however, to be clear about of what it is Mr Lohr was given notice. He was given notice of the FWO’s intention to apply for default judgment against SSG. But a judgment by default is different from a judgment on the merits. That point was made by Flaux J in Otkritie International Investment Management Ltd v Urumov & Others (emphasis added):[14]
The default judgment that the court enters, whatever its precise form, is not one which is a judgment on the merits. It is a procedural judgment which the claimant is entitled to ask for if the claimant has served regularly on the relevant defendant because the relevant defendant has failed to comply with the rules, here with the rules requiring acknowledgment of service within a set period.
[13] [2018] FCA 5 at [21]
[14] [2012] EWHC 890 (Comm) at [24]
Thus, by his having received notice of the FWO’s intention to apply for default judgment against SSG, Mr Lohr was given no more than the opportunity to oppose the Court granting default judgment against SSG. Mr Lohr was not given notice that if he failed to appear and default judgment were entered against SSG such default judgment would operate to deny Mr Lohr his right to have the Court determine at trial the allegations of fact contained in the statement of claim Mr Lohr put in issue by filing his defence.
There is another matter to note. Even if Mr Lohr had appeared at the hearing of the application for default judgment and sought to oppose the making of orders under r.13.03B(2)(c) of the FCC Rules against SSG, it is doubtful he would have had any real prospects of successfully opposing the making of the default judgment against SSG. That is so because it is likely I would have rejected his opposition to the granting of default judgment against SSG for reasons similar to those on which Flaux J in Otkritie relied for rejecting the opposition by the non-defaulting defendants in that case to the granting of default judgment against the defaulting defendant.
In Otkritie the claimant applied for default judgment against one of a number of defendants against all of whom the claimant alleged fraud. The non-defaulting defendants resisted the granting of default judgment on a number of grounds, one of which was that the granting of default judgment would bind all defendants to a finding of fraud. Flaux J rejected that submission, holding that “that particular submission really fails to appreciate the nature of a default judgment”.[15] His Lordship said: [16]
Since it is not a judgment on the merits, and since there are provisions in the rules that in certain circumstances a defendant against whom a default judgment has been entered may apply to set aside the default judgment. . . it seems to me that the effect of the default judgment is simply against [the defaulting defendant]. It has no effect whatsoever against any of the other defendants, either current defendants or defendants soon to be joined to the proceedings.
[15] [2012] EWHC 890 (Comm) at [23]
[16] [2012] EWHC 890 (Comm) at [25]
The third reason why the Declarations should be set aside is that, if I do not do so, the FWO’s claims against Mr Lohr for involvement in SSG’s contraventions of s.45 of the FW Act would proceed contrary to what the plurality in Tomlinson v Ramsay Food Processing Pty Ltd described as “a principle at the core of our legal system that a party claiming or denying the existence of a legal right or obligation should have an opportunity to present evidence and arguments to establish the facts and law on which the claim or denial is founded”.[17] The FWO does not submit Mr Lohr was privy in interest with SSG and, for that reason, is bound by the acts or omissions that resulted in default judgment being ordered against SSG. To permit the Declarations to stand in these circumstances would preclude Mr Lohr from having the Court determine on the merits the allegations of fact contained in the statement of claim Mr Lohr put in issue by filing his defence.
[17] [2015] HCA 28 at [38]
I propose, therefore, to order that the Declarations be set aside.
The Payment Orders
As I have already noted, although counsel for the FWO submitted the Declarations were binding on Mr Lohr, counsel also submitted the Material Facts on the basis of which I made the Payment Orders are not binding on Mr Lohr.
I have difficulty in accepting that submission. The making of the Payment Orders was premised, not only on the same facts as those on which the granting of the Declarations were premised, but also on the Declarations themselves. That is, it is because, as declared by the Declarations, SSG contravened s.45 of the FW Act that SSG is liable to pay the amounts the Payment Orders ordered SSG to pay.
Given the FWO does not submit that by making the Payment Orders Mr Lohr is bound by the Material Facts on the deemed admissions of which such orders were based, I do not propose to consider whether the Payment Orders should also be set aside.
Disposition
I propose to order that the Declarations be set aside.
I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Associate:
Date: 16 March 2018
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