Farac v Pendal Group Limited
[2021] FedCFamC2G 25
•9 September 2021
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Farac v Pendal Group Limited [2021] FedCFamC2G 25
File number(s): SYG 2443 of 2020 Judgment of: JUDGE CAMERON Date of judgment: 9 September 2021 Catchwords: INDUSTRIAL LAW – Inaction causing adverse action.
INDUSTRIAL LAW – Settlement negotiation privilege attaching to Fair Work Commission mediation or conciliation conference.
PRACTICE & PROCEDURE – Pleadings – application to strike out – application for leave to amend.
WORDS & PHRASES – Adverse action.
Legislation: Fair Work Act 2009 (Cth), ss.340, 342, 591, 592
Evidence Act 1995 (Cth), s.131
Patents Act 1977 (UK)
Workplace Relations Act 1996 (Cth), s.298K
Federal Court Rules 2011 (Cth), r.16.21
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth), sch.1
Cases cited: Unilever PLC v The Procter & Gamble Co [2000] 1 WLR 2436
YXW Pty Ltd v Sushi Sushi Franchising Pty Ltd (2016) 52 VR 182
BHP Iron Ore Pty Ltd v Australian Workers’ Union (2000) 102 FCR 97
Unsworth v Tristar Steering and Suspension Australia Ltd (2008) 216 FCR 122
Rowland v Alfred Health [2014] FCA 2
Division Division 2 General Federal Law Number of paragraphs: 31 Date of hearing: 31 August 2021 Place: Sydney Counsel for the Applicant: Mr T. Brennan Solicitor for the Applicant: Kennedys Counsel for the Respondents: Mr D. Mahendra Solicitor for the Respondents: MinterEllison ORDERS
SYG 2443 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: PETER ADAM FARAC
Applicant
AND: PENDAL GROUP LIMITED (ACN 126 385 822)
First Respondent
RICHARD BRANDWEINER
Second Respondent
ORDER MADE BY:
JUDGE CAMERON
DATE OF ORDER:
9 SEPTEMBER 2021
THE COURT ORDERS THAT:
1.Paragraphs 60, 61 and 78 of the statement of claim be struck out.
2.The respondents have leave to file an amended defence.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review 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
In this proceeding, the applicant has alleged that his employer, the first respondent (“Pendal”), and its chief executive officer, the second respondent, took adverse action against him because he had exercised certain of his workplace rights and so contravened s.340 of the Fair Work Act 2009 (Cth) (“FW Act”). On 9 July 2021, the respondents filed an interlocutory application in which, relying on r.16.21 of the Federal Court Rules 2011 (Cth) (“FCA Rules”), they sought orders striking out certain paragraphs of the applicant’s statement of claim filed 1 March 2021, namely:
a.Paragraphs 60 and 61 on the grounds that it is likely to cause prejudice, embarrassment or delay in the proceedings because the conference was private pursuant to s.592(3) of the Fair Work Act 2009 and was conducted for the purpose of settlement negotiations to which s.131 of the Evidence Act 1995 applies;
b.Paragraph 67 on the grounds that the pleading is vague, embarrassing and ambiguous, because it is nonsensical and circular to say there is a failure to investigate a complaint because of that complaint; and
c.Paragraph 78 on the grounds that it does not disclose a reasonable cause of action appropriate to the nature of the pleading because it does not plead any statement of fact or law.
The respondents also sought leave to file an amended defence to more fully plead to para.22 of the statement of claim.
Following the determination of a related proceeding in the Fair Work Commission (“FWC”), the applicant has indicated his consent to para.78 of the statement of claim being struck out.
RELEVANT LEGISLATION
Rule 16.21 of the FCA Rules is adopted for use in this Court by sch.1 to the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth). It relevantly provides as follows:
16.21Application to strike out pleadings
(1) A party may apply to the Court for an order that all or part of a pleading be struck out on the ground that the pleading:
(a)contains scandalous material; or
(b)contains frivolous or vexatious material; or
(c)is evasive or ambiguous; or
(d)is likely to cause prejudice, embarrassment or delay in the proceeding; or
(e)fails to disclose a reasonable cause of action or defence or other case appropriate to the nature of the pleading; or
(f)is otherwise an abuse of the process of the Court.
…
Section 340 of the FW Act relevantly provides:
340 Protection
(1) A person must not take adverse action against another person:
(a) because the other person:
(i)has a workplace right; or
(ii)has, or has not, exercised a workplace right; or
...
Section 342(2) relevantly provides:
Meaning of adverse action
Item
Column 1
Adverse action is taken by ...
Column 2
if ...
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an employer against an employee
the employer:
(a) dismisses the employee; or
(b) injures the employee in his or her employment; or
(c) alters the position of the employee to the employee’s prejudice; or
(d) discriminates between the employee and other employees of the employer.
Section 592 of the FW Act provides:
592 Conferences
(1)For the purpose of performing a function or exercising a power of the FWC (other than a function or power under Part 2-6), the FWC may direct a person to attend a conference at a specified time and place.
(2)An FWC Member (other than an Expert Panel Member), or a delegate of the FWC, is responsible for conducting the conference.
(3)The conference must be conducted in private, unless the person responsible for conducting the conference directs that it be conducted in public.
(4) At a conference, the FWC may:
(a) mediate or conciliate; or
(b) make a recommendation or express an opinion.
(5) Subsection (4) does not limit what the FWC may do at a conference.
Section 131(1) of the Evidence Act 1995 (Cth) provides, subject to the exceptions found in s.131(2), that evidence is not to be adduced of communications between parties to a dispute made in connection with an attempt to negotiate a settlement of the dispute or of documents prepared in connection with such an attempt. For present purposes, the common law relevantly provides similarly.
EVIDENCE
Mr Williams, the solicitor for the respondents, relevantly deposed the following in his affidavit affirmed 9 July 2021:
(a)on 19 March 2021 the respondents’ solicitors, MinterEllison, wrote to the applicant’s solicitors, Kennedys, requesting further and better particulars and a copy of a text message referred to in para.22 of the statement of claim;
(b)Kennedys replied on 26 March 2021 but did not provide the text message sought;
(c)the respondents filed their defence on 30 March 2021, which indicated their intention to seek the striking out of paras.60, 61, 67 and 78 of the statement of claim;
(d)on 14 April 2021, Kennedys provided MinterEllison with a copy of the text message referred to in para.22 of the statement of claim;
(e)on 15 April 2021 and 26 April 2021, MinterEllison wrote to Kennedys indicating that subject to the outcome at mediation, orders might be sought in relation to pleadings and particulars; and
(f)on 25 June 2021, MinterEllison wrote to Kennedys setting out their arguments as to why paras.60, 61 67 and 78 of the statement of claim were liable to be struck out to which Kennedys responded on 2 July 2021.
CONSIDERATION
Paragraphs 60 and 61
Paragraphs 60 and 61 of the statement of claim concern a conference in the FWC proceeding that was conducted by Deputy President Bull and, specifically, a refusal by the respondents “[a]s part of that process” to provide the applicant with certain information. It is alleged that that refusal was adverse action that was taken for a prohibited reason.
In support of their application for an order striking out those paragraphs, the respondents submitted that the parties’ conduct during the conference could not be relied on in this proceeding because it was subject to the settlement negotiation privilege provided by s.131(1) of the Evidence Act. In that regard the respondents submitted that the purpose of the conference had been to mediate or conciliate the dispute and that this had been sufficient to engage s.131. I note that there is no evidence of, or suggestion that, the Deputy President made a recommendation or expressed an opinion under s.592(4)(b). The applicant did not dispute the proposition that the conference had been for settlement purposes, although he did submit that there was no evidence that it had been. On balance I accept that the purpose of the conference was to essay the possibility of settlement. That being so, subject to the applicability of any of the statutory exceptions to the privilege found in s.131(2), settlement negotiation privilege attaches to what was said at, and to documents created in connection with, the conference.
It was also noted that the conference had, pursuant to s.592(3) of the FW Act, been a private one although it was not argued that this fact had any separate significance.
A situation similar to the present one was considered in Unilever PLC v The Procter & Gamble Co [2000] 1 WLR 2436, a patent case where the appellant’s action was based on the respondent’s threat made in the course of pre-litigation settlement negotiations to bring infringement proceedings. In ordinary circumstances, that threat would have been actionable under the Patents Act 1977 (UK). However, the action was struck out on the basis that it would have been an abuse of process for the appellant plaintiff to be allowed to plead anything said at the meeting either as a threat or a claim of right. The same reasoning applies in this case.
I note the applicant’s submission that Pendal’s refusal could have occurred in any number of ways, including failure to provide the information “over a period of time – including the time at the conference”, but that is not what is alleged. The refusal is alleged to have occurred as part of the conference process, not also over a period of time before or after the conference process. The other arguments concerning how the refusal might be proved without infringing the privilege were advanced only on a hypothetical basis. It can be inferred that if any of those possibilities were practically available then there would have been some evidence of that.
I note the applicant’s submission that conference proceedings are not treated by the FWC in subsequent hearings as privileged. I will accept that evidence from the bar table but it probably reflects the fact that by s.591 of the FW Act, the FWC is not bound by the rules of procedure or of evidence of which the common law “without prejudice” privilege and the statutory settlement negotiation privilege are two. However, the Court is bound by such rules and, relevantly, by s.131 of the Evidence Act. The fact that there were antecedent proceedings in the FWC where the privilege was not practically available does not affect the operation of s.131. This is because s.131(2) does not list waiver or inconsistency as exceptions and so they are not grounds for loss of privilege: YXW Pty Ltd v Sushi Sushi Franchising Pty Ltd (2016) 52 VR 182. In any event it was not argued that any of the s.131(2) exceptions might apply in this case.
As a result, the communication made by the respondents to the applicant as alleged in para.61 of the statement of claim is subject to the privilege. Because of that, I find that reliance on that communication as pleaded in paras.60 and 61 would be an abuse of process. It is appropriate therefore that those paragraphs be struck from the statement of claim.
Paragraph 67
The applicant alleges that Pendal took adverse action against him, in the sense of injuring him in his employment, by failing to investigate or take any action in respect of his complaints to Pendal of bullying and inappropriate treatment by his superior, Mr Gor. In para.66 it is pleaded that the applicant was injured in his employment because Pendal failed:
… to investigate or take any action in respect of the First Bullying Complaint and Further Complaints in circumstances where the allegations concerning the actions of Mr Gor were serious and severely impacting [his] health and safety … .
In para.67 of the statement of claim it is pleaded:
Pendal undertook the Failure to Investigate because of the First Bullying Complaint and Further Complaints, in contravention of section 340 of the FW Act.
As recorded earlier, in correspondence on the subject the respondents argued that para.67 was nonsensical and circular. In his address to the Court the respondents’ counsel submitted that it made no sense to say that Pendal undertook a failure to do something, it being impossible to undertake inaction, or, to put it another way, adverse action under s.340 did not comprehend inaction. The respondents’ complaint of circularity was based on the argument made in MinterEllison’s letter of 25 June 2021 that it was:
… nonsensical and circular to say there is a failure to investigate a complaint because of that complaint.
In the correspondence between the parties the applicant replied to the respondents’ argument saying:
… As a matter of experience, it is not uncommon (but not lawful) for an employer to refuse to investigate a complaint because they have taken offence to its substance or the fact of its existence. In relation to paragraph 67 of the SOC, Mr Farac says that Pendal undertook the Failure to Investigate because of the substance of the First Bullying Complaint and Further Complaints, which detailed numerous and serious allegations against Mr Gor who was a very senior employee crucial to Pendal's business, who Pendal had a financial and reputational interest to protect …
In addresses the applicant argued that, if necessary, “because” in para.67 should be read as “because of the substance of”, on the basis that that was the case that he sought to prosecute. He explained that his contention was that Pendal did not investigate the complaints because of their very subject matter.
The applicant submitted that if the refusal had been undertaken for the reason alleged, then that necessarily meant that there had been either an injury in employment or a prejudicial alteration of position on the basis that, but for the substance of the complaint, the investigation into the complaint would have occurred. The respondents countered, arguing that the necessary and nonsensical corollary of that contention was that there would have been an investigation had the complaints not been made.
Turning first to the nature of adverse action, the terms of ss.340(1) and 342(2) of the FW Act indicate that adverse action requires a positive act. In BHP Iron Ore Pty Ltd v Australian Workers’ Union (2000) 102 FCR 97, the Full Court of the Federal Court of Australia considered s.298K of the Workplace Relations Act 1996 (Cth) which was a predecessor of, and analogous in substance to, material passages in ss.340(1) and 342(1) of the FW Act. Section 298K relevantly provided:
298K Dismissal etc. of members of industrial associations etc.
(1)An employer must not, for a prohibited reason, or for reasons that include a prohibited reason, do or threaten to do any of the following:
(a)dismiss an employee;
(b)injure an employee in his or her employment;
(c)alter the position of an employee to the employee’s prejudice;
(d)refuse to employ another person;
(e)discriminate against another person in the terms or conditions on which the employer offers to employ the other person.
In BHP Iron Ore v AWU the Full Court said:
It has to be borne in mind, in construing s 298K, that it proscribes conduct by “an employer” directed to “an employee” or “other person” … . That use of the singular suggests that the alleged injury or alteration of position has to be examined in the light of the circumstances of each individual employee. … It is … significant that the conduct struck at by each paragraph of s 298K is expressed by an active verb: “dismiss”, “injure”, “alter the position”, “refuse to employ”, and “discriminate”. That implies that the proscription is essentially against an intentional act of the employer directed to an individual employee or prospective employee.
That implication is reinforced by the terms of s 298L(l) which contains an exhaustive catalogue of prohibited reasons, prefaced by the statement:
“Conduct referred to in subsection 298K(l) or (2) is for a prohibited reason if it is carried out because the employee, independent contractor or other person concerned ... ” (at 108 [35], [36])
The applicability of the reasoning in BHP Iron Ore v AWU to the FW Act is apparent from the introductory words of s.340(1) of that Act which are:
A person must not take adverse action against another person …
and by the definition of adverse action relevant to this matter found in s.342(2) which refers to the employer:
(a)dismissing the employee;
(b)injuring the employee in his or her employment;
(c)altering the position of the employee to the employee’s prejudice; or
(d)discriminating between the employee and other employees of the employer.
In Unsworth v Tristar Steering and Suspension Australia Ltd (2008) 216 FCR 122 at 137 [23], Gyles J held that an employer did not:
… “do” anything to “injure” an employee or “alter the position” of an employee
in circumstances where it did nothing more than maintain the status quo.
However, although the sense of ss.340(1) and 340(2) is one of a positive step having been taken, there can be circumstances where inaction does, for instance, injure an employee in his or her employment. In Rowland v Alfred Health [2014] FCA 2, a case involving a failure to rehire the applicant after a “spill and fill” restructure of one of the respondent’s surgical units, Marshall ACJ said:
Counsel for Alfred Health submits that the non-selection of Mr Rowland for a position in the Unit was not adverse action but rather “inaction” in that there was a failure to appoint him. The Court rejects the submission that inaction cannot constitute adverse action. For example, an employee may be denied a promotion notwithstanding that he or she satisfied established criteria while others (who do not) are promoted. The non-selection of Mr Rowland was adverse action … (at [48]).
His Honour’s reasoning identifies the fact that, for the purposes of the FW Act, adverse action is, principally, the consequence suffered by the particular employee, while the action or inaction which brings that consequence about is of secondary importance. The Full Court said as much in BHP Iron Ore v AWU. In that way a positive adverse action can be the product of inaction.
Turning to the question of circularity, I accept the arguability of the applicant’s contention that Pendal’s inaction might have been motivated by a desire not to investigate Mr Guo. The respondents’ argument was framed before that approach was made clear in argument at the hearing of this application and, although understandable in that context, does not now accurately characterise the issue.
For those reasons, para.67 will not be struck out.
Before passing from this issue I should note the lacunal nature of this particular allegation of adverse action. The pleading, which is made in paras.66(a) and 67, assumes that a failure to investigate can amount to an injury in employment without indicating what facts are relied on to support that idea. The applicant alleges that Mr Gor’s actions were serious and severely impacted his health and safety but he leaves it to the imagination of the reader to speculate how, should those facts be proved, a failure to investigate injured him in his employment.
That lack of a complete allegation and of related particularisation necessarily caused questions of Pendal’s motivation to assume principal significance when they should be consequential and dependent on the particulars of the adverse action alleged and the related causative action or inaction. In those circumstances, it is hardly surprising that the respondents have complained that the allegation is nonsensical and circular. For the reasons I have given, I do not agree that the pleading is circular but it is nonetheless opaque and deficient, a particular vice in an allegation that engages the reverse onus of proof in s.361 of the FW Act.
However that was not the complaint made and, as I have said, para.67 will not be struck out.
Amended defence
The respondents sought leave to amend their defence because they had had to file their pleading before they had received adequate particularisation of para.22 of the statement of claim. No argument was put in opposition to this aspect of the application and, in any event, I am satisfied that the leave sought should be granted for the reasons advanced.
CONCLUSION
For the reasons given, paras.60, 61 and 78 of the statement of claim will be struck out and the respondents will have leave to file an amended defence.
I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Cameron. Associate:
Dated: 9 September 2021
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