Farrell v Super Retail Group Limited (Cross-claim)

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FEDERAL COURT OF AUSTRALIA

Farrell v Super Retail Group Limited (Cross-claim) [2024] FCA 1189

File number: NSD 1009 of 2024
Judgment of: LEE J
Date of judgment: 8 October 2024
Catchwords: PRACTICE AND PROCEDURE – cross-claim – where cross-claimants seek to enjoin the solicitors for the first and second cross-respondent from representing them in the proceeding – where cross-claimants assert the solicitors have a financial and reputational interest in the proceeding – where solicitors issued media statement concerning allegations of bullying, victimisation and adverse treatment at Super Retail Group – where media statement was not an emergency disclosure within the meaning of the Corporations Act 2001 (Cth) – alleged failure of solicitors to give advice about exposure to defamation proceedings – where media statement relied on by SRG as repudiatory conduct – relevant principles – where relief sought of an exceptional nature – weight of being deprived of choice of legal representation – where proper administration of justice does not necessitate an order – cross-claim dismissed
Legislation:

Constitution ss 75, 76, 77

Corporations Act 2001 (Cth) Pt 9.4AAA, ss 1317AA(1), 1317AAD(2), 1317AAD(2)(c), 1317AB

Fair Work Act 2009 (Cth) ss 340(1), 570

Federal Court of Australia Act 1976 (Cth) s 23

Defamation Act 2005 (NSW) Pt 3, Div 1

Legal Profession Uniform Law (NSW) s 44(4)
Cases cited:

Boros v Pages Property Investments Pty Ltd [2021] NSWCA 288

Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd(1991) 22 NSWLR 389

Commonwealth Bank of Australia v Jackson McDonald (a firm) [2014] WASC 301

CPB Contractors Pty Limited v Celsus Pty Limited (formerly known as SA Health Partnership Nominees Pty Ltd) [2017] FCA 1620; (2017) 353 ALR 84

DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423

Dugan Process Holdings Pty Ltd [2021] VSC 555

Farrell v Super Retail Group Limited (Confidentiality Applications) [2024] FCA 954

Finch v Heat Group Pty Ltd (No 2) [2016] FCA 791; (2016) 353 ALR 193

Jackson v Sterling Industries Ltd (1987) 162 CLR 612

Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561

Masters v Cameron (1953) 91 CLR 353

McKenzie v Cash Converters International Ltd (No 3) [2019] FCA 10

Porter v Dyer[2022] FCAFC 116; (2022) 402 ALR 659

Premier Capital (China) Ltd v Sandhurst Trustees [2012] VSC 611

R & A Can Co Pty Ltd v Kotzman [2008] VSCA 68

R&B Investments Pty Ltd (Trustee) v Blue Sky (Reserved Question) [2024] FCAFC 89

ASX Listing Rule 3.1

Australian Law Reform Commission, Judicial Impartiality: The Fair-Minded Observer and its Critics (Background Paper J17, April 2021)

Young S “The Evolution of Bias: Spectrums, Species and the Weary Lay Observer” (2017) 41 Melbourne University Law Review 928

Sher J, “My Final Offer!”: The Ethics of Negotiation”, Brief (Law Society of Western Australia, August 2015)
Division: Fair Work Division
Registry: New South Wales
National Practice Area: Employment and Industrial Relations
Number of paragraphs: 131
Date of hearing: 8 October 2024
Counsel for the applicant / cross-respondent:
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Details
Case
[2024] FCA 1189
Decision Date

CaseChat Overview and Summary

In the matter of Farrell v Super Retail Group Limited, the cross-claimants, Ms Farrell and Ms Berczelly, sought to enjoin the solicitors for the first and second cross-respondents, Harmers Workplace Lawyers, from representing them in the proceeding. The dispute arose from allegations of bullying, victimisation, and adverse treatment at Super Retail Group (SRG), with Harmers Workplace Lawyers having issued a media statement concerning these allegations. The cross-claimants asserted that the solicitors had a financial and reputational interest in the proceeding, which could compromise their independence and objectivity.

The court was required to decide whether the solicitors' pecuniary and reputational interests constituted obstacles to the provision of legal services with the requisite degree of independence. This involved examining the nature of the court's inherent jurisdiction to restrain a solicitor from acting and whether such relief should be granted as a matter of discretion or evaluative normative assessment. The court considered the implications of the cross-claimants being deprived of their choice of legal representation and whether the proper administration of justice necessitated an order.

The court reasoned that the exercise of the inherent jurisdiction to restrain a solicitor from acting is better characterised as an evaluative normative assessment, rather than a discretionary decision. The court found that while the solicitors' interests might raise concerns, they did not reach the level of satisfaction required to conclude that the proper administration of justice mandated restraining the solicitors from acting. The court further noted that the media statement was not an emergency disclosure under the Corporations Act and that the allegations were not substantiated by SRG’s investigations. Therefore, the court dismissed the cross-claim.

The court ordered that the cross-claim seeking to restrain the solicitors from representing the cross-claimants be dismissed and directed the parties to file and serve any submissions in relation to the costs of and incidental to the cross-claim by 9 December 2024.

Orders

Orders of the court

1. The cross-claim by which the cross-claimants seek an order or orders that the first and second cross-respondents be restrained from retaining the third and fourth cross-respondents from representing them in, or in relation to, this proceeding; and/or that the third and fourth cross-respondents be restrained from representing either of the first or second cross-respondents in, or in relation to, this proceeding be dismissed.

2. The parties file and serve any submissions in relation to the costs of and incidental to the cross-claim on or by 9 December 2024.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

I will divide the balance of these reasons into the following four sections: first, I will set out additional aspects of the background and make relevant findings; secondly, explain the relevant legal principles; thirdly, detail the submissions advanced in favour of the relief sought; and fourthly, I will set out my conclusions. B RELEVANT BACKGROUND AND FINDINGS B.1 General Background and Findings Ms Farrell advances two cases as pure alternatives. Her primary contention is that the controversy between her, Ms Berczelly and the SRG Parties has resolved, and she seeks specific performance of a settlement agreement (Settlement Case). Her secondary case is that if the dispute does remain unresolved, she seeks substantive relief against the SRG Parties arising out of Ms Farrell’s former employment by one of the SRG Parties (which is alleged to have been terminated for a reason that included a prohibited reason under s 340(1) of the Fair Work Act 2009 (Cth) (FWA) (or under Pt 9.4AAA of the Corporations Act 2001 (Cth) (Corporations Act)) (Substantive Case). Ms Berczelly is a respondent to Ms Farrell’s proceeding (being a proper party to the Settlement Case) and has filed a submitting appearance. As noted above, on 20 September 2024, Ms Berczelly commenced her own similar employment case against the SRG Parties (Berczelly Case). Again, the Berczelly Case, which has been filed now to preserve limitation periods, will not proceed if specific performance of a settlement agreement is granted. From approximately August or September 2023, Ms Farrell contends an employment dispute arose between her and SRG. She retained Harmers at this time. Shortly thereafter, on 11 December 2023, SRG became aware that Harmers acted for Ms Farrell, and Ms Farrell commenced a period of leave from her employment. Ms Berczelly retained Harmers in December 2023 and, in February 2024, SRG became aware that Harmers also acted for her. SRG engaged solicitors (Allens) and, from February 2024 onwards, Allens engaged in various “without prejudice” communications with Harmers. A mediation was conducted on 17 April 2024, which was attended by representatives of SRG, Ms Farrell and (part way through and by telephone) Ms Berczelly. Legal representatives were also present. Following the unsuccessful mediation, SRG released an announcement to the Australian Securities Exchange (ASX) about expected workplace litigation. The announcement (ASX Announcement) was as follows: 26 April 2024ASX AnnouncementEXPECTED WORKPLACE LITIGATIONThe Board of Super Retail Group Limited (ASX: SUL) today announces that the Group expects two employees, represented by Harmers Workplace Lawyers, will shortly commence court proceedings against the Group. The Group expects the employees to jointly claim loss and damage in the range of $30 million to $50 million.The Group expects that the allegations in the proceedings will include: the non-disclosure of a relationship between Anthony Heraghty, the Group Managing Director & Chief Executive Officer, and the former Chief Human Resources Officer (who is not one of the two employees making the claim); inappropriate company travel; bullying, victimisation and adverse treatment; particular employees in the corporate team having unreasonable workloads, insufficient resources and restricted access to information; and unsatisfactory company record management.The Board has conducted a review and investigations into these allegations. The Board was supported by independent external advisers. The Board's review and investigations concluded that none of the allegations are substantiated.Super Retail Group will defend any court proceedings in relation to the allegations. Allens is acting for the Group.As these matters are expected to be the subject of litigation, the Group does not intend to make any further comment at this time. The Group will update the market on this matter as appropriate.The release of this announcement has been authorised by the Board of Super Retail Group.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

In any event, the law is to be applied as stated in the authorities and I am required to examine the matter through the lens of the hypothetical referee armed with the necessary knowledge to make a reasonable assessment. C.3 A Discretionary Decision? I was taken to two decisions suggesting that the “inherent” jurisdiction to retain a solicitor from acting is “discretionary”. In reliance on what was said by Brereton J in Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561 (at 586 [92]), Lyons J in Dugan Process Holdings Pty Ltd [2021] VSC 555 (at [63]) said:Further, the Court’s inherent jurisdiction to restrain a solicitor from acting is discretionary. In exercising that discretion, the Court must take into account the prima facie right of a party to be represented by the lawyer of his or her choice, the inconvenience, cost and disruption which might be caused in requiring a party to change lawyers, and the exceptional nature of the Court’s jurisdiction. Although it is unnecessary to decide for present purposes, I confess that I have some misgivings as to whether this characterisation of the nature of the decision required is correct. The exercise of a judicial discretion generally allows a judge to make a choice between lawful, but different courses of action and the concept necessarily implies choice: R&B Investments Pty Ltd (Trustee) v Blue Sky (Reserved Question) [2024] FCAFC 89 (at [3] per Murphy, Beach, Lee JJ). The process upon which I am presently engaged seems to me better characterised as an evaluative normative assessment, albeit conducted by reference to the hypothetical construct of the reasonable observer. If I am satisfied based on the evidence that a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires a solicitor be prevented from acting to protect the integrity of the judicial process, it does not seem to me that there is any discretion then involved as to whether relief should follow. If the Court is satisfied that the step is required, then the only option is to make an order providing the solicitor not act. Hence, any review of the decision whether to grant such an order would be subject to review by reference to the correctness standard. The analogy to the nature of a determination as to the actual or apprehended bias of a judicial officer is far from perfect but illustrates the point: the disqualification is required to ensure justice is done or is seen to be done. The expressions in the cases that the power to restrain is an exceptional one and should be exercised cautiously are, it seems to me, not admonitions as to how the discretion must or should be exercised, but rather reflect that such an application is a serious matter and the reasons advanced in support of it need scrutiny given that if an order is to be made one is required to reach the level of satisfaction the hypothetical referee would conclude that the proper administration of justice requires that a representative be prevented from acting in the interests of the protection of the integrity of the judicial process and the appearance of justice.

Ratio Decidendi

Legal Principle Established

The SRG Parties urge the Court to find the solicitors’ “pecuniary and reputational interests in this litigation are obstacles to the provision of legal services accompanied by the requisite degree of independence”. E CONSIDERATION It is well to commence by reference to an important matter of context. As noted above, I fully accept that Ms Farrell and Ms Berczelly rationally formed the view that persons acting or purporting to act to promote the interests of SRG have suggested to at least one journalist that SRG believes that Ms Farrell and Ms Berczelly were engaged in some form of “shakedown” of a public company. The basis of this subjective belief is well illustrated by having reference to two articles in evidence. The first is an article published in The Australian on 27 April 2024, authored by that newspaper’s Senior Business Reporter. That article includes the following: Shopping giant Super Retail has launched an astonishing pre-emptive attack on a $30m-$50m legal claim from two executives it believes is designed to “shake down” the company, with accusations chief executive Anthony Heraghty had a secret affair with his human resources chief.…The company said an external investigation launched in December had cleared Mr Heraghty and Ms Kelly of having an affair and any claims of bullying. Ahead of a snap meeting with the company’s lawyers, sources close to Super Retail on Friday accused the employees behind the legal action of using “shake down” tactics.…Internally, Super Retail believes it is the victim of baseless allegations dressed up as potent legal threats and wielded to trigger a payday for the law firm and its clients. Rather than wait for court documents to land, it made the decision to alert the stock exchange. “It’s like blackmail or shake down,” a source close to Super Retail management said. The offensive strategy adopted by the company is reflective of Mr Heraghty’s management style. A further “exclusive” article was published by the same writer the following day which included: Shopping giant Super Retail Group offered to settle a legal claim from at least two rogue executives over an alleged secret affair between its chief executive and its HR manager, but it was rejected after the offer fell well short of a $50m payday they expected.Harmers Workplace Lawyers, a specialist workplace firm that over the past decade has carved out a niche in certain areas of industrial relations including around sexual harassment, engaged in mediation talks with Super Retail earlier this year as it sought losses and damages on behalf of its clients that could be worth $30m to $50m.Those mediation talks later failed, The Australian can reveal, with offers of a settlement raised by the company but not accepted.The failure of mediation to find a workable solution and growing fears it was being held to ransom on baseless allegations led Super Retail on Friday go on the offensive by revealing to the Australian Stock Exchange that it was being pursued by lawyers acting for two current, female Super Retail executives making a number of scandalous claims and potentially chasing as much as a $50m payout.