Goulding v Simonds Homes Victoria Pty Ltd
[2020] FCCA 2457
•2 September 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| GOULDING v SIMONDS HOMES VICTORIA PTY LTD | [2020] FCCA 2457 |
| Catchwords: PRACTICE AND PROCEDURE – Discovery – issues relating to income and damages for loss of income – relevance of documents submitted to government agencies – where no tax returns prepared or discovered – whether documents containing representations as to financial affairs submitted to Child Support Agency discoverable in absence of tax returns. LIMITATION PERIODS – When cause of action arises – claim for breach of employment contract – claim for breach of contract to provide services – whether fraud or mistake alleged – meaning of ‘mistake’ in the relevant provision – whether all reasonable steps taken to discover fraud or mistake – no arguable case that limitation period not expired. |
| Legislation: Child Support (Assessment) Act 1989 (Cth), s.150 Fair Work Act 2009 (Cth), ss.117, 119, 544, 545, 546 and Div.11 of Pt.2-2 Federal Circuit Court of Australia Act 1999 (Cth), s.45 |
| Cases cited: ACN 005 057 349 Pty Ltd v Commissioner of State Revenue [2015] VSC 76 |
| Applicant: | JOHN GOULDING |
| Respondent: | SIMONDS HOMES VICTORIA PTY LTD (ACN 050 197 610) |
| File Number: | MLG 1941 of 2018 |
| Judgment of: | Judge Riethmuller |
| Hearing date: | 14 April 2020 |
| Date of Last Submission: | 28 May 2020 |
| Delivered at: | Melbourne |
| Delivered on: | 2 September 2020 |
REPRESENTATION
| Counsel for the Applicant: | Dr Wolff |
| Solicitors for the Applicant: | Adams Maguire Sier |
| Counsel for the Respondent: | Mr Harrington |
| Solicitors for the Respondent: | Minter Ellison |
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 1941 of 2018
| JOHN GOULDING |
Applicant
And
| SIMONDS HOMES VICTORIA PTY LTD (ACN 050 197 610) |
Respondent
REASONS FOR JUDGMENT
The applicant brought a claim against the respondent for damages and unpaid entitlements said to arise as a result of a contract of employment, and various statutory rights under the Fair Work Act 2009 (Cth) (Fair Work Act).
Procedural history
The claim was filed on 5 July 2018. Directions were made in August of 2018 for the filing of pleadings and a mediation with a Registrar of the court.
The parties were unable to resolve their dispute at the mediation. Following the mediation, on 18 February 2019, a Registrar made further orders for discovery and amended pleadings, as well as orders for evidence at the hearing to be by way of affidavit and specific times for the filing of the affidavit material prior to the hearing date. Thereafter a hearing date was set for the matter on 14 April 2020.
The matter next came before the court on 24 February 2020 (by way of an interlocutory application filed by the respondent), where the parties obtained orders by consent for discovery of further specific documents, directions for submissions as to whether orders for discovery should be made for documents submitted by the applicant to the Child Support Agency relating to his income, and revised directions for filing of trial material.
On 11 March 2020 the respondent obtained orders (by consent) to issue more than 5 subpoenas.
On 3 April 2020 the matter was again before the court with respect to amendments to the pleadings sought by the applicant (although not the subject of an application in a case). By this point it was apparent that there would be significant issues at trial concerning the credibility of various witnesses with respect to events that occurred many years ago. As in person hearings had ceased in Melbourne (due to the COVID-19 restrictions) the trial was adjourned to a date to be advised despite objections from the applicant. The trial date, of 14 April 2020 was maintained to deal with the interlocutory issues.
At the hearing on 14 April 2020 various documents were tendered, and orders were made enabling the parties to provide further written submissions with respect to the documents and any request for a further oral hearing by 13 May 2020. The dates provided in these orders were later changed (by consent) to end on 15 May 2020, then changed again (by consent) to end on 3 June 2020. The result is that the parties have now filed in excess of 450 pages of documents each including numerous sets of submissions seeking rulings on a number of issues.
Interlocutory issues
As best I can identify from the materials and submissions, the issues that must be determined at present are as follows:
a)Should a proposed second applicant, Jingo Pty Ltd (‘Jingo’), be permitted to join the proceedings to pursue a contract claim against the respondent;
b)Should the applicant be permitted to amend his Statement of Claim to make a claim for monies allegedly due under a ‘profit share’ clause in the relevant contract of services in the years prior to the final year of his engagement with the respondent;
c)Should the applicant be permitted to amend the pleadings to make a claim for ‘retrenchment’;
d)Should the applicant be permitted to make a claim for ‘exemplary damages’; and
e)Whether the respondent may seek discovery of documents provided by the applicant to the Child Support Agency which would ordinarily contain his representations as to his income earned (and its source) in various relevant periods as identified from the pleadings.
Background
The applicant carried out work for the respondent from 5 April 2006 as a cost planner/estimator. On 2 March 2008 he was engaged as the ‘Regional Manager – North Region’. Thereafter, through various contracts the applicant provided his services to the respondent until the agreement was terminated by the respondent on 20 August 2012.
The applicant says that he was employed by the respondent throughout this period and therefore the applicant and respondent were subject to the provisions of the Workplace Relations Act 1996 (Cth) and subsequently the Fair Work Act. The applicant claims that he was entitled to
a)Accrued Annual leave upon termination (which he calculates at 49.7 days);
b)Damages consequent upon termination of the agreement of around $300,000 for salary and unspecified amounts for a motor vehicle allowance and profit share clause and alternatively for breach of the Fair Work Act with respect to the minimum period of notice of termination and redundancy pay.
The respondent argues that it never employed the applicant. Rather, the applicant was initially employed by Tomanic Pty Ltd (a company associated with the applicant), and that from July 2007 he was employed by Jingo (another company associated with the applicant, where his wife appears to have been the director and shareholder). These companies contracted with the respondent to provide the applicant’s services. Importantly, the respondent says that it never paid the applicant directly (invoices were sent by the associated companies to the respondent who paid the companies, including GST for the services rendered). The respondent maintains that the arrangements to obtain the applicant’s services through these companies were put in place at the applicant’s request as the applicant ‘did not wish to be directly employed by Simonds Personnel due to the breakdown of his domestic relationship’: see Amended Defence filed 30 April 2019 at paragraph [4(b)].
Joinder of a Second Applicant
The applicant and Jingo now seek to have Jingo joined in the proceedings as a second applicant (the solicitors for the applicant are also acting for Jingo). Whilst Jingo had been de-registered since the events alleged in the pleadings, it has be re-registered to enable it to seek to join the proceedings.
Counsel argues that the claims that Jingo seeks to bring are in the alternative to the claims of the applicant: that is, if the applicant fails in his argument that he was an employee on terms identical to the contracts that appear to be between the respondent and Jingo. Whilst the applicant’s counsel set out a large number of references relevant to the question of whether a person is an employee or an independent contractor that is a matter for trial. For present purposes it remains a real possibility that the applicant was actually employed by Jingo and that the respondent and Jingo had a contractual relationship whereby Jingo supplied labour for hire.
It is open to the parties to bring a claim that can only succeed in the alternative, just as it is open to an applicant to sue respondents in the alternative.
The court has broad powers to permit amendments after proceeding have been commenced: see Pt.7 of the Federal Circuit Court Rules 2001 (Cth) (the ‘Rules’). The general principles with respect to amendments is summarised in Caason Investments Pty Ltd v Cao [2015] FCAFC 94 at paragraphs [20]-[21], where Gilmour and Foster JJ said:
20. The Court's power to grant leave to amend is broad and has the remedial objective of ensuring that any defect in the pleadings is cured and that the real questions in the controversy are properly agitated and to avoid a multiplicity of proceedings: Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 at [14] (citing Dwyer v O'Mullen (1887) 13 VLR 933 at 939-940) and [71]. The object of the Court is not to punish parties for mistakes made in the conduct of their case, but to correct errors with the result that a decision can be made on the real matters in controversy: Clough and Rogers v Frog (1974) 4 ALR 615 at 618, citing Cropper v Smith (1884) 26 Ch D 700 at 710-711.
21. Leave to amend should be granted unless the proposed amendment is futile, such that the issue sought to be added is unlikely to succeed, the amendment is likely to be struck out or would cause substantial prejudice or injustice to the opposing party in a way that cannot be compensated by costs: Research in Motion Ltd v Samsung Electronics Australia Pty Ltd (2009) 176 FCR 66 at [21] to [22]; Medich v Bentley-Smythe Pty Ltd [2010] FCA 494 at [8]. Rule 16.21 of the FCR identifies the grounds on which pleadings may be stuck out.
Joinder of a party is required under r.11.01(1) of the Rules if their ‘participation is necessary for the Court to completely and finally determine all matters in dispute in a proceeding’. It is apparent that the claim by Jingo arises out of the same facts and circumstances as the claim by the applicant. As Jingo consents to its joinder and seeks to press a claim, the Rules permit the joinder of Jingo as an applicant and does not require it to be joined as a respondent (if leave is granted to join Jingo): see r.11.01(3).
The respondent opposes the joinder of Jingo arguing that Jingo does not have an arguable case due to the expiration of the statutory limitation of the actions period. Actions brought in relation to a contravention under the Fair Work Act must be made within 6 years of the contravention: see ss.544 and 545, however this would not apply to Jingo as it was never an employee of the respondent.
Section 5 of the Limitation of Actions Act1958 (Vic) imposes a 6 year limitation period for actions founded on contract or breach of statutory duty. This statute applies to proceedings in federal courts in the State of Victoria: see generally Maguire v Simpson [1977] HCA 63; (1977) 139 CLR 362 and Austral Pacific Group Limited (In Liq) v Air Services Australia [2000] HCA 39; (2000) 203 CLR 136. Thus, causes of action that accrued more than 6 years prior to the presently constituted proceedings (which were filed on 5 July 2018) cannot be brought even if the amendments were to take effect from the date the proceedings commenced.
Any claim brought by Jingo at the time that Jingo sought to be joined to these proceedings (in 2020) would be statute bared if it accrued prior to 2014 (the respondent has said that it will plead the statute of limitations defence, and there is no argument that the respondent would be estopped from doing so).
It was argued that the limitation defence issues should be deferred until trial, relying upon the judgement in Wardley Australia Limited v Western Australia [1992] HCA 55; (1992) 175 CLR 514 (‘Wardley’). There is no doubt that nuanced questions with respect to limitation periods are better dealt with at trial. However, amendments should not be permitted (including joinder of additional parties) if there is not at least an arguable case. Counsel for applicant argued that there are a number of answers to the limitation period defences articulated by the respondent:
a)That Jingo only suffered a loss in November 2018, when the respondent raised the defence that it had no contract with the applicant; and alternatively;
b)That as it is alleged that the respondent gave no notice of the termination to Jingo the cause of action only accrued when Jingo’s director became aware of the respondent’s defence (that it had contracted with Jingo), in March of 2020.
c)That Jingo’s cause of action is conditional as Jingo would only suffer a loss if the applicant’s case fails.
d)That the respondent has acknowledged a debt due to Jingo within the meaning of s.24(3) of the Limitation of Actions Act.
e)That amendment to the documents will be presumed to have taken effect when the document was first filed, which in this case was within the limitation period.
f)That the limitation period has not expired with respect to the proposed claim for breach of the profit share agreement due to the effects of fraud or mistake within the meaning of s.27 of the Limitation of Actions Act
(a) When did Jingo suffer a loss
If Jingo had contracted with the respondent to provide services, as alleged in the defence, the obligation to pay Jingo accrued each month after services were supplied. Any claim for wrongful termination of the services agreement arose on the day of the breach, which at the latest was when the respondent ceased paying Jingo.
Whilst counsel seeks to categorise this as a case where loss has not crystallised it is not a case where loss is not suffered at the time of termination of the agreement: the loss is the loss of the payments under the contract which arose on the alleged breach of contract. The reliance upon Wardley and Bodycorp Repairers Pty Ltd v Holding Redlich [2018] VSCA 17 in this regard is misconceived.
Any claims by Jingo for money due and owing under the contract, or damages for breach, arose at the time the monies fell due or the breach occurred which was in August or September of 2012.
(b) Relevance of a notice of termination
The applicant pleads that the respondent purported to terminate the agreement on 20 August 2012. The respondent did not accept services after that date. For any wrongful termination the cause of action for breach of contract obviously occurred at the time that the respondent refused to continue to accept services from the applicant. It is, as counsel for the applicant says (in his outline of submissions filed 8 April 2020) ‘undisputed that since 1 August 2012 the Respondent has not made a payment to either Jingo nor the Applicant’: see paragraph [30]. It is difficult to see how the cause of action could be said to have accrued any later than the end of September 2012 (assuming an invoice for August was sent and remained unpaid). To allege that Jingo was only aware of the termination of the agreement in 2020 is simply specious in circumstances where the applicant ceased providing services to the respondent. The claim that the director of Jingo was unaware of the turn of events as she neither sent invoices, nor managed the company accounts demonstrates that the applicant was, on this argument, the agent of the company, and therefore the applicant’s knowledge is sufficient.
(c) Jingo’s Cause of Action is not conditional
If Jingo is the party who contracted with the respondent, then its loss is not conditional upon any claim by the applicant failing: Jingo would have a standard contract claim in its own right. Its cause of action is not conditional, rather a claim by Jingo may fail if it were found that the contract apparently entered into between Jingo and the respondent is a sham or that despite the documents the true parties to the contract were the applicant and the respondent.
(d) Claim that there has been an acknowledgement of a debt
The argument that the respondent has acknowledged a debt to Jingo relied upon long quotes from Giacci v Giacci Holdings Pty Ltd [2010] WASCA 233 and Australian Medico-Legal Group Pty Ltd v Claireleigh Mosman Pty Ltd [2017] NSWCA 218 which provide little assistance.
If there has been an acknowledgement of the claim, s.24(3) of the Limitation of Actions Act deems that the time of the accrual of the cause of action to be on the date of the acknowledgement. To the extent that the claim is for damages it is outside the ambit of the relevant provision which only applies to debts and liquidated demands.
To the extent that the claim is for a debt or liquidated demand, there is no acknowledgement of a debt to Jingo that arises from the matters relied upon by counsel for the applicant (at p.6 of the outline filed 8 April 2020) where counsel says:
29. The Defendant in its defence of 30 April 2019 says that:
a) the Respondent entered into various contracts with Jingo – Para 4(g), 5(b), 6, 9, 15(b)
b) the Respondent paid Jingo – Para 5(e), 7(c), 15(f)
c) the Respondent terminated the Further Jingo Services Contract on 20 August 2011 (which is a secretarial error) – Para 19
d) the Respondent terminated the Further Jingo Services– Para 20(b).
In the applicant’s affidavit (at paragraph [140]) he says that he received a letter from the respondents on 22 August 2012. The letter itself is annexed to the affidavit at JWG37. The letter is addressed to ‘Mr J Goulding Jingo Pty Ltd’, however it is clear that it is addressed to Jingo as the endorsement on the letter (for a signature and return to confirm acceptance of the terms set out in the letter) was a ‘release and discharge …. from all claims demands damages and costs’ was drawn for Jingo to sign. The body of the letter sets out an offer to pay a sum ‘without any admission of liability’.
The applicant sets out that the offer by the respondents was without admission of liability: see paragraph [215]. On the face of the letter, it appears to be an offer of settlement that would not be admissible: see s.131 of the Evidence Act 1995 (Cth). Most importantly, the letter does not acknowledge that there is a debt or other sum due and owing to the applicant or Jingo as it clearly states that it is made without any admission of liability. The terms of the letter can be contrasted with the letters of acknowledgement discussed in Hepburn v McDonnell [1918] HCA 43; Bucknell v Commercial Banking Company of Sydney Ltd [1937] HCA 35 and Motor Terms Co Pty Ltd v Liberty Insurance Ltd [1967] HCA 9.
The matters identified in counsel’s written outline merely show that the respondents plead that they entered into contracts with Jingo, paid Jingo and terminated the contract. None of these statements is an acknowledgement of a debt owing to Jingo pursuant to these arrangements. The letter expressly states that it is an offer ‘without admission of liability’. As there is no acknowledgement of a debt owing, the limitation period commences at the time that the cause of action arose.
(e) Date at which amendments take effect
It is correct to say that generally an amendment will, unless there are orders to the contrary, be taken to have effect from the date of the filing of the relevant document. Counsel relied upon Street v Luna Park Sydney Pty Ltd [2006] NSWSC 230 (‘Street’s Case’) at paragraphs [46] to [47] as authority for this proposition. However, in that case Brereton J noted (relying upon Liff v Peasley [1980] 1 All ER 623, 641-643 (CA); [1980] 1 WLR 781, 802-804; Ketteman v Hansel Properties Ltd [1987] AC 189; Wenham v General Credits Ltd (NSWSC, McLelland J, 16 December 1988, unreported); Fernance v Nominal Defendant (1989) 17 NSWLR 710) that:
47 … it is clear that the relation-back principle does not apply to an amendment which adds a party: where a party is added, proceedings against it are commenced only at the date of its joinder, so that the relation-back doctrine does not deprive a party joined after expiry of a limitation period of its limitation defence …
Counsel sought to argue that this statement in Street’s Case only applied to adding defendants, and not adding additional applicants. The argument is untenable. To allow Jingo to be joined would deprive the respondent of the limitation period defence. In Mabro v Eagle, Star & British Dominions Insurance Co Ltd [1932] 1 KB 485 Scrutton LJ said: ‘The Court has never treated it as just to deprive a defendant of a legal defence’ (at p.487) and Greer L.J. said: ‘It has been the accepted practice for a long time that amendments which would deprive a party of a vested right ought not to be allowed’ (at p.489): cited with approval by the High Court in Maxwell v Murphy [1957] HCA 7; (1957) 96 CLR 261.
The argument also ignores the clear limits on amendments after the expiration of limitation periods which are set out in r.7.03 which provides:
7.03 Amendment after limitation period
…
(2) The Court may give leave to make an amendment correcting the name of a party, even if it is alleged that the effect would be to substitute a new party, if:
(a) the Court considers it appropriate; and
(b) the Court is satisfied that the mistake sought to be corrected was genuine and was not misleading or such as to cause reasonable doubt as to the identity of the party.
(3) The Court may give leave to make an amendment changing the capacity in which a party seeks orders (whether as applicant or respondent by counterclaim) if:
(a) the Court considers it appropriate; and
(b) the capacity in which the party will seek orders is one in which, at the time when the proceeding was started by the party, the party might have sought orders.
Neither sub-r.7.03(2)(b) or (c) cover the amendment sought with respect to Jingo in this case. This is not a case where there was a mistake as to the identity of the applicant, as the applicant pleaded from the outset that when the contract was entered into with the respondent, he was ‘purporting to act on behalf of Jingo Pty Ltd’. It cannot be considered a change in the capacity in which the applicant seeks orders, unless one ignores the separate legal personality of the corporation. In any event, the applicant seeks to maintain the present action in his own right.
(f) Postponement of limitation period due to fraud or mistake
The final argument is one based upon the operation of s.27 of the Limitation of Actions Act which provides:
27. Where, in the case of any action for which a period of limitation is prescribed by this Act -
(a) the action is based upon the fraud of the defendant or his agent or of any person through whom he claims or his agent; or
(b) the right of action is concealed by the fraud of any such person as aforesaid; or
(c) the action is for relief from the consequences of a mistake–
the period of limitation shall not begin to run until the plaintiff has discovered the fraud or the mistake, as the case may be, or could with reasonable diligence have discovered it.
Counsel for the applicant referred to no authorities with respect to the operation of this provision, merely saying in his outline:
46. Until the 25th of March 2020, the Applicant was under the impression that his 2010, 2011, 2012, and 2013 profit share had been fairly and correctly calculated by the Respondent (compare affidavit of John Goulding of 7 April 2020 at para 237-244 inclusive).
47. That mistake was only rectified by the Respondent on 25 March 2020, from which time the limitation period for those claims then began to run.
49. Moreover, the Respondent does not come to Court with clean hands. It arguably underpaid the Applicant significantly in 2010 while it arguably knew very well that it had underpaid him, then kept that information from him until last week. To now grant it the protection of a limitation defence is to reward such behaviour.
Retrenchment
50. Furthermore, a factual determination will have to be made if the underpayment of the profit share to the Applicant might rise to the level of fraud. The Applicant reserves its rights in this regard, including the right to a further amendment, once it has been determined if the facts support such an allegation against the Respondent.
Counsel for the respondent summarized his argument (in his outline of submissions filed 11 April 2020) by saying:
Mistake as to employment contract claim entitlements: at [45]
85. The Applicant’s submissions as to mistake can have no relevance to the Jingo Joinder application. It is a clumsy attempt by the Applicant to invoke s.27(c) of the LAA on his own behalf because there is no other basis to engage the Act to obtain the benefit of an extension of time.
86. There is no evidence of any ‘mistake’ affecting Lupieri [the Director of Jingo].
87. As to the Applicant’s attempt to amend his employment claim:, the pleaded claim in the ASOC under the alleged employment contracts dating back to 2008 did not contain any allegation, until March 2020, that under the employment contract, there had been an underpayment in breach of the 2% profit share term.
88. The Applicant’s third affidavit (8 April) discloses he knew of the contractual right of Jingo to claim a 2% profit share at all times. There was no mistake as to any understanding of a right under the services contract with Jingo to claim this 2%.
89. The Applicant and Jingo were paid such an entitlement in 2009 and in 2010. He did not challenge the calculation then for 2010 but now seeks to do so for 2010 to 2012.
90. The Applicant is a trained accountant. He was never denied access to the Applicant’s books. There is no evidence he or Jingo ever challenged any calculation and he was rebuked or mislead.
91. There is no evidence of fraud or concealment by Simonds.
92. If the Applicant has any claim under contract dating back to 2009/2010 (which is denied), it was the Applicant whom failed to properly examine and assess his payments at the time. He was not attentive or negligent. There was no ‘mistake’; and nothing Simonds did contributed to to such inattention to detail by the Applicant.
93. Further, the Applicant’s 8 April 2020 affidavit does no more than plead a conclusion that he was not paid and he now alleges a mistake on his own behalf. The affidavit material in support is wholly deficient and does not:
(a) engage with the discovered documents to explain the underpayment and how it came about; and
(b) give any indication of the quantum of such claim of underpayment;
In his reliance on s.27(c) of the LAA, the Applicant bears the onus of making out a ‘mistake’. He has not discharged that onus. There was no mistake as that term is understood in s.27(c) of the LAA. The Applicant produces no authority in support of the proposition
Both counsel approached this issue from first principles, citing no authorities. Counsel for the applicant did not provide a proposed pleading with respect to this point, relying instead upon what can be drawn from the affidavits that have been filed. Whilst generally an inappropriate course, I have proceeded to determine the issue on this material rather than invite a further application and interlocutory hearing.
The relevant provision postponing the limitation period places the onus on the claimant of proving two things: first, that the action is for relief from the consequences of fraud or mistake, and secondly that the claimant could not ‘with reasonable diligence have discovered it’.
The meaning of ‘reasonable diligence’ requires the claimant to do what, in the circumstances of the case, could be reasonably expected. The test has been expressed in different ways in different contexts: for example,
a)In ACN 005 057 349 Pty Ltd v Commissioner of State Revenue [2015] VSC 76 Sloss J refers (at paragraph [140]) to the passage in The Europa [1863] EngR 835: ‘the doing of that which, under ordinary circumstances and with regard to expense and difficulty, could be reasonably required’ (followed in Young v Paddle Brothers Pty Ltd [1955] VicLawRp 30; [1956] VLR 38, 42).
b)In Peco Arts Inc v Hazlitt Gallery Ltd [1983] 1 WLR 1315 the test was expressed as ‘the doing of that which an ordinarily prudent buyer and possessor of a valuable work of art would do having regard to all the circumstances, including the circumstances of the purchase’.
c)In Sze Tu v Lowe [2014] NSWCA 462 the NSW Court of Appeal considered the test in the context of a dispute between family members, saying that ‘in the context of a partnership between family members, the likelihood of a family upheaval, where the outcome of a full audit was unknown, was also relevant’: see paragraph [411].
It is also important to distinguish disputes as to amounts paid from equitable fraud or actions for mistake. The mere failure of a person to realise that money was due to them under a contract is not sufficient as otherwise the general limitation provision would be unduly impacted: see Phillips-Higgins v Harper [1954] 1 QB 411 (‘Phillips-Higgins’) (followed in Australia in Sinclair v Registrar-General [2010] NSWSC 173, and Candibon Pty Ltd v Minister for Planning & Anor [2011] VSC 415). In Phillips-Higgins it was found that actions for account of underpaid salary were not actions based upon mistake (the facts of the case had many similarities to this case as it concerned a solicitor who was employed on terms that included a salary component and a profit share component).
The paragraphs of the applicant’s affidavit that are relied upon allege that there was an agreement for the payment a profit share: see paragraph [237]. Whilst not alleged in this part of the affidavit, this is supported by the terms to the alleged written agreements referred to by the applicant in the pleadings. The applicant describes the methodology for calculating the profit share as:
238. The way it worked in practice was that in the months before a new financial year - normally April and May - I would begin a process of budget preparation with Paul McMahon with assistance from members of the accounting team as required to establish my budget figures. That happened for each of the financial years 2009/10, 11, 12 and 13 and it was generally not a short conversation but a gradual process where I prepared a budget, which McMahon reviewed, added his input, we agreed what share of overheads wold be allocated to me, and eventually agreed what my profit figure should be. That was important because once that figure was agreed that it could not be unilaterally changed, and because against it my profit share was calculated, and I would commit mine and my team's energy to achieving that target.
…
240. Until the 25th of March 2020, I had always thought that my 2010, 2011, 2012, and 2013 profit share had been more or less fairly and correctly calculated by the Respondent.
241. Simonds paid me the sum of $19,483 excl GST as bonus payment on or about 22 November 2010. I mistakenly believed that this profit share payment had been correctly calculated and paid to me.
The applicant goes on to detail that the claim came to his attention through reviewing documents discovered by the respondent, saying:
242. … I read those documents during the next days, and found out that I had been mistaken when I thought in 2010 that I had been paid the correct amount as part of my profit share arrangement. I became very frustrated and it made me then doubt the results from the various years. I studied the results available to me and realised that there were large errors and that it represented a substantial amount of money not correctly paid to me.
This sets out the applicant’s case at its highest, effectively based upon handwritten figures on a page of accounts figures. Even if one assumes that the allegations are sufficient to show an arguable claim for equitable fraud or mistake (see Levy & Watt [2014] VSCA 60 at paragraph [85]), the applicant says nothing that goes to the question of when he (or Jingo) ‘could with reasonable diligence have discovered it’, as required by the relevant provision. In the material filed in these proceedings there is nothing addressing why the applicant (either on his own behalf, or as agent for Jingo) could not have discovered the error. The applicant’s affidavit evidence sets out that the process of establishing budgets, and negotiating appropriate shares of overheads and expenses took some time and involved him directly with a number of others in the respondents business. He makes no complaint that any information was withheld from him in these processes that occurred each year for a number of years. On the applicant’s own evidence he has considerable relevant skills: he holds many qualifications that bear upon his capacity to review and understand the accounts: for example, Bachelor of Business (Accounting) (RMIT); Fellow of the Institute of Public Accountants; a qualification to advise on Superannuation and Managed Investments; Accredited Mortgage Consultant; and Master of Commerce/MBA (Deakin).
Whilst I have approached the case on the basis of a potential claim of incorrect calculations as to the profit share, it appears that the real issue was one of interpretation of the profit share agreement as the respondent took the view that the agreement provided for a payment of a 2% share of total profits if the profits are above the budgeted profits for the relevant period, not 2% of the amount by which the total profits are above the budgeted amount, as alleged by the applicant. If, as it appears, this is the real issue then there can be no room for the operation of s.27 of the Limitation of Actions Act as it would always have been apparent that the method used by the respondent (on its understanding of the clause) is different from the interpretation propounded by the applicant.
I am not persuaded that there is any evidence before the court to show an arguable case that the relevant matters could not have been discovered by reasonable diligence of the applicant in circumstances where the evidence shows that he had considerable skills in understanding the accounts and access to them at the relevant time. As a result I am not persuaded that the applicant or Jingo has shown an arguable case that the requirements of s.27 could be fulfilled. Thus, the limitation period with respect to the claims for profit shares has expired and the action by Jingo is, in this respect, without any reasonable prospects of success.
For the purpose of the argument that s.27 of the Limitation of Actions Act is engaged in this case I have taken the applicant’s evidence at its highest and not weighed it against the affidavits filed for the respondent which set out the respondent’s claims that the amount paid was correct when one considers the final accounts (as audited) and the terms of the profit share agreement relied upon by the applicant. Even at its highest, I am not persuaded that the applicant has shown that Jingo has an arguable case for an extension of the limitation period, and therefore must inevitably fail with respect to the matters that are statute bared by s.5 of the Limitation of Actions Act.
Conclusions on application to join Jingo
As I am not persuaded that Jingo has an arguable case that it has a claim that is not statute bared, nor that it has an arguable basis for being joined despite the limitation periods having expired I therefore refuse to grant leave for the joinder of Jingo to the proceedings.
Profit share claim
The original pleading alleged a breach of the profit share terms of the agreements with respect to the financial year ending 30 June 2012: see paragraphs [33] and [34].
Rule 7.03of the Rules relevantly provides:
7.03 Amendment after limitation period
(1) This rule applies if an application in a general federal law proceeding for leave to make an amendment is made after the end of a relevant period of limitation current at the date when the proceeding was started.
…
(4) The Court may give leave to make an amendment even if the effect is to include a new cause of action, if:
(a) the Court considers it appropriate; and
(b) the new cause of action arises out of the same, or substantially the same, facts as a cause of action for which relief has already been claimed in the proceeding by the party seeking leave to amend.
A substantive basis for the applicant’s claim against the respondent, from the outset, was allegations of breach of contract by the applicant with respect to his remuneration. The claim with respect to the profit share clause arises out of the same agreements and during the same period of time as the balance of the applicant’s claims. In this respect it appears that the profit share claim, as made by the applicant, is arguably a further incident of the breaches of contract alleged by the applicant against the respondent with respect to his remuneration payable under the contracts. That is, it ‘arises out of the same, or substantially the same, facts as a cause of action for which relief has already been claimed’.
However, r.7.03(1) of the Rules (as set out above) limits the rule to situations where the relevant limitation period had not expired as at the date when the proceeding was started. This rule provides a limit to the ambit of the discretion in r.7.03(4).
The applicant seeks leave to amend his statement of claim in order to allege further breaches of the pleaded contracts with respect to the profit share agreement for the periods ending 30 June 2010 (proposed paragraph [31A]-[31C]); and the year ending 30 June 2011 (proposed paragraphs [31D]-[31G]). The difficulty for the applicant is that these claims became statute bared in 2016 and 2017 respectively as the six year limitation period expired, yet the current proceedings were not commenced until 5 July 2018.
The claim for profit shares is different to the claims with respect to accrued employee entitlements such as holidays and termination payments. Holiday and termination entitlements accrue during each work period as they are based upon the period of time that a person is employed, but they do not become payable until leave is taken or termination occurs. Thus, the cause of action for those payments accrued on the date of termination, not each day that a small part of the entitlement accrued. The profit share accrued and became payable at the end of the financial year to which it related (or at least by the time that the accounts were settled), just as weekly wages become payable each week. Thus, if the amendment is permitted it would take effect as from the date of the proceedings being issued, however even at that time the limitation period had expired. The claim must inevitably fail on this basis alone.
To the extent that there is an argument that the limitation period could be extended under s.27 of the Limitation of Actions Act, I am not persuaded that the applicant has shown an arguable case that such an extension could be obtained, for the same reasons as set out in respect of the Jingo Claim.
I therefore refuse to allow the amendments to be made in this respect by the applicant.
Claim for Retrenchment
The applicant proposes to amend the Statement of Claim to allege that he was ‘retrenched’. At common law a claim may be brought for breach of contract if it is alleged that the respondent unlawfully terminated the contract or otherwise failed to comply with its express or implied terms. Alternatively a claim can be made under the Div.11 of Part 2-2 of the Fair Work Act in reliance upon the termination or redundancy provisions of the legislation, which have a carefully delineated meaning. In some circumstances there are specific entitlements upon termination or redundancy specified in the relevant award: see, for example, Rhodes v Firepower Pump Systems Pty Ltd trading as Territory Fire Service & Training [2020] FCCA 1649. Finally, claims for ‘unfair dismissal’ under the Fair Work Act can be brought in the Fair Work Commission, but those claims cannot be brought in this court.
Counsel for the respondent rightly points out that whilst the term ‘retrenched’ is a common word used with respect to employment, it has no particular legal meaning. The respondent’s complaint is not a pernickety complaint about the infelicitous use of the word ‘retrenched’, as the applicant has already pleaded claims for breach of contract with respect to his termination and also claims with respect to minimum notice under s.117 of the Fair Work Act and redundancy payments under s.119 of the Fair Work Act. This makes the pleading embarrassing as it does not set out particular facts and circumstances that lead to a legal remedy and it is not apparent what legal remedy the pleading could lead to that is not already pleaded.
I therefore refuse to grant the applicant leave to make this amendment.
Claim for Exemplary Damages
The applicant seeks leave to amend to make a claim for ‘exemplary damages’. No particulars are pleaded to show the basis for the claim, it is simply proposed to be added to the prayer for relief after the claim for interest.
Exemplary damages are a limited remedy at common law. In a number of statutory schemes exemplary damages are available: see for example, claims under s.115 of the Copyright Act 1968 (Cth); Taleb v GM Holden Ltd [2011] FCAFC 168. However, there is no statutory basis for exemplary damages in this case. Of course, under the Fair Work Act applicants can pursue the imposition of penalties and orders that the penalties be paid to the applicant rather than consolidated revenue: see Sayed v Construction, Forestry, Mining and Energy Union [2016] FCAFC 4 and s.546 of the Fair Work Act.
There is long standing authority that exemplary damages are not available for claims for breach of contract: see Butler v Fairclough [1917] HCA 9, cited with approval in Gray v Motor Accident Commission [1998] HCA 70 and Mann v Paterson Constructions Pty Ltd [2019] HCA 32. A similar position continues to be adopted in the United Kingdom: see One Step (Support) Ltd v Morris-Garner [2018] UKSC 20. Thus there is no basis for this claim at common law.
As there is no basis for a claim for exemplary damages on the matters raised in this case it is not appropriate to allow the amendment to make such a claim.
Discovery application
The respondent seeks discovery from the applicant of copies of documents submitted to government agencies (such as Centrelink or the Child support Agency) that set out what income the applicant earned or received during the period that he was providing services to the respondent. The discovery sought is against the applicant and not the relevant government agency.
Discovery is generally limited in this court as a result of s.45 of the Federal Circuit Court of Australia Act 1999 (Cth). In a case such as this I am persuaded that discovery of documents tending to show the income of the applicant (and its sources) are likely to contribute to the fair and expeditious conduct of the proceedings. In the context of this case I am not persuaded that the discovery sought is simply to embarrass or harass the applicant. In this case the documents are likely to go directly to issues in dispute between the parties on the issues joined in the pleadings (Mulley v Manifold [1959] HCA 23; (1959) 103 CLR 341) and not merely lead to course of enquiry (see The Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Co [1883] UKLawRpKQB 95; (1882) 11 QBD 55), although documents in the latter category can still be the subject of discovery orders in this court, if the test in s.45 is satisfied.
Discovery of documents prepared for government agencies is commonly relevant, at least with respect to Taxation Returns and associated documents, in cases where the income or earnings of a party or the identity of their employer is relevant. The relevance of other documents, such as representations to the Child Support Agency would usually be limited, at least in cases where there are reliable income tax documents (such as Group certificates from employers or tax returns). Unlike taxation documents, child support forms commonly set out representations of the person completing them without supporting documents. However, the documents the applicant may have submitted to the Child support Agency remain potential evidence relating to his income as they will likely contain representations as to income and the source of income. As the applicant has produced no tax returns or associated documents the respondent is forced to look more widely for discoverable documents that bear upon this important issue.
In this case, there is an issue as to whether the applicant was in substance an employee and if so why the structure of using a company between the respondent and applicant was imposed by one or both. The respondent pleads that the arrangement was implemented at the applicant’s behest as the applicant sought to minimise child support obligations. The applicant has not squarely denied this claim, nor has he admitted the claim.
The company interposed between the applicant and the respondent, Jingo, is not a company in which the applicant held shares nor was director. Whether this case involves a variation of an Odco arrangement remains to be determined at trial: see Building Workers' Industrial Union of Australia v Odco Pty Ltd [1991] FCA 87; (1991) 99 ALR 735; (1991) 37 IR 380; [1991] ATPR ¶41-092; (1991) 29 FCR 104 and the recent review of the law in this area in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2019] FCA 1806. Even if this is not a variation of an Odco style of arrangement, the nature of the relationship between the applicant and respondent, as they understood the relationship, is clearly a relevant consideration: see generally Howard v Merdeval Pty Ltd [2020] FCA 43 at paragraph [27].
If the applicant succeeds in showing that he was an employee of the respondent, and did not receive reasonable notice of termination, the question of damages will be significant. The actual earnings of the applicant through the structure that was established using Jingo will be a central question in the amount of damages that may be payable as damages would ordinarily be based upon the actual weekly losses of income to the applicant. For example, if he represented to the Child Support Agency that he had minimal income for the purpose of calculating his contributions to the support of his children this would be strong evidence of his actual income as paid to him by Jingo and indicate the amount of his personal loss (in distinction to the loss to Jingo). Of course, when tax returns are available it would be a rare case where the additional discovery of this type of document could be seen as reasonably required to ensure that the parties can attain justice in a case such as the present.
The final point raised by the applicant is the effect of s.150 of the Child Support (Assessment) Act 1989 (Cth), which imposes secrecy obligations upon those involved in administering the child support scheme. However, the applicant is not one of the people bound by the provision as he is not employed by the Child Support Agency, nor providing services: see s.150(1). The Registrar of the Child Support Agency (and the staff of the Agency) are bound by the provision, but discovery is not sought against the Registrar or the Agency. Similar provision apply to the Commissioner of Taxation, however this does not prevent a court from requiring a person to discover the documents they have submitted to the Commissioner nor the copies of the assessments issued by the Commissioner, a process that occurs routinely in modern litigation.
In the unusual circumstances of this case I am persuaded that the applicant should make discovery of the documents sought by the respondent.
Conclusion
In this matter I am not persuaded that Jingo should be joined, nor that the applicant should be permitted to make amendments in the nature of those dealt with in these reasons. I am persuaded that the applicant should make discovery to the respondent as sought.
I will direct the parties to draw orders reflecting these reasons and submit them to chambers for my consideration within 7 days.
I certify that the preceding seventy-three (73) paragraphs are a true copy of the reasons for judgment of Judge Riethmuller
Associate:
Date: 2 September 2020
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