Hoday v Pro-Test Pty Ltd
[2020] FCCA 1096
•7 May 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| HODAY v PRO-TEST PTY LTD & ORS | [2020] FCCA 1096 |
| Catchwords: INDUSTRIAL LAW – Application for discovery of documents – whether appropriate, in the interests of the administration of justice, to allow discovery in this proceeding – order for discovery of first category of documents – application in respect of remaining categories of documents dismissed. |
| Legislation: Federal Circuit Court of Australia Act 1999 (Cth), ss.45(1), 45(2) Federal Circuit Court Rules 2001 (Cth), pt.14, Div.14.2 |
| Cases cited: Australian Building and Construction Commissioner v CFMEU and Ors (No.5) [2018] FCCA 1100 |
| Applicant: | JOHN HODAY |
| First Respondent: | PRO-TEST PTY LTD |
| Second Respondent: | EWAN MCDONALD |
| Third Respondent: | TIM DABROWSKI |
| Fourth Respondent: | JAMES TAUCHNITZ |
| File Number: | BRG 119 of 2019 |
| Judgment of: | Judge Jarrett |
| Hearing date: | By written submission |
| Date of Last Submission: | 3 April 2020 |
| Delivered at: | Brisbane |
| Delivered on: | 7 May 2020 |
REPRESENTATION
| Counsel for the Applicant: | Mr Reidy |
| Solicitors for the Applicant: | Harmers Workplace Lawyers |
| Counsel for the Respondents: | Mr Grant |
| Solicitors for the Respondents: | Thomson Geer |
THE COURT DECLARES THAT:
It is appropriate, in the interests of the administration of justice to allow discovery in this proceeding.
ORDERS
The first respondent make discovery in accordance with Part 14, division 14.2 of the Federal Circuit Court Rules 2001 (Cth) by, inter alia, filing and serving an affidavit of documents in respect of the following categories of documents:
(a)documents relating to the terms of engagement of the first respondent by Shell QGC Pty Ltd (ACN 098 563 663) for the “Four Well Project”.
Otherwise all outstanding applications within the application in a case filed on 18 December, 2019 are dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 119 of 2019
| JOHN HODAY |
Applicant
And
| PRO-TEST PTY LTD |
First Respondent
| EWAN MCDONALD |
Second Respondent
| TIM DABROWSKI |
Third Respondent
| JAMES TAUCHNITZ |
Fourth Respondent
REASONS FOR JUDGMENT
On 19 December, 2019 the applicant filed an application in a case seeking orders permitting him to file an amended statement of claim, giving him leave to rely upon certain affidavits and seeking orders for discovery.
On 20 December, I made orders dealing with the proposed amended statement of claim and the proposed further evidence to be led by the applicant. The balance of the application seeking orders for discovery was stood over to a hearing date of 3 April, 2020. On 2 April, 2020 the parties agreed to orders that the remaining aspects of the application in a case should be deal with on the papers on the basis of the parties’ written submissions.
The applicant has filed written submissions in support of the discovery orders he seeks. The respondent has filed submissions in response. The applicant has filed a written submission in reply. As a result of that process the issues have narrowed such that only three categories of documents remain in contention.
In general terms, the applicant’s claim is for compensation for dismissal from his employment with the first respondent in contravention of the general protections provisions of the Fair Work Act 2009. He claims that he was dismissed for raising complaints and inquiries in relation to his employment. He also makes claims for contraventions of the National Employment Standards about notice and redundancy although the latter of these claims is a claim in the alternative. The applicant also prosecutes a breach of contract claim. He claims damages arising from the loss of opportunity to profit from what he says is his interest in a joint venture as well as the opportunity to continue in employment with the first respondent and receive the remuneration.
The applicant alleges that he was employed by the first respondent to work in a joint venture business conducted via a company Jet Lift Australia Pty Ltd. The applicant was also a shareholder in another company that held shares in Jet Lift. Whilst there is a dispute on the pleadings about when the applicant commenced his employment for the first respondent, there was no dispute that after he was employed by the first respondent he performed the role of chief executive officer of Jet Lift. In September, 2018 the applicant says that he accepted the position of chief operating officer of Jet Lift. Again, there is a dispute about this matter. The respondents contended that the applicant was never the chief operating officer for Jet Lift but rather was the chief technical officer. Nothing turns on that difference for the purposes of this application.
The applicant made a series of complaints and inquiries from 18 September about his employment including demoralising treatment, attempts at demotion and changes to his remuneration package. The respondents do not deny many of the complaints pleaded by the applicant.
The second respondent was the chief executive officer of the first respondent as well as a director of Jet Lift. He is said to be liable to the applicant as an accessory to the first respondent’s breaches of the Fair Work Act.
The applicant’s employment was terminated on 18 October, 2018 on the basis of redundancy. His case is that the termination was for the reason that he had made a number of complaints in response to attempts to change his conditions of employment and about other matters concerning his employment including changes to the management structure and demoralising and degrading treatment. As I have said, the complaints are in large part not in issue. Nor is the proposition that the complaints and enquiries were about the applicant’s workplace rights for the purposes of the Fair Work Act.
The compensation claimed by the applicant for contravention of the general protections provisions includes loss of future income or the opportunity to earn future income. He pleads that his income also included a bonus. I will return to that matter shortly.
The applicant also pursues a breach of contract claim. That is pleaded in the following way:
10. A further term of the contract of employment implied by law, or in the alternative, implied by a proper construction of the contract provided that the first respondent would exercise any power or discretion under the contract in good faith and for a proper purpose including a power or discretion to terminate the contract (the “good-faith term”).
11. By the good-faith term, the first respondent was required:
(a) to act for a proper purpose in exercising the power of dismissal;
(b) to make full disclosure to the applicant of any conflict of interest before exercising any power;
(c) not to exercise the power of dismissal when it had a conflict of interest;
(d) to apply its policies and procedures prior to exercising any power of dismissal;
(e) to act for the proper purpose of allowing the applicant to perform his duties in order to achieve the contractual objective.
…
Breach of contract
33. In breach of the good-faith term, the first respondent:
(a) failed to disclose to the applicant its negotiations and dealings with Shell/QGC for the first respondent to secure a project which at the prospect of revenue of approximately $4.2 million (the “QGC/Shell project”);
(b) failed to disclose to the applicant that it was performing fieldwork for Santos (the “Santos work”) which work was normally performed by JLA and from which work JLA derived revenue;
(c) failed to disclose to the applicant that it had secured the QGC/Shell project that otherwise would have gone to JLA;
(d) failed to disclose its conflict of interest with JLA;
(e) acted for an improper purpose of securing business for itself which would otherwise have gone to JLA;
(f) did not apply its policies and procedures;
(g) acted for the improper purpose of preventing the applicant from performing his duties to achieve the contractual objective for JLA and getting for itself the Santos work and the QGC/Shell project;
(h) in the circumstances of (a) to (g) above, exercised the power to dismiss on the putative ground of redundancy when, if the first respondent had acted in good faith and honestly and reasonably, the applicant’s employment should have continued.
34. By reason of the breach of the contract of employment, the applicant has suffered loss and damage, namely, the opportunity to continue in employment with JLA as its CEO for at least a further three years and the opportunity to profit from his shareholding through Hoday Tauch.
The respondents deny that the applicant’s employment contract contained the term pleaded in paragraph 10 of his amended statement of claim or that it had the effect pleaded in paragraph 11 of the amended statement of claim. The respondents deny paragraphs 33 and 34 of the amended statement of claim.
There are three categories of documents in respect of which the applicant seeks discovery which remain in dispute between the parties. Those categories are:
a)documents relating to the terms of engagement of the first respondent by Shell QGC Pty Ltd (ACN 098 563 663) for the “Four Well Project”;
b)documents relating to payments to the first respondent by Shell QGC Pty Ltd (ACN 098 563 663) for the “Four Well Project” in the period from 18 October 2018;
c)any documents evidencing dealings between the first respondent and OSD Pty Ltd (ACN 058 047 046) in relation to the “Four Well Project” in the period from 18 October 2018.
The first category of documents is said to be relevant to the calculation of the quantum of compensation and damages to which the applicant is entitled. He argues that “Disclosure of the nature of the arrangements between the first respondent and Shell QGC is relevant to establishing future loss. The documents are relevant to establishing the likely future commercial arrangements and, consequently likely future profits.”
There is no direct pleading by the applicant that the first respondent entered into any commercial arrangements with Shell QGC. The pleading in paragraph 33 assumes that there was an agreement reached between the first respondent and Shell QGC and about which the applicant was not told. That there was such an agreement, however, does not seem to be in dispute given the evidence in chief that has been filed by the respondents. I have assumed that there is such an agreement.
Assuming that there is such an agreement, however, it is difficult to see how the terms of the engagement of the first respondent and Shell QGC are relevant to the future loss claimed by the applicant. That future loss consists of a loss of salary for at least three years which, according to the applicant’s own case, was a fixed amount per annum, the loss of future bonuses (which I have dealt with in detail later in these reasons) and the loss of opportunity to profit from his shareholding in “Hoday Tauch”.
However, it is also said that the documents are “relevant to the contractual claim that the good faith term was breached. The applicant pleads that, in breach of the good faith term of the applicant’s employment contract, the first respondent did not disclose its dealings with Shell QGC. The documents will provide circumstantial evidence of undisclosed dealings between the first respondent and Shell and QGC”. The applicant alleges that the first respondent engaged in conduct in breach of the alleged implied term of good-faith in the contract of employment. The documents that it seeks in this category are documents “relating to the terms of engagement of the first respondent” for the “Four Wells Project”. By that description, this category of documents will include but will not be limited to the agreement that was apparently reached between the first respondent and Shell QGC. The description is sufficiently wide to include, I would think, correspondence or other communications reduced to writing between the representatives of the first respondent and the representatives of Shell QGC that “relates to” the terms of the agreement. If the applicant successfully establishes that the contract of employment included the implied term for which he contends then the documents within that category (including the agreement itself) may afford some proof of a breach of that term. They are documents which are only in the power, possession or control of the first respondent or Shell QGC.
The respondents argue that the documents ought not be the subject of an order for discovery because apart from anything else they contain commercially sensitive information which might be damaging to the first respondent and perhaps Shell QGC if that information fell into the hands of a competitor. However, it does not seem to be suggested that the applicant is a competitor of the first respondent and in any event he, and those that advise him, will be bound by the usual undertakings of confidentiality in respect of documents discovered for the purposes of litigation.
The second and third categories of documents I have set out above are relevant to the applicant’s bonus claim. He does not put his case for discovery on any other basis than that. Paragraph 9(c) of his amended statement of claim pleads that it was an express term of the applicant’s contract of employment that from 1 July, 2017 he was to be paid a bonus calculated as follows: Annual underlying company profit x 10% x 80%. The pleading does not clearly articulate which company’s profit is to be used in the calculation. That is to say, it is not clear whether it is asserted that it was the first respondent’s annual underlying profit or that of Jet Lift. The particulars in the schedule to the amended statement of claim (Part H – Details of compensation claimed) do not clarify the position.
The parties have filed affidavits of evidence in chief of the witnesses they intend to call at the trial of these proceedings. The applicant has filed two affidavits deposed by himself. In the first, he does not swear to any agreement with the first respondent concerning the payment of a bonus. At best for his case is an email annexed to his affidavit as “JH11”. That is an email dated 13 June, 2017 sent from James Tauchnitz and “cc’d” to Falk, McDonald and David McKenzie. It is probably the email pleaded by the applicant at paragraph 8(b)(iii) of his amended statement of claim in which he pleads that the terms of his employment contract are evidenced in writing and are contained in, inter alia, that email. To the extent that that email represents an agreement between the applicant and the first respondent, or evidences such an agreement about the payment of a bonus, it clearly only relates to the 2017/2018 financial year.
The applicant also deals with the matter in his affidavit in reply filed on 6 September, 2019. At paragraph 41 of that affidavit he refers to paragraph 19 of an affidavit deposed by Ewan McDonald and filed on 21 August, 2019. In his affidavit, the applicant says:
41. I have read paragraph 19 of the McDonald affidavit. This board meeting is where I received my only performance evaluation. The overall message was that Pro-Test was happy with my work and looking forward to the next year. Improvement in the financial area was recommended, after which I increased time spent with the Pro-Test accountant looking after the books for JLA. This was also the meeting where I was given my bonus remuneration structure.
(my emphasis)
Annexure “JH11” to the applicant’s first affidavit purports to record resolutions made at Board meeting of Jet Lift concerning the applicant’s remuneration, including the payment of what is described herein as a “short-term cash incentive”. The applicant does not suggest that the email incorrectly reflects the resolutions that were made at the Board meeting or his understanding of or indeed the agreement about the bonus arrangements that he had with either the first respondent or Jet Lift.
I have also considered the affidavits of Dagan, Gamblen and Falk filed by the applicant, including the affidavit in reply deposed by Falk. None of the evidence in those affidavits assists with the resolution of the question concerning the bonus to be paid to the applicant.
In response to the applicant’s plea concerning the bonus, the respondents deny that there was any term of the employment contract for the payment of a bonus to the applicant. The respondents further plead, in effect, the terms of the email which is annexure “JH11” to the applicant’s first affidavit:
a)Jet link agreed to pay the applicant a “short term cash incentive” “subject to [Jet Link] having a positive underlying profit in the 2017/2018 financial year”;
b)10% of the underlying profit of Jet Link in the financial 2017/2018 would be carved out for a Jet Link staff bonus pool;
c)the applicant would be entitled to receive a minimum of 80% of the bonus pool as the short term cash incentive;
d)the short term cash incentive was provided as an entitlement for the 2017/2018 financial year only and the applicant did not have an entitlement to any such payment in subsequent years.
It seems implicit in the respondent’s pleading that the relevant underlying profit relevant for the purposes of the applicant’s claim (whether that be characterised as a bonus or a short term cash incentive) is the underlying profit of Jet Link. That is also borne out by the email “JH11”.
The applicant was employed until October, 2018. His claim for lost bonus payments is for the period following the termination of his employment. The only evidence, including the applicant’s own evidence, concerning the period over which the payment of the bonus would be calculated and paid was the period 1 July, 2017 – 30 June, 2018. He makes no claim for unpaid bonuses for this period. That is confirmed by the categories of documents in respect of which he presses his application for discovery.
The applicant argues that to pursue his claim for lost bonus payments he needs to calculate Jet Lift’s net profit. His claim is linked to particular work that he asserts the first respondent conducted for two customers, namely Shell QGC Pty Ltd and Santos Limited. He asserts that the work done for those two entities ought to have been done by Jet Link and if it was Jet Link would have generated a net profit which he anticipates to be about $1.26 million. Using the formula I have referred to earlier his claim under this head is for $100,800.
However to properly calculate his claim the applicant submits that he must have information about the earnings from the work conducted by the first respondent for Shell QGC. He also needs details of the cost to the first respondent of contractors that it used to carry out the work and in particular, a company called OSD Pty Ltd. The applicant says that he is unable to calculate his claim for those payments without details of the payments made to the first respondent by Shell QGC and Santos and the expenses paid to OSD Pty Ltd.
The difficulty with the applicant’s argument, however, is that his claim is in respect of a period of time after his termination and the only evidence before the Court suggests that if there was an agreement about bonus payments it was only in respect of the 2017/2018 financial year.
Discovery does not happen as a course in the Federal Circuit Court of Australia. The Court must be satisfied that it is in the interests of the administration of justice for there to be discovery: s.45(1) of the Federal Circuit Court of Australia Act 1999 (Cth). In deciding whether to make a declaration under s.45(1), the Court must have regard to whether allowing the discovery would be likely to contribute to the fair and expeditious conduct of the proceedings and such other matters (if any) as the judge considers relevant: s.45(2).
In Australian Building and Construction Commissioner v CFMEU and Ors (No.5) [2018] FCCA 1100, Judge Manousaridis undertook an extensive consideration of s.45(1) of the Federal Circuit Court of Australia Act. His Honour concluded (citations omitted):
38. If I have correctly construed s.45(1) of the FCC Act, whether or not it would be appropriate in the interests of the administration of justice to allow discovery will depend on the circumstances of the case. One circumstance may be where the person against whom discovery is sought (respondent to discovery) acted or is alleged to have acted in some fiduciary or analogous capacity in the interests of the applicant for discovery, and the proceeding relates to that person’s conduct in that capacity. Discovery may be appropriate in these circumstances because, given the relationship between the parties, the applicant for discovery may know nothing more than that the respondent to discovery may hold documents that may be relevant to an issue or issues in the proceeding, but the applicant for discovery otherwise is in no position to identify with any particularity or sufficient particularity what those documents might be. That, at least according Lindley LJ, accounted for the origin of the equitable jurisdiction to order discovery:
The old practice of the Court of Chancery was limited to cases with which the Chancery Courts were familiar, such as breaches of trust where all the documents were in the possession of the trustee, and the cestui que trust knew nothing about the matter; and in that class of case the practice of the Court of Chancery was admirable, and without it it would have been impossible to administer justice.
39. Another set of circumstances where it might be appropriate in the interests of the administration of justice to allow discovery is where information that is relevant to an issue in the proceeding is peculiarly within the knowledge of the respondent to discovery. This will usually be the case where the state of mind of the respondent to discovery is an issue in the proceedings, or where the asserted cause of action or an element or elements of the asserted cause of action occurred in some secrecy. In these circumstances allowing discovery might be appropriate in the interests of the administration of justice because, given that the relevant information is or is likely to be peculiarly within the possession of the respondent to discovery, or the event occurred in some secrecy, the applicant would be unable to determine, or at least will have difficulty in determining, whether the respondent to discovery has any relevant documents and, if so, the sort of documents he or she might have.
40. The two circumstances I have identified suggest that it may be appropriate in the interests of the administration of justice to allow discovery whenever there is a substantial imbalance between the parties of their knowledge, or means of acquiring knowledge, of the existence of documents that are relevant to all or some of the issues in the proceeding. Where such an imbalance exists, it may be appropriate to impose on the party that has the knowledge, or means of acquiring knowledge, the burden of searching for and disclosing documents in that party’s power or possession that are relevant to some or all the issues in the proceeding, rather than leave the party who does not have the knowledge or means of acquiring knowledge to do the best he or she can to obtain by subpoena the documents of whose existence he or she is not in a position to know. Where, on the other hand, there is no such imbalance of knowledge or means of acquiring knowledge, it is reasonable to expect that the interests of the parties in identifying and gaining access to relevant documents before the hearing will usually be met by the availability of the issue of subpoenas for production, not only against third parties, but also against each other.
In the context of an application such as the present where specific categories of documents are sought by way of discovery, a critical consideration will be whether the documents relate to a matter in issue between the parties. It is axiomatic, I think, that discovery will not be permitted and a declaration will not be made where the documents that are sought on the application for discovery have no relevance to the issues in the proceedings. In a case where there are pleadings, the issues are generally determined by reference to those pleadings. Here, on their face the pleadings establish a dispute between the applicant and the respondent concerning the bonus payments. On the one hand the applicant asserts, at least by implication, that bonus payments were to be paid by reference to the calculation of net profit for each financial year for, presumably Jet Lift. On the other, the respondent asserts that it was for only one financial year, namely the 2017/2018 financial year.
However, in these proceedings there has been an order for the filing of affidavits of evidence in chief by all witnesses upon which the parties intend to rely at the hearing of this application. The parties have complied with that direction. In a system of case management where parties are required to file affidavits of evidence in chief well prior to the hearing, some regard can be paid to the evidence and the way in which it informs the case of each party that is otherwise revealed in their pleadings. It would seem antithetical to make an order for discovery in such circumstances which would necessarily put both parties to cost and inconvenience for no purpose
Having regard to the applicant’s evidence in chief, the only evidence concerning the issue of the payment of a bonus is entirely consistent with the respondents’ case and inconsistent with his own. In those circumstances it is difficult to see how allowing the discovery that he seeks would be likely to contribute to the fair and expeditious conduct of the proceedings. Where the documents that are sought to be the subject of the order are documents which could not assist the applicant to prosecute his case as it is revealed in his evidence, an order for discovery would engage the respondents in cost and inconvenience in swearing an affidavit of documents and then for there to be inspection of any documents so discovered.
In this case, I have concluded that there would be no point in permitting discovery in respect of the second and third categories of documents that remain in dispute between these parties because it will not advance the applicant’s case at all given the evidence that I have identified above. However, an order is appropriate in respect of the first category of documents for the reasons I have set out above.
Accordingly, I make the orders set out at the commencement of these reasons.
I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of Judge Jarrett
Associate:
Date: 7 May, 2020
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