Joseph v Parnell Corporate Services Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Joseph v Parnell Corporate Services Pty Ltd [2020] FCA 426

File number: NSD 1035 of 2018
Judge: FLICK J
Date of judgment: 2 April 2020
Catchwords:

INDUSTRIAL LAW – whether wrongful termination of employment contract – misconduct

CONTRACT – notice of termination of employment – reliance upon grounds other than those stated in letter of termination – misconduct included disclosure of confidential information

CONTRACT – damages for settlement of proceedings instituted overseas – whether settlement reasonable

CORPORATIONS LAW – breach of directors duties 

Legislation:

Fair Work Act2009 (Cth) ss 44, 61, 90, 119, 323, 324, 539

Corporations Act2001 (Cth) ss180, 181, 182

Employees Liability Act1991 (NSW) ss 3, 5

Cases cited:

Australian Securities & Investments Commission v Maxwell [2006] NSWSC 1052, (2006) 59 ACSR 373

Australian Securities and Investments Commission v Vocation Ltd [2019] FCA 807, (2019) 371 ALR 155

Avenia v Railway & Transport Health Fund Ltd [2017] FCA 859, (2017) 272 IR 151

Blyth Chemicals Limited v Bushnell (1933) 49 CLR 66

BNP Paribas v Pacific Carriers Limited [2005] NSWCA 72

Bostik (Australia) Pty Ltd v Gorgevski (No 1) (1992) 36 FCR 20

Briginshaw v Briginshaw (1938) 60 CLR 336

Carter v The Dennis Family Corporation [2010] VSC 406

Concut Pty Ltd v Worrell [2000] HCA 64, (2000) 75 ALJR 312

Gooley v Westpac Banking Corporation (1995) 129 ALR 628

JK v State of New South Wales [2014] NSWSC 1084

Rankin v Marine Power International Pty Ltd [2001] VSC 150, (2001) 107 IR 117

Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359

Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245

Termite Resources NL v Meadows [2019] FCA 354, (2019) 370 ALR 191

Unity Insurance Brokers Pty Limited v Rocco Pezzano Pty Limited [1998] HCA 38, (1998) 192 CLR 603

Willis Australia Group Pty Ltd v Mitchell-Innes [2015] NSWCA 381

Date of hearing: 9 - 11, 14 and 16 October 2019
Date of last submissions: 22 October 2019
Registry: New South Wales
Division: Fair Work Division
National Practice Area: Employment & Industrial Relations
Category: Catchwords
Number of paragraphs: 191
Counsel for the Applicant: Mr D O’Sullivan
Solicitor for the Applicant: McArcle Legal
Counsel for the Respondents: Mr D Barnett
Counsel for the Respondents: Atanaskovic Hartnell

ORDERS

NSD 1035 of 2018
BETWEEN:

ROBERT JOSEPH

Applicant
AND:

PARNELL CORPORATE SERVICES PTY LTD
(ACN 138 251 617)

First Respondent

PARNELL PHARMACEUTICALS HOLDINGS LTD
(ACN 137 904 413)

Second Respondent

PARNELL CORPORATE SERVICES U.S. INC. (and another named in the Schedule)

Third Respondent
AND BETWEEN:

PARNELL CORPORATE SERVICES PTY LTD
(ACN 138 251 617) (and others named in the Schedule)

First Cross-Claimant
AND:

ROBERT JOSEPH

Cross-Respondent

JUDGE:

FLICK J

DATE OF ORDER:

2 APRIL 2020

THE COURT ORDERS THAT:

1.The parties are to bring in Short Minutes of Orders to give effect to these reasons within 28 days.

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

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Details
Case
[2020] FCA 426
Decision Date

CaseChat Overview and Summary

The case of Joseph v Parnell Corporate Services Pty Ltd involved the former Chief Executive Officer of the Parnell group of companies, Robert Joseph, who was summarily dismissed from his position. Joseph sought to challenge his dismissal, arguing it was invalid due to insufficient notice of the meeting where the decision was made. He also sought damages and declaratory relief. The court had to decide whether the termination was wrongful and if so, what damages, if any, Joseph was entitled to. Additionally, the court needed to assess the reasonableness of a settlement reached in overseas proceedings that formed part of the amended cross-claim.

The central legal issues involved whether Joseph's dismissal was wrongful, and if so, what damages he could claim. The court also had to determine if the settlement of proceedings in the United States was reasonable and if the termination was justified on grounds other than those stated in the letter of termination. Furthermore, the court considered whether Joseph had breached his director's duties by disclosing confidential information and if such actions constituted misconduct warranting termination.

The court found that Joseph's dismissal was valid and not wrongful. It concluded that the termination was justified on the grounds of misconduct, specifically the disclosure of confidential information and other breaches of contract. The court held that Joseph's actions, including the release of sensitive strategic information, were likely to cause significant detriment to the company. Additionally, the court found that the settlement of the overseas proceedings was reasonable and did not warrant further damages. Consequently, the court dismissed Joseph's claims for wrongful termination and awarded no damages.

The final orders of the court required the parties to bring in short minutes of orders to give effect to these reasons within 28 days, in accordance with Rule 39.32 of the Federal Court Rules 2011.

Orders

Orders of the court

1. The parties are to bring in Short Minutes of Orders to give effect to these reasons within 28 days.

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

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

The principal witnesses in the proceeding were Mr Joseph and Dr Bell. Mr Joseph – an overall assessment of his evidence Mr Joseph has worked in the pharmaceutical industry for about 20 years and was the Chief Executive Officer of the “Parnell group” of companies. He “established the US operations of Parnell undertaking drug discovery research, clinical trial, regulatory approval process and the successful commercialisation of multiple veterinary pharmaceutical products”. Mr Joseph, it may be accepted, gave his evidence in what initially appeared to be a straight forward and confident manner. But reason emerged during his cross-examination to occasion reservation as to the reliability of his evidence. There are, with respect, many reasons to question the reliability of his account of events, and many reasons to question his account (in particular) of the events in December 2015, when it is claimed that he inserted a syringe into the leg of Ms Lindsey. Without being exhaustive, these reasons include the following. First, irrespective of any divergence in the evidence between Mr Joseph and Ms Lindsey as to what actually happened in respect to the Needle Incident, the approach taken by Mr Joseph to the identification of the issues to be resolved in this Court occasioned disquiet. This incident assumed importance by reason of the fact that it:·was one of the four reasons relied upon to summarily dismiss Mr Joseph; and ·occasioned Ms Lindsey to commence proceedings in the United States, which were there settled by Parnell and formed part of the Amended Cross-Claim in the proceeding in this Court. The importance of this incident can thus be assumed. At the outset of the hearing in this Court, an application was made on behalf of Mr Joseph to amend his Defence to the proposed Amended Cross-Claim. One of the amendments proposed to be made to the Defence included a statement that Ms Lindsey had made: … an admission on oath during [her] deposition… to the effect that a clean needle had been administered with her consent … Mr Joseph was aware of the substance of the proposed amendment. The deposition being referred to was a deposition given by Ms Lindsey in the proceeding she had commenced in the United States. But where in that deposition Ms Lindsey made any “admission” proved to be elusive. Having been given a copy of the deposition, Mr Joseph was invited overnight to review it and identify those parts which constituted the “admission”. The following morning he identified in excess of 40 pages where he said the “admission” could be found. Even on a very preliminary review of those pages, no such “admission” could be found. How Mr Joseph could endorse an amendment to a Defence being filed in this Court upon such an uncertain and misleading a basis occasioned disquiet and reservation as to the reliability of his evidence. A second reason to question the reliability of Mr Joseph’s evidence also arose out of the Needle Incident. On many and repeated occasions a comparatively simple question was asked of Mr Joseph in cross‑examination and a response provided which was anything other than an answer to the question. But one instance arose during the cross‑examination as to how the pages he had identified in the deposition constituted “admissions”. Mr Joseph was asked: And how does that go to an admission that a clean needle had been administered with her consent?Although perhaps a question which was not susceptible to a short answer, the response provided was more in the nature of an advocate’s plea rather than an answer and occupied some 29 lines of transcript. An exchange then occurred between the Bench and Counsel in the absence of Mr Joseph as to concerns whether Mr Joseph was attempting to answer questions being put and whether he was being deliberately evasive. Counsel for Mr Joseph endorsed an approach whereby Mr Joseph was to be informed of these concerns. Mr Joseph returned to the witness box. The concerns were conveyed to him. Questions were thereafter put in cross‑examination. The approach of Mr Joseph as to the manner in which he responded to questions did not alter. These concerns warrant a conclusion that Mr Joseph’s evidence in many respects should be viewed through the looking glass of an advocate advancing his case in the witness box rather than a witness attempting to provide simple answers to simple questions.

Decision

Reasons for decision

Each of the two decisions, however, should be separately considered – the former only briefly.The October 2017 Decision On 14 October 2017, the Minutes of a meeting of directors of Parnell Holdings record as follows: On the same day, Dr Alan Bell, as Chairman of Parnell Holdings, wrote to Mr Joseph. That letter stated in part as follows: Dear RobertTermination of your employment with Parnell Pharmaceutical Holdings LtdWe refer to your employment by Parnell Corporate Services Pty Ltd (Parnell CS) pursuant to the written contract of employment dated 1 February 2011 (your Contract) and to your secondment to Parnell Corporate Services U.S. (Parnell CS US) pursuant to the written agreement between you and Parnell CS US effective from 1 February 2012 (your US Contract).You are employed pursuant to your Contract and your US Contract as the Chief Executive Officer (CEO) of the companies identified in Schedule 1 to your Contract and in Schedule 1 to your US Contract (Parnell Group) and Veterinary Investigative Services, Inc.Termination of your employmentThis letter constitutes notice of the termination of your employment pursuant to clause 18.1 of your Contract and your US Contract.The Board does not presently elect to make a payment in lieu of the 6 month notice period provided for in clause 18.1. You will therefore be required to continue to perform the duties required of you under your Contract and your US Contract, as detailed below, and will be paid your full salary, until the expiry of your 6 month notice period.…(emphasis in original) Mr Joseph maintained throughout the present proceeding that the October 2017 Decision was invalid. He contended (inter alia) that he was given insufficient notice of the intention to hold the meeting – notice having been given at about 10am and the meeting being held some few minutes later. Relief in respect to this allegedly wrongful termination of his services was initially sought, including a claim for damages and declaratory relief. The measure of such damages as may have been recoverable would most likely have been confined to the amount payable had appropriate notice of termination been given: cf. Bostik (Australia) Pty Ltd v Gorgevski (No 1) (1992) 36 FCR 20 at 32. Sheppard and Heerey JJ there observed:In the course of the submissions about the amount of damages to be awarded, there was general discussion about the assessment of damages in a case such as this. The contract in question is a contract of employment which is terminable by either party on giving to the other the applicable period of notice provided for in the award. Where an employee is wrongfully dismissed, he is entitled, subject to mitigation, to damages equivalent to the wages he would have earned under the contract from the date of the dismissal to the end of the contract. The date when the contract would have come to an end, however, must be ascertained on the assumption that the employer would have exercised any power he may have had to bring the contract to an end in the way most beneficial to himself; that is to say, that he would have determined the contract at the earliest date at which he could properly do so: ….(citations omitted).

Ratio Decidendi

Legal Principle Established

The 18 December 2017 letter of termination expressly referred to this Notice and went on to provide as follows: 10. In summary, your press release:a.in breach of clause 15 of your Contract and your US Contract, discloses confidential information of Parnell, of which you have knowledge by reason of your position as a director and employee of Parnell, about the licensing of product rights and IP rights related to Zydax for human use;b.in breach of clause 15 of your Contract and your US Contract, discloses confidential information of Parnell, of which you have knowledge by reason of your position as a director and employee of Parnell, about the negotiation of commercial distribution rights for Reproductive Hormones;c.in breach of clause 15 of your Contract and your US Contract, discloses confidential information of Parnell, of which you have knowledge by reason of your position as a director and employee of Parnell, about communications between the Board of Directors and employees;d.wrongly asserts, in relation to the Zydax patent rights for human use and the commercial distribution rights for Reproductive hormones, that “two deals have now been negotiated, and are ready for acceptance”;e.wrongly asserts that the desired growth of Parnell’s contract manufacturing business is likely to be beyond the capacity of Brad McCarthy acting as COO of Manufacturing;f.wrongly asserts that the preferred strategy of Alan Bell and Brad McCarthy as directors of Parnell was to split off all the Company’s assets other than Zydax for virtually no consideration to a new company to be owned solely by them;g.wrongly asserts that Alan Bell and Brad McCarthy as directors of Parnell have withheld information from shareholders and have sought to withhold information from you as a director;h.wrongly asserts that Alan Bell and Brad McCarthy as directors of Parnell have sought to obstruct you from undertaking your legal obligations;i.wrongly asserts that the Board of Parnell has engaged in conduct that involved breaches of the Corporations Act 2001 (Cth) (Corporations Act), the Parnell constitution, and the bondholders agreement; andj.wrongly asserts that the Board of Parnell has articulated (and impliedly has) no strategy for Parnell except to split off all the Company’s assets (other than Zydax) for virtually no consideration, or alternatively to manage Parnell’s business according to a loss-making model.11.The disclosures of confidential information referred to in paragraphs 10.a, 10.b and 10.c above are likely to cause significant detriment to Parnell by reason that they relate to commercially sensitive aspects of Parnell’s strategic direction and commercial activities.12.The assertions identified in paragraphs 10.d to 10.j above:a. are false and misleading;b. impute improper motives and unlawful conduct to Mr Bell and Mr McCarthy;c. are disparaging to the Board and to Parnell; andd.are likely to cause significant detriment to Parnell, including by undermining shareholder confidence in the integrity of the Board and the soundness of Parnell’s strategic direction.