Maritime Union of Australia v Patrick Stevedores No 1 Pty Ltd
[1998] FCA 378
•21 APRIL 1998
FEDERAL COURT OF AUSTRALIA
MARITIME UNION OF AUSTRALIA & Others
v
PATRICK STEVEDORES NO.1 PTY Ltd & Others
No VG 152 of 1998
SUMMARY
INTRODUCTION
In accordance with the practice of the Federal Court in some other cases of public interest, North J has prepared this brief summary to accompany the reasons for judgment, delivered today. It must, of course, be emphasised that the only authoritative pronouncement of the Court’s reasons is that contained in the published reasons for judgment. This summary is intended to assist in understanding the principal conclusions reached by the Court, but is necessarily incomplete.
The Maritime Workers Union of Australia (the Union) and employees of companies in the Patricks group of companies (Patricks) who are members of the Union have brought proceedings in the Federal Court alleging that Patricks and others have acted unlawfully by taking steps to replace the employees with non-Union workers.
An urgent situation arose on 6 April 1998, when the Union and the employees believed that Patricks were about to dismiss the entire workforce over Easter.
The Union and the employees applied to the Court immediately on 6 April 1998 and asked for temporary orders to keep the employees in work until the main application is heard by the Court. The Court listed that urgent matter for hearing on 8 April 1998.
The following night, on 7 April 1998, the Patrick companies which employed the employees (the Patrick employers) appointed administrators to companies on the ground that they were insolvent.
Part of the cause of the insolvency was that other Patrick companies which owned the stevedoring operation (the Patrick owners) cancelled a contract for the supply of labour by the Patrick employers to the Patrick owners. That contract was the way the Patrick employers obtained stevedoring work to employ the employees.
On the same night, the Patrick owners engaged contractors to provide a new workforce. Under these contracts, the Patrick owners committed themselves to substantial financial obligations.
The Court has now been asked to make orders to return the situation to the pre-7 April 1998 position. The Union and the employees seek orders that the Patrick employers continue to employ the employees and the Patrick owners use only those employees to do the work which has always been done by the employees.
The orders are only to last until the case is heard in full.
The approach of the Court to such temporary orders is well settled. It involves two considerations. One is whether the applicants have raised a serious issue to be tried or, in other words, that they have an arguable case, and the other requires the Court to balance the interests of all parties to determine whether it is more convenient or just that orders be made.
When making temporary orders, the Court is usually dealing with urgent matters on much less material than at the final hearing. The Court must form views on that material, to decide whether to make temporary orders. But the views are made only for that purpose. The picture might look quite different after all the evidence is heard at a final hearing.
Going now to the issue whether the Union and the employees have raised a serious question to be tried. In my view, they have demonstrated an arguable case that the Patrick employers acted in breach of s 298K(1) of the Workplace Relations Act. This section provides:
“An employer must not, for a prohibited reason, or for reasons that include a prohibited reason, do or threaten to do any of the following:
(a) dismiss an employee;
(b) injure an employee in his or her employment;
(c) alter the position of an employee to the employee’s prejudice”.
The cancellation of the labour supply contract and the appointment of administrators on 7 April 1998 were made possible by a complex inter-company transaction which occurred in September 1997. By dividing the functions of employing workers and owning the business between two companies, the Patrick group put in place a structure which made it easier to dismiss the whole workforce. It is arguable, on the evidence, that this was done because the employees were members of the Union. So there is an arguable case that the Patrick employers acted in breach of s 298K(1) of the Act.
There is also an arguable case that these acts amounted to a breach of the employees’ contracts of employment.
There is also evidence that the Patrick owners and other companies in the Patrick group, together with others, agreed on these unlawful acts as part of an overall plan to replace the workforce with non-Union labour. This means that there is an arguable case that the Patrick owners and Patrick employers have engaged in an unlawful conspiracy.
Next, the Court balances the interests of the parties to determine whether orders should be made. Some of the considerations are:
(a)Section 298K(1) of the Workplace Relations Act gives an important protection of the individual rights of employees to belong to a Union if they choose. The Court should perhaps be more ready to protect such rights than merely financial interests.
(b)The employees have an interest in returning to the work they did before 7 April 1998.
(c)If temporary orders are not made, the Patrick owners and Patrick employers will have to make more and complex arrangements to conduct the business. This will confer rights on other parties which will be impossible to untangle if the Court decided to make orders in favour of the employees after a trial of the action.
(d)Patricks argued that they already have obligations to a new workforce. They will have to honour those obligations. However, they entered into them the night before this application commenced. They took the risk that orders would be made.
(e)Patricks say that the Patrick employers are insolvent. This is an important issue. Ordinarily, the Court would not force a company to trade if it is insolvent. However, if the Court orders that the Patrick owners use the Patrick employees for stevedoring work, one reason for the insolvency is removed. Further, the employees have agreed not to claim wages to the extent necessary for the employer companies to trade profitably. As the labour expense is the major operating expense, this unusual concession reduces the argument based on the insolvency of the Patrick employers.
(f)Another reason for the insolvency was the inability of the Union and employees to co-operate with the Patrick employers. The control of the Patrick employers is now in the hands of the administrators. They are independent, neutral and professional in their approach. The previous problems of co‑operation will be much reduced by the role of the administrators. In another unusual development, the Union and the employees have undertaken to the Court that they will not take industrial action while the orders are in force. This also increases the chance of successful trading.
After balancing all the factors for and against the making of orders, I have concluded that the orders should be made. I will now formally pronounce the orders and then hand down my detailed written reasons for making the orders.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY VG No 152 of 1998
SCHEDULE OF PARTIES
B E T W E E N :
MARITIME UNION OF AUSTRALIA First Applicant
and
PETER BREUKERS, JAKE HAUB and KIERAN COYLE Second Applicants
- and -
PATRICK STEVEDORES NO 1 PTY LTD
(ACN 003 621 645) (Under Administration) First Respondent
and
PATRICK STEVEDORES NO 2 PTY LTD
(ACN 003 893 141) (Under Administration) Second Respondent
and
PATRICK STEVEDORES NO 3 PTY LTD
(ACN 010 815 361) (Under Administration) Third Respondent
and
NATIONAL STEVEDORING TASMANIA PTY LTD
(ACN 009 477 150) (Under Administration) Fourth Respondent
and
PATRICK STEVEDORES OPERATOINS NO 2 PTY LTD
(ACN 056 292 687) Fifth Respondent
and
LANG CORPORATION LTD
(ACN 008 660 124) Sixth Respondent
and
STRANG PATRICK HOLDINGS PTY LTD
(ACN 003 893 847) Seventh Respondent
and
NATIONAL STEVEDORING HOLDINGS PTY LTD
(ACN 060 623 529) Eighth Respondent
and
PLZEN PTY LTD
(ACN 065 905 571) Ninth Respondent
and
INTRAVEST PTY LTD
(ACN 001 726 496) Tenth Respondent
and
CUMBERLANE HOLDINGS PTY LTD
(ACN 000 079 078) Eleventh Respondent
and
EQUITIUS PTY LTD
(ACN 065 981 526) Twelfth Respondent
and
JAMISON EQUITY LTD
(ACN 008 648 655) Thirteenth Respondent
and
SERENADE PTY LTD
(ACN 008 644 737) Fourteenth Respondent
and
SCARABUS PTY LTD
(ACN 008 645 387) Fifteenth Respondent
and
PATRICK STEVEDORES HOLDINGS PTY LTD
(ACN 060 462 919) Sixteenth Respondent
and
PATRICK STEVEDORES OPERATIONS PTY LTD
(ACN 065 375 840) Seventeenth Respondent
and
CHRISTOPHER D’ARCY CORRIGAN Eighteenth Respondent
and
WILLIAM CLAYTON Nineteenth Respondent
and
ROBERT DUNN Twentieth Respondent
and
NATIONAL FARMERS FEDERATION Twenty-first Respondent
and
PCS OPERATIONS PTY LTD
(ACN 081 231 049) Twenty-second Respondent
and
PCS TRAINING SERVICES PTY LTD
(ACN 081 231 021) Twenty-third Respondent
and
P AND C STEVEDORES PTY LTD
(ACN 081 225 078) Twenty-fourth Respondent
and
DONALD GORDON McGAUCHIE Twenty-fifth Respondent
and
PAUL XAVIER HOULIHAN Twenty-sixth Respondent
and
JAMES WILLIAM FERGUSON Twenty-seventh Respondent
and
COMMONWEALTH OF AUSTRALIA Twenty-eighth Respondent
and
PETER KEASTON REITH Twenty-ninth Respondent
FEDERAL COURT OF AUSTRALIA
INTERIM INJUNCTIONS - Serious question to be tried under s 298K(1) of the Workplace Relations Act - Breach of employment contract and conspiracy by unlawful means - Balance of convenience - Whether orders should require party to conduct business - Whether orders should require companies under administration to trade while insolvent - Undertaking by employees not to take industrial action - Undertaking by employees not to claim wages against the administrators
CORPORATIONS LAW - Leave to proceed against companies in administration
Workplace Relations Act 1966 (Cth)
Corporations Law (Cth)
Kimpton v Minister for Education of Victoria (1996) 65 IR 317
Australian Coarse Grains Pool Pty Ltd v Barley Marketing Board of Queensland (1982) 46 ALR 398
Tableland Peanuts Pty Ltd v Peanut Marketing Board (1984) 52 ALR 651
Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148
Murphy v Lush (1986) 65 ALR 651
Epitoma Pty Ltd v Australasian Meat Industry Employees’ Union (1984) 3 FCR 55
Co‑operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd (1997) 3 All ER 297
Business World Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499
Pioneer Water Tanks (Australia 94) Pty Ltd v Delat Pty Ltd (admin apptd) (1997) 25 ACSR 757
MARITIME UNION OF AUSTRALIA & Others v PATRICK STEVEDORES NO.1 PTY LTD (under administration) (ACN 003 621 645) & Others
No VG 152 of 1998
PLACE: MELBOURNE
JUDGE: NORTH J
DATE: 21 APRIL 1998
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VG 152 of 1998
BETWEEN
MARITIME UNION OF AUSTRALIA
FIRST APPLICANTPETER BREUKERS, JAKE HAUB and KIERAN COYLE
SECOND APPLICANTSAND:
PATRICK STEVEDORES NO.1 PTY LTD (under administration) (ACN 003 621 645)
FIRST RESPONDENT
OTHER RESPONDENTS (as per the Schedule of Parties)
JUDGE(S):
NORTH J
DATE OF ORDER:
21 APRIL 1998
WHERE MADE:
MELBOURNE
UPON THE APPLICANTS by their Counsel undertaking to pay to any party adversely affected by the interim injunctions granted by the Court on the motion, notice of which was filed by the Applicants on 14 April 1998, such compensation if any as the Court thinks just, in such manner as the Court directs -
AND UPON THE APPLICANTS by their Counsel further undertaking that until the hearing and determination of this proceeding, or until further order, they will not engage in any industrial action -
AND UPON THE APPLICANTS by their Counsel further undertaking that they will not hold the administrators appointed to the First, Second, Third and Fourth Respondents personally liable for their wages and other benefits arising from their employment with the First, Second, Third and Fourth Respondents for which the administrators would otherwise incur personal liability as administrators during the course of their administration -
In this undertaking “industrial action” does not include action by an employee if:
(a)the action was based on a reasonable concern by the employee about an imminent risk to his or her health or safety; and
(b)the employee did not unreasonably fail to comply with a direction of his or her employer to perform other available work, whether at the same or another workplace, that was safe and appropriate for the employee to perform.
THE COURT ORDERS THAT:
Until the hearing and determination of this Application, or further order, the Fifth Respondent, Patrick Stevedores Operations No 2 Pty Ltd, and the Seventeenth Respondent, Patrick Stevedores Operations Pty Ltd, each by itself, its servants and agents, are restrained from acting upon or giving effect to:
(a)its purported termination of the Labour Supply Agreement made on 23 September 1997 between it and the First Respondent, Patrick Stevedores No 1 Pty Ltd;
(b)its purported termination of the Labour Supply Agreement made on 23 September 1997 between it and the Second Respondent, Patrick Stevedores No 2 Pty Ltd;
(c)its purported termination of the Labour Supply Agreement made on 23 September 1997 between it and the Third Respondent, Patrick Stevedores No 3 Pty Ltd;
(d)its purported termination of the Labour Supply Agreement made on 23 September 1997 between it and the Fourth Respondent, National Stevedores Tasmania Pty Ltd.
Until the hearing and determination of this Application, or further order, the First, Second, Third, Fourth, Fifth and Seventeenth Respondents shall:
(a)continue to treat the Labour Hire Agreements referred to in paragraphs 1(a) to (d) as remaining on foot and binding upon the parties to those agreements;
(b)give effect to the terms of those agreements.
Until the hearing and determination of this Application, or further order, the First, Second, Third, Fourth and Fifth Respondents by themselves, their servants or agents, are restrained from terminating the Labour Hire Agreements referred to in paragraphs 1(a) to (d) for any reason without first giving to the First Applicant 14 days written notice of that intention and the reason for that proposed termination.
Until the hearing and determination of this proceeding, or further order, the Fifth Respondent and the Seventeenth Respondent, by themselves, their servants or agents, are restrained from acquiring the stevedoring services, which until 7 April 1998 they acquired from the First, Second, Third and Fourth Respondents, from any person other than the First, Second, Third or Fourth Respondents.
Until the hearing and determination of this proceeding, or further order, the First, Second, Third and Fourth Respondents by themselves, their servants or agents, are restrained from:
(a)entering into any agreement, arrangement or other transaction; or
(b)taking any action or doing anything;
having the effect that the employment of the employees engaged in their stevedoring business is or will be terminated.
Until the hearing and determination of this proceeding, or further order, the Fifth. Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth, Thirteenth, Fourteenth, Fifteenth, Sixteenth and Seventeenth Respondents, by themselves, their servants and agents, are restrained from:
(a)entering into any agreement, arrangement or other transaction, or taking any action or doing any thing, having the effect of divesting itself of their assets or undertaking, otherwise than in the ordinary course of business;
(b)dealing with or otherwise disposing of any of their assets or undertaking otherwise than in the ordinary course of business.
Leave is granted to the Applicants to proceed against the First, Second, Third and Fourth Respondents until further order, for the purpose only of further proceedings, if any, relating to the grant of interim relief.
The Respondents file and serve their Defences by 12 May 1998.
(a) The Applicants and Respondents are to make discovery to each other of
the documents:
(i)on which they rely in support of their contentions in the proceedings;
(ii)of which they are aware and which, to a material extent, adversely affect their own case or support the other cases.
(b)Discovery is to be made in four stages as follows:
(i)Stage 1: 21 April 1998 to 5 May 1998;
(ii)Stage 2: 6 May 1998 to 12 May 1998;
(iii)Stage 3: 13 May 1998 to 19 May 1998;
(iv)Stage 4: 20 May 1998 to 26 May 1998.
(c)At the end of each of the first three stages, each of the said parties are to provide the other parties with an interim list of documents which it has been able to ascertain within that stage, and allow immediate inspection of such documents.
(d)By the end of Stage 4:
(i)the said parties are to file and serve a consolidated list of all documents necessary to be disclosed under paragraph 9(a), verified by affidavit;
(ii)provide immediate inspection of the documents disclosed in Stage 4;
(iii)file and serve any notice of motion and affidavit in support relating to discovery.
There be liberty to all parties to apply in relation to the foregoing orders upon 24 hours written notice to all other parties.
The directions hearing is adjourned to 10.15 am on 28 May 1998.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VG 152 of 1998
BETWEEN
MARITIME UNION OF AUSTRALIA
FIRST APPLICANTPETER BREUKERS, JAKE HAUB and KIERAN COYLE
SECOND APPLICANT
AND:
PATRICK STEVEDORES NO.1 PTY LTD (under administration) (ACN 003 621 645)
FIRST RESPONDENT
OTHER RESPONDENTS (as per the Schedule of Parties)
JUDGE(S):
NORTH J
DATE:
21 APRIL 1998
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
This is an application for interim orders against a number of the respondents. The Lang Corporation Ltd, the sixth respondent, controls a group of companies, the first to fifth respondents and the seventh to seventeenth respondents, which operate a stevedoring business at seventeen facilities around Australia. Where, in these reasons, it is not important to distinguish between the particular companies in the group, I will refer to the first to seventeenth respondents or any of them as Patricks or the Patrick group. I will refer to all the respondents against whom interim orders are sought (the first to twenty-seventh respondents) as the respondents. Peter Breukers, Jake Haub and Kieran Coyle, the second applicants (the employees), work for one or other of the first to fourth respondents (the employers), which are the companies in the Patrick group which employ labour to operate the stevedoring business. The employees are members of the Maritime Union of Australia, the first applicant, an organisation of employees registered under the Workplace Relations Act 1996 (the Act). Kieran Coyle sues as representing approximately 1,400 other employees of the employers who are members of the Union. Although the steps necessary to allow group members to opt out under s 33J of the Federal Court of Australia Act 1976 (Cth) have not yet been completed, counsel for the Union and the second applicants had instructions on behalf of all the employees of the employers who are members of the Union.
To understand the nature of the interim orders sought, it is necessary to appreciate some background facts. The applicants have believed, for some time, that Patricks intended to dismiss its workforce and replace it with non-Union labour. Some of the employees were employed at No 5 Webb Dock in Victoria, from where Patricks operated part of its stevedoring business. In January 1998, Patricks transferred their right to use No 5 Webb Dock to companies associated with the National Farmers Federation (NFF). Patricks also agreed to provide cranes and other equipment to those companies so that they could conduct the stevedoring operation at No 5 Webb Dock. This transaction was seen by the applicants as part of a plan by Patricks to replace its workforce. No 5 Webb Dock, they thought, would be used to train an alternative workforce and then that workforce would be used to do the work which the employees had previously done. The applicants believed that Patricks had some involvement with the NFF companies.
In response to these events, the applicants filed an application in this Court (VG 42 of 1998) on 11 February 1998, raising various causes of action generally based on the allegation that the transfer of No 5 Webb Dock was part of a plan to replace the Patricks workforce. Just before Easter, the applicants learned from a source outside Patricks that Patricks would dismiss the whole workforce over Easter. On 6 April 1998, the Monday before Easter, the applicants filed a notice of motion, seeking orders to prevent the dismissal of the employees. On that day, the Court fixed the hearing of the motion for Wednesday, 8 April 1998.
Late in the evening of 7 April 1998, Patricks published a press release, which included the following:
“Patrick today accepted offers and entered into contracts for a range of services from nine separate companies including the National Farmers Federation (NFF) backed P&C Stevedoring which will provide some crane and machinery operators.
......
Patrick has taken steps to ensure all displaced employees of the relevant companies will be eligible to receive their full leave and redundancy entitlements.
......
Patrick expects to continue stevedoring under the new contracted arrangements.”
At the commencement of the hearing on 8 April 1998, counsel for Patricks told the Court that, during the previous evening, each of the employers had appointed administrators under Part 5.3A of the Corporations Law. He said that the employees had not been dismissed but that the administrators intended to dismiss them because the employers were insolvent. I granted an injunction to restrain the employers under administration from so doing, and adjourned the hearing until the first hearing day after Easter, 15 April 1998.
The applicants had applied for interim orders to ensure that the employees would be retained and would work as they had previously done. In the event, the injunction ensured that the employees were not dismissed, but it did not have the effect that the employees returned to their work. This was the result of the effects of a complex transaction which occurred in September 1997. As a result of the transaction, the administrators had a workforce but no work. The applicants only learned of the transaction on 8 April 1998.
I will refer to the details of the transaction later. In essence, it involved a sale of the business and assets of each employer to another company in the Patricks group, Patrick Stevedores Operations No 2 Pty Ltd, the fifth respondent, then called Patrick Stevedores ESD Pty Ltd (ESD). The employers used part of the proceeds of sale to buy back a large proportion of their own shares, and to repay debts. In order to secure the labour necessary to operate the business which ESD had acquired, it entered into a labour supply agreement (LSA) with each employer. The LSA was terminable by ESD without notice if there was any interruption in the supply of labour. The LSA was then the only significant asset of each employer. In due course, Patrick Stevedores Operations Pty Ltd (PSO), the seventeenth respondent, acquired the rights of ESD in each LSA. In early 1998, some employees took industrial action in some facilities as a protest against the transfer by Patricks of No 5 Webb Dock. With the rights acquired in September 1997, PSO terminated each LSA on 7 April 1998. That action meant that the employers had lost their only significant asset, were rendered insolvent, and thereby provided the ground for the employers to appoint administrators. On the same day, Patricks entered into a number of contracts for the provision of labour by a new workforce.
When the hearing resumed on 15 April 1998, the applicants had commenced a new proceeding (VG 152 of 1998). The interim orders are now sought in those proceedings. The applicants reassert the general allegation made in application VG 42 of 1998, that Patricks plan to replace its union workforce with non-union labour. The causes of action now pleaded also rely on the September 1997 transaction and the appointment of administrators as the bases for a number of causes of action. The interim orders sought are intended to ensure that, until the trial of the action, the employees are retained to do the work that they did until 7 April 1998. In general terms, the applicants seek orders preventing the employers from dismissing the employees and requiring Patricks to utilise the employees and no others in operating its stevedoring business. In other words, they seek a return to the pre-7 April 1998 position. The statement of claim in application VG 152 of 1998, filed on 14 April 1998, relies on nine causes of action. It is convenient to focus attention on two of them for present purposes. First, the applicants allege that the employers acted in breach of s 298K(1) of the Act, which relevantly provides:
“An employer must not, for a prohibited reason, or for reasons that include a prohibited reason, do or threaten to do any of the following:
(a) dismiss an employee;
(b) injure an employee in his or her employment;
(c) alter the position of an employee to the employee’s prejudice”.
The prohibited reasons are set out in s 298L, which relevantly provides:
“Conduct referred to in subsection 298K(1) .... is for a prohibited reason if it is carried out because the employee ....:
(a)is, has been, proposes to become or has at any time proposed to become an officer, delegate or member of an industrial association; or
.......
(h)is entitled to the benefit of an industrial instrument or an order of an industrial body; or
......
(l)in the case of an employee .... who is a member of an industrial association that is seeking better industrial conditions - is dissatisfied with his or her conditions”.
Second, the applicants allege that the respondents conspired to injure the applicants by unlawful means. For present purposes, I will confine attention to the alleged contravention of s 298K(1) as the unlawful means, although a number of other unlawful means are relied upon in the statement of claim.
The principles which govern the determination of an application for interim injunctions are well established. The Court must determine whether there is a serious question to be tried and whether the balance of convenience favours the grant of relief: Australian Coarse Grains Pool Pty Ltd v Barley Marketing Board of Queensland (1982) 46 ALR 398; Tableland Peanuts Pty Ltd v Peanut Marketing Board (1984) 52 ALR 651, at 653; Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148, at 153-154; Murphy v Lush (1986) 65 ALR 651, at 652; Epitoma Pty Ltd v Australasian Meat Industry Employees’ Union (1984) 3 FCR 55, at 58-59. In this application, the Court is asked to act urgently. It must make findings, but only for the purpose of resolving the interim application. It is important to emphasise that the conclusions reached are not final determinations made at trial. In such applications, findings are often based on incomplete material. This is particularly so in cases such as claims for breach of s 298K(1) and conspiracy, where the claim is likely to depend on inferences to be drawn from primary facts. In recognition of this feature, s 298V places the onus of proving the reason for conduct on the respondent. I turn to consider whether the applicants have raised a serious question to be tried in relation to the causes of action asserted by them.
SERIOUS QUESTION TO BE TRIED
Section 298K(1)
There are two elements which constitute a breach of the section - the doing of an act of a specified type, and the reason for doing the act. Is there a serious question to be tried on the first element, that the employers have injured the employees in their employment or altered their position to their prejudice?
Prior to 23 September 1997, each of the employers owned the assets and business of the stevedoring operation at particular ports as well as employing the labour for the operation. On 23 September 1997, each of the employers sold the assets and business to ESD under a Business Purchase Agreement (BPA). As I understand the transaction, the purchase price of about $300 million was used by the employers to buy back from other members of the Patrick group a substantial proportion of their shares and to repay debt. After the transaction, a debt of about $14 million to $16 million was owed by other members of the Patrick group to the employers. Each of the employers also entered into an LSA with ESD. The employers agreed to provide labour and carry out the following services:
“(a)The provision of suitably qualified personnel to man the Facilities, and to supervise the performance of work at the Facilities;
(b)The driving of container, luffing, mobile and ship cranes;
(c)The driving of straddles, forklift machines, transtainers and other mobile equipment;
(d)The provision of supervisory personnel to plan and maintain an adequate working rate within the operation;
(e)All clerical requirements in relation to the operational activities;
(f)Maintenance of machinery used by PS ESD;
(g)The management of the store and gear store;
(h)The provision of bus driving services for both visitors and workers;
(i)The monitoring of reefer cargo;
(j)The provision of security and the functioning of the gate house.”
Clause 2.3(h) of each LSA provides:
“In the performance of the Services the Contractor will:
......(h)ensure that the performance of the Services are not interfered with or delayed or hindered for any reason”.
Clause 13.1 (a) and (b) of each LSA provides:
“(a)In the event of a breach of this Agreement by the Contractor (other than a breach of clause 2.3(h)) PS ESD may give written notice to the Contractor to rectify the breach (‘Rectification Notice’). If the breach is not rectified to the reasonable satisfaction of PS ESD within a 30 day period after a Rectification Notice is given, PS ESD may terminate this Agreement immediately by giving written notice to the Contractor (‘Termination Notice’).
(b)In the event of a breach of clause 2.3(h) of this Agreement PS ESD may terminate this Agreement immediately.”
Clause 13.3 of each LSA provides:
“If an application is made to wind up either party, voluntarily or otherwise, or a receiver, receiver and manager, liquidator, administrator or controller (as defined in the Corporations Law) is appointed over any assets of either party, this Agreement will terminate immediately.”
The action of the employers transferring their businesses and entering into an LSA on the terms contained in clause 13.1(b) had a significant effect. It gave ESD the power to bring to an end the only significant asset of the employers, to thereby render each employer insolvent and, as a consequence, to allow the employers to claim that the workforce was redundant. This could all occur while allowing ESD to continue the stevedoring business. Because clause 13.1(b) could be triggered on the occurrence of a minor work stoppage by some employees and because such an event was, in the practical world, likely to occur at some time, the power to bring about circumstances in which the workforce of the employers could be dismissed was readily available.
The concepts of injury and prejudicial alteration referred to in s 298K(1) (b) and (c) are concepts of wide operation. They are capable of referring to the effect of a commercial transaction entered into by an employer which has, or may have, an unfavourable impact on employees: Kimpton v Minister for Education of Victoria (1996) 65 IR 317. In my view, there is a serious question to be tried that the employers injured the employees in their employment or altered the employees’ position to their prejudice by entering into the BPAs and the LSAs or by appointing administrators. But it is not conduct in that wide area of operation that is prescribed. For the purpose of prescribing conduct, the Act confines the concepts by the requirement that such conduct be for a prohibited reason.
As the evidence presently stands, it is arguable that the Patrick group, including the employers and ESD, were dissatisfied with the Union and its approach to waterfront reform. The Patrick group wanted to achieve wholesale change to their workforce and to reduce award conditions. They had a number of meetings with the Minister for Workplace Relations (the Minister), the twenty-ninth respondent. For a meeting on 12 March 1997, the Minister received a briefing paper which included:
“8. At this stage, the views expressed to officials by the stevedores [including Patricks] indicate that they have not identified specific objectives for change and have neither spelt out or tested the specific steps by which any particular objectives might be achieved.
· for example both stevedores appear to have it in mind that they might achieve wholesale change of their respective work forces
-our discussions with them, however, do not suggest that they have given careful consideration to how this might be achieved, or to the means by which responses to such a step might be managed;
· both stevedores have indicated that they would like to reduce existing award conditions in areas such as overtime (Patrick) and annual leave (P&O Ports)
-neither convey the impression that they have settled on a strategy for achieving this end (nor did they give an indication of the importance of such an objective to their overall reform strategies).
9. Another matter that might be canvassed is the proposition that a dispute - of itself - would produce desired change on the waterfront.
· this proposition would seem to have gained some currency among various parties; the thinking seems to be that a dispute, of itself, will lead to reform
-as the strategy paper noted, a dispute would not - of itself - remove or alter MUA coverage, remove or suspend registration, or cancel the award or terminate any agreement
: although it could provide the basis for taking action to one or more of those ends;
· what would be needed for the MUA’s influence on the waterfront to be significantly weakened would be for a range of affected service users and providers to take decisive action to protect or advance their interests
- stevedores would need to activate well-prepared strategies to dismiss their workforce, and replace them with another, quickly, in a way that limited the prospect of, for example, the Commission ordering reinstatement of the current workforce
-service users would need to take action under the WR Act or the Trade Practices Act to protect their interests, and this could have the effect of changing the MUA’s behaviour and/or inflicting some financial pain through the award of damages
:the significant cost of national waterfront action also needs to be borne in mind.
......
11. Attachment C deals with the termination of a workforce; this paper is included in the strategy document prepared by officials.
· you might draw on this to explore the level of consideration which the stevedores have given to this matter.
12. As indicated in MCU 97/147, P&O Ports can be expected to raise with you the role that the Government will take in achieving change”. (emphasis added)
On the present state of the evidence, I can infer that the question of replacing the Union workforce of the employers was discussed. Further, the evidence suggests that Mr Corrigan, the eighteenth respondent, the Chief Executive Officer of Lang Corporation Ltd, had a role in facilitating the training of a new waterfront workforce in Dubai. At about the same time in September 1987, the BPAs and LSAs were concluded. Clause 13(1)(b) of each LSA had the effect referred to in paragraph 9 of the briefing paper. The LSAs made it easier for the employers to terminate the workforce. If the LSA was terminated, the employers’ only significant asset was gone. There was a clear case of redundancy and the Australian Industrial Relations Commission would not have reinstated the employees. But ESD could continue the existing business with a new workforce. Before the BPAs and LSAs, if the employers had terminated the workforce and attempted to continue the business with a new workforce, the old workforce could have applied successfully to the Australian Industrial Relations Commission for reinstatement because there would have been no redundancy to justify the terminations. The corporate counsel of Lang Corporation Ltd deposed to the reasons for the restructure, which involved the making of the BPAs and LSAs, the share buybacks and debt repayments. The reasons were to avoid customer confusion, confusion as to which entity owned which assets, to allow better performance monitoring and to allow borrowing at better rates. There is no express denial that a reason for undertaking the restructure in this particular way was to facilitate the termination of the employees’ employment. The reasons given do not explain why clause 13(1)(b) of each LSA took the particular form. Furthermore, the reasons given are not inconsistent with the reason alleged by the applicants. Section 298K(1) requires the prohibited reason to be one reason, but not the only reason. In my view, there is a serious question to be tried that one reason why the employers made the BPAs and LSAs in the form they took and the reason why they appointed the administrators was because the employees were members of the Union, and the employers wanted to dismiss them to replace them with a non-Union workforce.
It was contended by Patricks that the applicants could not succeed in the claim under s 298K(1) because the real cause of harm to the employees was not the employers’ entry into the September 1997 transactions and the appointment of the administrators on 7 April 1998, but rather the threatened termination of their employment. The termination could now only be achieved by a decision of the administrators and that decision would not be made for a prohibited reason but for the reason that the employers were insolvent. I do not accept this approach for the purposes of this interim application. It is arguable that the conduct alleged to be in breach of s 298K(1) was undertaken so that the administrators would have no option but to dismiss the workforce. The conduct was arguably designed so that the termination would be the probable outcome. The threatened termination was the effect of the conduct in breach of s 298K(1). It does not matter that the final act was to be the act of the administrators, if that act was intended and likely to occur as a result of the prior conduct of the employers. The Court has power to make orders to remedy the “effects” of conduct in breach of s 298K(1) (s 298U(e)). There is a serious question to be tried that the threatened termination of employment of the employees is the effect of conduct of the employers in breach of s 298K(1).
Conspiracy by unlawful means
The applicants allege that the employers and ESD were involved in a conspiracy by unlawful means. A number of unlawful means are relied upon. However, for the purposes of this interim application, the applicants focus attention on the alleged breach of s 298K(1) by the employers. It follows from the earlier discussion concerning the reason for the conduct that ESD was to play a part in a strategy to provide for the easier termination of the workforce by the employers. The role was given to it by the BPA and the LSA. The evidence raises a serious question to be tried that ESD agreed to participate in a strategy, one part of which was that the employers would act in breach of s 298K(1) by entering into the BPA and LSA and appointing administrators in due course.
The applicants have also established that the actions of the employers in entering into the BPA and the LSA and appointing the administrators were arguably in breach of the implied term of the employment contracts between the employers and the employees not to act in a manner likely to destroy the relationship of confidence and trust between them. In my view, there is a serious question to be tried that ESD was party to an agreement to replace the employers’ workforce with non-union labour, and PSO knew that the agreement required the employers to act in breach of the implied term of the employees’ contracts of employment.
I now turn to consider whether the balance of convenience favours the grant or refusal of injunctions.
BALANCE OF CONVENIENCE
Nature of the claims
It is an object of the Act to ensure freedom of association, including the right of employees to join an organisation of their choice (s 3(f)). Section 298K is in aid of that object. It prohibits victimisation on the ground of Union membership. The Act provides for a penalty for breach and gives wide powers to the Court to stop the conduct or remedy its effects (s 298U). The Court should take into account as favouring the grant of interim relief that the context of the claims is not a commercial dispute about money but an attempt to vindicate the rights of the employees to earn a living free of victimisation.
Money as adequate relief
The respondents argued that the injunction should not be granted because the employees’ claims could be met by monetary compensation. The employees had no reason to fear the insolvency of their employers, because the government has promised to pay compensation for their redundancies. I do not accept this contention. The Act provides for reinstatement as a remedy for breach of s 298K (s 298U(b)). The employees are not limited to a claim for compensation. The Act recognises that it may not be appropriate to allow people to buy their way out of discriminatory conduct. Thus, at a final hearing, the Court may determine that the employees should be reinstated. If orders are not made now, it will be practically impossible for the Court to make such orders later because there will be so many irreversible changes flowing from the employees’ absence from the workplace. In a practical sense, the failure to grant orders now will deny the employees the possibility of the remedy which they seek and as to which they have raised a serious question to be tried. The passage of time and events would defeat this remedy.
The acceptability of the workforce
Until 7 April 1998, the employees constituted Patricks’ workforce. That is the status quo which existed when the application for interim relief was commenced. Although Patricks made generalised complaints about the employees’ work practices, there is no material which would justify the conclusion at this stage that the workforce was unsatisfactory. Indeed, the company accounts for the year ended 30 September 1996 show that the first respondent made an after tax profit of $10,911,000 for the year ended 30 September 1995 (the first year) and an after tax profit of $20,431,000 for the year ended 30 September 1996 (the second year). Mr Corrigan wrote in the directors’ report, dated 31 December 1996, that:
“The trading profit represents a significant improvement over the prior year as a result of improved efficiency of operations.”
The company accounts show that the second respondent made an after tax profit in the first year of $2,139,000 and $9,322,000 in the second year. The third respondent made an after tax profit of $3,566,589 in the first year and $6,943,285 in the second year.
One specific complaint against the employees was that they had engaged in industrial action in late 1997 and early 1998. The action in 1998 was as follows:
Place Start Date Duration No 5 Webb Dock Late January to 13 February 1998 East Swanson Dock 16 February 1998 4 days Port Botany 11 March 1998 2 days 25 March 1998 7 days 7 April 1998 7 days Fisherman Island and
Maritime Wharves
3 April 1998 4 days
In response to this claim, the applicants have proffered an undertaking to the Court that, if interim injunctions were granted, the applicants would not take industrial action against the employers. The offer of this undertaking is one of number of unusual features of this case. The undertaking provides an answer to the employers’ apprehension about further industrial action. It is a factor in favour of the grant of the injunctions.
The new labour force - Cost to Patricks and effect on third parties
PSO entered into an agreement on 7 April 1998 with PCS Resources Pty Ltd (PCS), the twenty-second respondent, for the provision of labour to operate the stevedoring business. The agreement is terminable on 90 days notice. PCS was notified that it was to provide 353 full time employees for the first 90 day period. PSO claims that it is obliged to pay about $10 million whether the employees are required to work or not (cl 4.4). On its face, an obligation of such magnitude would provide a reason against granting an injunction. However, there are several considerations which reduce the force of this factor. Clause 16.1 relevantly provides:
“.... no party is liable for any failure to perform or delay in performing its obligations under this agreement if that failure or delay is due to anything beyond that party’s reasonable control. ....”
The clause would appear to apply to the situation where PSO was unable to use labour from PCS as a result of an injunction granted by the Court. The parties seem to have anticipated the possibility that fulfilment of the obligations may be rendered impossible. The timing of the contract supports this view. On 6 April 1998, the applicant filed a notice of motion, returnable on 8 April 1998, in the previous action seeking orders, inter alia, restraining the present first and second respondents from:
“2.......
(a)entering into any agreement, arrangement or other transaction; or
(b)taking any action or doing any thing;
having the purpose or effect that the employment of the employees engaged in their stevedoring business is or will be terminated.
......
5.Such further or other Orders as to the Court seems appropriate.”
Given the corporate relationship, it is likely that the action against the present first and second respondents and Mr Corrigan would have been known to PSO. The affidavit in support of the notice of motion, sworn by Joshua Bornstein on 6 April 1998, stated that the basis of the application included a concern by the National Secretary of the Union that the Patricks’ workforce would be terminated and:
“that if this should occur, and binding contractual arrangements are entered into with third parties, the Applicants will be seriously prejudiced in the prosecution of this proceedings and in relation to the remedies that they seek”.
PSO entered into the obligation aware of the risk of such an injunction. This consideration reduces the force of the contention that the PCS contract is a factor against granting the injunctions. In any event, the Union accounts for the year ended 30 June 1997, which are in evidence, show nett assets of $19.6 million and an operating surplus for the year of $815,000. The Union has offered an undertaking as to damages which, this evidence shows, could meet a claim arising from PSO entering into the contract with PCS.
On 7 April 1998, PSO entered into a contract with Ganelect Engineering Services Pty Ltd (Ganelect) for three years, to provide consulting services in connection with the maintenance of equipment for a fee of $15,000 per month. If an injunction were granted, PSO would remain bound to pay this fee and Ganelect would not be prejudiced. PSO made the agreement with knowledge of the application to the Court to be heard the following day. If the Union were found liable to compensate PSO for these payments until the trial of the action, pursuant to its undertaking as to damages, the resources of the Union are sufficient to meet the liability. The contract also provided for Ganelect to provide maintenance services at a price to be agreed (cl 6.5). In the absence of an agreement as to price, there is no obligation on the part of Ganelect to provide services or on PSO to pay. There is no evidence of any agreement as to price.
By document dated 6 April 1998, PSO contracted with KSK Contractors Pty Ltd (KSK) for the supply of stevedoring labour and equipment for twelve weeks. It appears from the document that PSO executed the agreement on 7 April 1998. By then, PSO was aware of the application before the Court to be heard on the following day. PSO therefore took the risk that it would have to honour its obligations under the contract even if interim relief were granted. KSK will not suffer any loss because PSO is bound to honour the agreement. In any event, having regard to the extent of the claims which might realistically be made under the undertaking as to damages, the resources of the Union would be sufficient to meet any claim for losses occasioned by the making of this contract.
Insolvency of the employers
A significant factor against the grant of an injunction would be if the injunction had the effect of requiring the employers to carry on business at a loss. It was contended on behalf of the respondents that the employers are insolvent. Mr Clayton, the sole director of the employers, gave oral evidence that he appointed the administrators on 7 April 1998 because he formed the view that the employers were then insolvent. He explained that his view was based on the fact that the only significant asset of each of the employers, the LSA, had been terminated, that industrial action in the previous few months and work practices of the employees had led to expenses exceeding revenue, and there was no prospect of resolving the disputes with the Union.
However, circumstances have changed since 7 April 1998. The Court is able to restore the benefits of the LSAs to the employees by appropriate orders. This would give the employers the capacity to continue trading and generating revenue. There would be no industrial action because the employees and the Union are prepared to give undertakings to the Court to that effect. The employees have also told the Court that they offer the administrators their labour at no cost to the extent necessary to get the employers’ business back to profitable operation. I would not regard this as a significant factor in favour of the granting of an injunction if it placed the employees in an unrealistic or overly burdensome position. But the figures produced by the employers for January and February 1998 suggest that employees may need to sacrifice wages for only a few days per month. The revenue in January and February 1998 was $19.7 million and the expenses were $20.2 million. Break-even would be achieved by salary sacrifice of $500,000, which is a few days wages for the whole workforce. The co‑operation exhibited by the employees in taking these positions also removes one of the barriers to successful future trading referred to by Mr Clayton. Later in these reasons, I refer to the positive impression I formed of one of the administrators, Mr Butterell, in the witness box. Those conclusions apply to this aspect of the case as well. To the extent that the appointment of the administrators was occasioned by the inability of the Union and the employers to co-operate, the officers of the employers have been replaced by the administrators and no longer play a part in the events. From the evidence before the Court, it seems likely that Mr Butterell and the employees and the Union will not have the same difficulties in co-operation as did the officers of the employers and the employees and the Union before the administrators were appointed.
Of course, a critical factor will be whether PSO will have work to provide to the employees through the employers. There is some evidence about this. Mr Butterell gave evidence towards the end of the last day of hearing of the application. He said that Mr Corrigan had phoned him that morning and said that the work of PSO had reduced by more than 50 per cent and Mr Corrigan had pulled out or was pulling out of various ports. This evidence must be given due weight. But it must be balanced by the consideration that it was very general and does not allow me to determine, for instance, whether the work lost is retrievable in the short term. It is perhaps reasonable to think that the drop in trade occurred suddenly and as a result of a specific incident. Otherwise, it would be likely that Mr Corrigan would have provided the information to the Court two days earlier, when the application commenced. The commencement of trading by the employers with an undertaking by employees not to take industrial action could be expected to influence the customers who have decided not to use PSO presently. The significance of the reduction in business on the grant of an injunction is reduced by the employees’ willingness to sacrifice wages.
The costs of the administrators have been provided, for the moment, by a payment of $350,000 from Patricks to the administrators. If work commenced as a result of an injunction, revenue would be generated immediately to pay any further expenses of the operation. It was first suggested by Patricks that any revenue would have to be paid to a secured creditor as the result of a crystallisation of a charge consequent upon the appointment of administrators. But counsel for the administrators drew attention to s 440B of the Corporations Law, which may prevent such an effect. In any event, the administrators are able to apply for relief against a chargee under Div 7 of Part 5.3A of the Corporations Law. The evidence is that the labour cost of the operation constitutes most of the expense of the employers’ business. Further, Mr Butterell has sought payment of $10 million of the $14 million to $16 million owing to the employers by other Patrick companies as a result of the BPAs. He is currently investigating recovery of this sum. Mr Clayton also made a demand for this sum shortly before he appointed the administrators. If it is paid, any non-labour expenses of running the business, apart from the administrators’ costs, will be easily met from it.
Supervision
The injunctions sought would require the employers to retain their workforce and would compel PSO to use that workforce for any stevedoring work it had. It was contended by the respondents that it was contrary to the principles governing the grant of injunctions that such orders be made because the orders would involve compelling parties to conduct business and would thereby involve the Court in supervision of many commercial acts. PSO relied on Co‑operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd (1997) 3 All ER 297. In that case, a Safeway supermarket was an anchor tenant in a large shopping centre. It was losing money. The owners decided to close it down during the currency of the lease and in breach of a covenant to keep open and trade. The Court of Appeal ordered that the owner re-open the supermarket and conduct the business. The House of Lords reversed this decision on the ground that there was a settled practice that orders requiring a party to run a business would not be made. Lord Hoffmann delivered the opinion of the House of Lords and said, at 299:
“A decree of specific performance is of course a discretionary remedy and the question for your Lordships is whether the Court of Appeal was entitled to set aside the exercise of the judge’s discretion. There are well-established principles which govern the exercise of the discretion but these, like all equitable principles, are flexible and adaptable to achieve the ends of equity, which is, as Lord Selborne LC once remarked, to ‘do more perfect and complete justice’ than would be the result of leaving the parties to their remedies at common law (see Wilson v Northampton and Banbury Junction Rly Co (1874) LR 9 Ch App 279 at 284). Much therefore depends upon the facts of the particular case and I shall begin by describing these in more detail.”
He then examined the reasons for the “settled practice” that orders requiring a respondent to run a business not be made, at 302-303, 304-305, 307 & 308:
“The most frequent reason given in the cases for declining to order someone to carry on a business is that it would require constant supervision by the court. In J C Williamson Ltd v Lukey (1931) 45 CLR 282 at 297-298 Dixon J said flatly: ‘Specific performance is inapplicable when the continued supervision of the Court is necessary in order to ensure the fulfilment of the contract.’
There has, I think, been some misunderstanding about what is meant by continued superintendence. It may at first sight suggest that the judge (or some other officer of the court) would literally have to supervise the execution of the order. In C H Giles & Co Ltd v Morris [1972] 1 All ER 960 at 969, [1972] 1 WLR 307 at 318 Megarry J said that ‘difficulties of constant superintendence’ were a ‘narrow consideration’ because -
‘there is normally no question of the court having to send its officers to supervise the performance of the order .... Performance .... is normally secured by the realisation of the person enjoined that he is liable to be punished for contempt if evidence of his disobedience to the order is put before the court ....’
This is, of course, true but does not really meet the point. The judges who have said that the need for constant supervision was an objection to such orders were no doubt well aware that supervision would in practice take the form of rulings by the court, on applications made by the parties, as to whether there had been a breach of the order. It is the possibility of the court having to give an indefinite series of such rulings in order to ensure the execution of the order which has been regarded as undesirable.
Why should this be so? A principal reason is that, as Megarry J pointed out in the passage to which I have referred, the only means available to the court to enforce its order is the quasi-criminal procedure of punishment for contempt. This is a powerful weapon; so powerful, in fact, as often to be unsuitable as an instrument for adjudicating upon the disputes which may arise over whether a business is being run in accordance with the terms of the court’s order. The heavy-handed nature of the enforcement mechanism is a consideration which may go to the exercise of the court’s discretion in other cases as well, but its use to compel the running of a business is perhaps the paradigm case of its disadvantages and it is in this context that I shall discuss them.
The prospect of committal or even a fine, with the damage to commercial reputation which will be caused by a finding of contempt of court, is likely to have at least two undesirable consequences. First, the defendant, who ex hypothesi did not think that it was in his economic interest to run the business at all, now has to made decisions under a sword of Damocles which may descend if the way the business is run does not conform to the terms of the order. This is, as one might say, no way to run a business. In this case, the Court of Appeal ([1996] 3 All ER 934, [1996] Ch 286) made light of the point because it assumed that, once the defendant had been ordered to run the business, self-interest and compliance with the order would thereafter go hand in hand. But, as I shall explain, this is not necessarily true.
Secondly, the seriousness of a finding of contempt for the defendant means that any application to enforce the order is likely to be a heavy and expensive piece of litigation. The possibility of repeated applications over a period of time means that, in comparison with a once and for all inquiry as to damages, the enforcement of the remedy is likely to be expensive in terms of cost to the parties and the resources of the judicial system.
......
.... If the terms of the court’s order, reflecting the terms of the obligation, cannot be precisely drawn, the possibility of wasteful litigation over compliance is increased. So is the oppression caused by the defendant having to do things under threat of proceedings for contempt. The less precise the order, the fewer the signposts to the forensic minefield which he has to traverse. The fact that the terms of a contractual obligation are sufficiently definite to escape being void for uncertainty, or to found a claim for damages, or to permit compliance to be made a condition of relief against forfeiture, does not necessarily mean that they will be sufficiently precise to be capable of being specifically performed. So in Wolverhampton Corp v Emmons [1901] 1 KB 515 at 525 Romer LJ said that the first condition for specific enforcement of a building contract was -
‘that the particulars of the work are so far definitely ascertained that the Court can sufficiently see what is the exact nature of the work of which it is asked to order the performance.’
Similarly in Morris v Redland Bricks Ltd [1969] 2 All ER 576 at 580, [1970] AC 652 at 666 Lord Upjohn stated the following general principle for the grant of mandatory injunctions to carry out building works:
‘.... the court must be careful to see that the defendant knows exactly in fact what he has to do and this means not as a matter of law but as a matter of fact, so that in carrying out an order he can give his contractors the proper instructions.’
Precision is of course a question of degree and the courts have shown themselves willing to cope with a certain degree of imprecision in cases of orders requiring the achievement of a result in which the plaintiffs’ merits appeared strong; like all the reasons which I have been discussing, it is, taken alone, merely a discretionary matter to be taken into account (see Spry Equitable Remedies (4th edn, 1990) p 112). It is, however, a very important one.
......
There is a further objection to an order requiring the defendant to carry on a business, which was emphasised by Millett LJ in the Court of Appeal (see [1996] 3 All ER 934 at 948-50, [1996] Ch 286 at 303-305). This is that it may cause injustice by allowing the plaintiff to enrich himself at the defendant’s expense. The loss which the defendant may suffer through having to comply with the order (for example, by running a business at a loss for an indefinite period) may be far greater than the plaintiff would suffer from the contract being broken.
......
It is true that the defendant has, by his own breach of contract, put himself in such an unfortunate position. But the purpose of the law of contract is not to punish wrongdoing but to satisfy the expectations of the party entitled to performance. A remedy which enables him to secure, in money terms, more than the performance due to him is unjust. From a wider perspective, it cannot be in the public interest for the courts to require someone to carry on business at a loss if there is any plausible alternative by which the other party can be given compensation. It is not only a waste of resources but yokes the parties together in a continuing hostile relationship. The order for specific performance prolongs the battle. If the defendant is ordered to run a business, its conduct becomes the subject of a flow of complaints, solicitors’ letters and affidavits. This is wasteful for both parties and the legal system. An award of damages, on the other hand, brings the litigation to an end. The defendant pays damages, the forensic link between them is severed, they go their separate ways and the wounds of conflict can heal.
The cumulative effect of these various reasons, none of which would necessarily be sufficient on its own, seems to me to show that the settled practice is based on sound sense. Of course the grant or refusal of specific performance remains a matter for the judge’s discretion. There are no binding rules, but this does not mean that there cannot be settled principles, founded on practical considerations of the kind which I have discussed, which do not have to be re-examined in every case, but which the courts will apply in all but exceptional circumstances.
......
Finally, all three judges in the Court of Appeal took a very poor view of Argyll’s conduct. Leggatt LJ said that they had acted ‘with gross commercial cynicism’; Roch LJ began his judgment by saying that they had ‘behaved very badly’ and Millett LJ said that they had no merits (see [1996] 3 All ER 934 at 940, 946, [1996] Ch 286 at 295, 301). The principles of equity have always had a strong ethical content and nothing which I say is intended to diminish the influence of moral values in their application. I can envisage cases of gross breach of personal faith, or attempts to use the threat of non-performance as blackmail, in which the needs of justice will override all considerations which support the settled practice. But although any breach of covenant is regrettable, the exercise of the discretion as to whether or not to grant specific performance starts from the fact that the covenant has been broken. Both landlord and tenant in this case are large sophisticated commercial organisations and I have no doubt that both were perfectly aware that the remedy for breach of the covenant was likely to be limited to an award of damages. The interests of both were purely financial: there was no element of personal breach of faith, as in the Victorian cases of railway companies which refused to honour obligations to build stations for landowners whose property they had taken: compare Greene v West Cheshire Rly Co (1871) LR 13 Eq 44.
......
....There was no question of stealing a march, or attempting to present CIS with a fait accompli, because Argyll had no reason to believe that CIS would have been able to obtain a mandatory injunction whether the fixtures had been removed or not. They had made it perfectly clear that they were closing the shop and given CIS ample time to apply for such an injunction if so advised.”
Argyll involved a claim for final not interim relief. That makes a difference to the approach. An interim order can be varied or discharged much more easily than a final order. Consequently, the reluctance stemming from the oppression of the threat of contempt proceedings for breach of the injunction is diminished. If a party finds a particular difficulty in the operation of the injunction, that party can avoid the “blunt instrument of enforcement” by returning to Court and applying for a variation of the injunction in anticipation of such difficulty. Further, the duration of an interim injunction is limited and such duration may be influenced by the conduct of the parties. In the present case, I pressed the parties to commit themselves to an early final hearing of the case in order to limit the operation of any injunction. The applicants submitted a timetable which envisaged a trial not long after 5 May 1998. At the other extreme, the solicitor for the Commonwealth and the Minister swore a very detailed affidavit, estimating the time necessary to complete all the pre-trial steps and concluding that those respondents would not be ready for trial before 28 December 1998. It is difficult to estimate the time necessary to complete the interlocutory steps in this case. However, the case should be heard expeditiously because of the public importance of the issues involved. Consequently, the Court is available for an early trial. As a result of these factors, the duration of any injunction is, to a significant degree, in the hands of the respondents. This is not to minimise the task of preparation for trial. But it acknowledges that the priority in time and resources which the respondents give to the preparation of the case is a factor which will influence the potential duration of an injunction.
Another distinction between this case and Argyll, is that Argyll concerned two large businesses whose interests were purely financial. As I said earlier, this case concerns employees whose interest is primarily a personal interest in retaining employment free from discriminatory conduct. In a case seeking to vindicate such personal rights, a court should be more ready to make orders than it would be in a case involving purely financial interests.
The concern expressed in Argyll about the court being swamped with numerous applications in clarification or amplification of such orders and the consequential costs burden on the parties needs to be considered in this case. The question is one of degree. Some large commercial litigation involves many interlocutory applications of discovery, subpoenas and the like. The Court does not refuse discovery because it will be productive of many interlocutory hearings. In corporations and bankruptcy jurisdictions, the Court gives directions concerning the conduct of businesses. I do not anticipate that an excessive number of applications would be generated from the orders sought in this case. The orders are clear. How long they would last is, to a significant degree, in the control of the respondents. An important consideration is that the administration of the employers is in the hands of Mr Butterell. He gave oral evidence in this application. He has had over thirty years’ experience in the area of insolvency matters. He was confident of being able to manage the employers’ business, providing the financial bases could be secured and the management employees remained available. From my observation of Mr Butterell in the witness box, I am persuaded that he will operate the businesses in a cool-headed, professional, deliberate and fair manner. My assessment of Mr Butterell is a relevant factor in the conclusion that his conduct of the business is not likely to generate an unacceptable level of applications related to any injunctions granted. In Argyll, Lord Hoffmann explained that the Court resisted making such orders because it was undesirable to force hostile parties to work together. The administrator’s presence makes this consideration of less concern in this case. Control of the employers is in the hands of a neutral, independent person. Again, my assessment of Mr Butterell in the witness box is an important factor in arriving at this conclusion.
The interim orders sought would prevent PSO using labour other than the employees supplied by the employers. This would give the employers, and hence the employees, an advantage beyond the rights conferred by the LSAs. Under the LSAs, PSO is entitled to acquire labour from sources other than the employers (clause 2.2). Lord Hoffmann referred to the chance that a defendant would be unfairly enriched at the expense of a plaintiff as an objection to the making of orders requiring the plaintiff to carry on a business. The respondents contend that the objection applies to the interim orders sought. I do not agree. In fact, PSO did not make use of their right to use other labour. It obtained all its labour from the employers. That, therefore, is the status quo which the interim orders should address. The orders are to last for a limited period. It is another question whether, after full investigation at trial, clause 2.2 would be overridden by final orders for the remaining duration of the contract.
Thus, to the extent that the factors discussed in Argyll are relevant to the present case, they do not militate against the grant of an injunction. In that sense, it is an exceptional case on the analysis made by Lord Hoffmann.
The consequences of the appointment of the administrators
On behalf of the administrators, it was contended that, even if the Court made orders against PSO requiring it to use the employers’ workforce, the Court should not make orders against the employers requiring them to retain the workforce. Rather, the Court should let the administrators determine what the employer should do in the light of the effect of the injunction on PSO. This approach, it was argued, recognised the role of the administrators under Part 5.3A of the Corporations Law to exercise wide powers to maximise the chances of the companies, or as much as possible of their businesses, continuing in existence or, if that is not possible, to provide a better return for creditors and members than would result from an immediate winding up of the companies (s 435A). But the claims raised in these proceedings allege wrongful acts by the employers. The administrators need not necessarily have any concern about these claims and they may not have powers to address the issues arising from the claims. The Court has both the concern and the powers. There is nothing in the scheme of Part 5.3A which suggests that the administrator must be left to administer the companies without the intervention of the Court in such circumstances. On the contrary, the fact that administrators may not be able to address the matters raised in the proceedings makes it necessary for the Court to do so. If any orders made by the Court later create difficulties for the administrator, they may seek directions from the Court (s 447D(1)) or seek to vary the orders made in the light of emerging circumstances.
CONCLUSION
At the end of the last day of hearing this application, the applicants strongly urged me to make orders in their favour immediately. I refused because I considered that the issues raised required careful consideration.
In respect of the balance of convenience, the case raised a large number of matters. Earlier in these reasons, I explained my approach to each factor. In the end, the assessment of the relative weight of the factors is a matter of judgment. It is a balancing exercise. After reflection, I have formed a clear view that the balance is in favour of granting the injunctions sought. The judgment is based, in part, as explained earlier in these reasons, upon my assessment of Mr Butterell in the witness box in relation to his future role in the administration of the employers. Although I favour the approach to the grant of interlocutory mandatory injunctions expressed by Gummow J in Business World Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499, I have reached the “high degree of assurance” referred to in Queensland v Australian Telecommunications Commission (1985) 59 ALR 243, at 244, which the respondents argued should govern the approach to the grant of such injunctions.
The applicants argued that a relevant consideration in determining the balance of convenience was that Patricks had acted dishonestly and with stealth. It is undesirable to express a conclusion on these allegations. It is not necessary to do so. The balance of convenience favours the applicants without the need to determine this issue. I do not do so.
Having heard this application over three days, the previous application VG 42 over one day, and a strike out application in VG 42 for one day, and having spent several days examining the evidence for the purpose of preparing these reasons, it is plain to me that the circumstances relating to the proceedings are changing rapidly. The injunctions will be made in the light of circumstances placed before the Court so far. The nature of the case makes it important that the parties have ready access to the Court to address any issues which may arise. I will reserve liberty to apply to all parties on short notice.
FORM OF ORDERS
The respondents argue that the effect of the orders sought was to force PSO to use only Union labour and this is contrary to the policy of the Act. This is not the way the orders work. They require PSO to continue to use the employers, who employ the employees. The orders work by reference to the employees as employees, and not by reference to their Union membership. They are entitled to the benefit of the orders whether they remain Union members or not.
The fifth and seventeenth respondents contended that there was no basis for interim orders preventing them divesting themselves of assets other than in the ordinary course of business. The inter-company transactions of September 1997 are an instance of a rapid rearrangement of assets within the group to the detriment of some members of it. In my view, the orders sought are justified.
I do not intend to make the orders sought against the twenty-second to the twenty-seventh respondents, as such orders are not necessary in light of the orders restraining the fifth and seventh respondents from acquiring the stevedoring services which, until 7 April 1998 they acquired from the employers, from any person other than the employers.
LEAVE TO BEGIN AND PROCEED AGAINST THE COMPANIES IN ADMINISTRATION
In VG 42, pursuant to s 440D(1) of the Corporations Law, I granted leave to the applicants to continue existing proceedings against the companies under administration for the purpose of the hearing and determination of the claim for interim relief. The administrators did not oppose the grant of leave to begin and proceed with the present application for the purpose of the hearing and determination of the claim for interim relief. The reason for granting leave was that, without such leave, the applicants would be unable to seek to restrain the continuance of the alleged unlawful conduct: Pioneer Water Tanks (Australia 94) Pty Ltd v Delat Pty Ltd (admin apptd) (1997) 25 ACSR 757, per Carr J at 760. This disadvantage to the applicants was not balanced by any disadvantage to the administrators because their costs to date are covered by the advance of $350,000. Having regard to the administrators’ present financial position, the leave is extended until further order for the purpose only of further proceedings, if any, relating to the grant of the interim relief.
DIRECTIONS
In order to ensure that the application proceeds to trial expeditiously, I will make orders for limited discovery and for discovery to be made in stages. This will allow the process to start shortly and for preparation to commence without waiting until the conclusion of the discovery process.
I certify that this and the preceding twenty-six (26) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice North
Associate:
Dated: 21 April 1998
Counsel for the First & Second Applicants: J W K Burnside QC with
H Borenstein & M BrombergSolicitors for the First & Second Applicants:
Maurice Blackburn & Co Pty Counsel for the First-Fourth Respondents: P B Murdoch QC with
J ElliottSolicitors for the First-Fourth Respondents:
Phillips Fox Counsel for the Fifth-Seventeenth Respondents: J Middleton QC with
M McDonaldSolicitors for the Fifth-Seventeenth Respondents: Freehill Hollingdale & Page Counsel for the Eighteenth Respondent: G P Harris
Solicitors for the Eighteenth Respondent: Blake Dawson Waldron
Solicitors for the Nineteenth Respondent: Arthur Robinson & Hedderwicks Counsel for the Twentieth Respondent: G P Harris
Solicitors for the Twentieth Respondent: Blake Dawson Waldron
Counsel for the Twentyfirst-Twentyseventh Respondents:
J I Fajgenbaum QC with
NJD GreenSolicitors for the Twentyfirst-Twentyseventh Respondents:
Minter Ellison Counsel for the Twenty-eighth & Twenty-ninth Respondents:
G Pagone QC with
D Chan & W HarrisSolicitors for the Twenty-eighth & Twenty-ninth Respondents:
Dunhill Madden Butler Date of Hearing: 8, 15-17 April 1998 Date of Judgment: 21 April 1998
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