Mutch v ISG Management Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Mutch v ISG Management Pty Ltd [2020] FCA 362

File numbers: VID 1492 of 2018
VID 474 of 2019
Judge: BROMBERG  J
Date of judgment: 18 March 2020
Catchwords:

PRACTICE AND PROCEDURE – proceeding commenced as representative proceeding pursuant to Pt IVA Federal Court of Australia Act 1976 (Cth) (“FCA”) – application for declaration that proceeding not properly commenced as representative proceeding pursuant to s 33C FCA – whether claims give rise to substantial common issue of fact or law – claims that group members were employees of respondent – claim that indicia of employment common to group members and that each indicia raised a common issue – whether claim that group members were employees must be determined on individual-by-individual basis and thus no common issue raised – application dismissed

PRACTICE AND PROCEDURE – application pursuant to s 33N FCA for order that proceeding no longer continue as representative proceeding – whether representative proceeding would provide efficient and effective means of dealing with claims of group members – whether it was otherwise inappropriate that claims be pursued as representative proceeding – where utility in common rather than individual determination of whether particular indicia support characterisation of relationship between group members and respondent as that of employment – application dismissed

PRACTICE AND PROCEDURE – application for order pursuant to s 33ZF FCA to require group members to elect to remain group members by an opt‑in process which would effectuate class closure – whether class closure orders appropriate or necessary to ensure justice is done in the proceeding – whether compelling reason to order class closure – discussion about difference between opt-in and opt-out processes – statutory preference for opt‑out process not to be undermined by exercise of s 33ZF discretion – application dismissed

PRACTICE AND PROCEDURE – application for common fund order under s 33ZF FCA – where High Court found in BMW v Brewster Australia Ltd [2019] HCA 45 that no power for Federal Court to make a common fund order under s 33ZF – application dismissed

PRACTICE AND PROCEDURE – application under s 31A(2) FCA for summary judgment for respondent’s cross-claim – where summary judgment application made prematurely – application adjourned

INDUSTRIAL LAW – whether group members employees of respondent or employees or independent contractors of another corporation – for the purpose of the determination of ss 33C and 33N FCA issues, consideration of factors likely to be relevant at trial
Legislation:

Corporations Act 2001 (Cth): s 601AH(2)

Fair Work Act 2009 (Cth): s 357(1)

Federal Court of Australia Act 1976 (Cth): ss 31A(2), 33C(1)(c), 33N(1), 33ZF

Cases cited:

Ace Insurance Ltd v Trifunovski (2013) 209 FCR 146

ACT Visiting Medical Officers Association v Australian Industrial Relations Commission [2006] FCAFC 109

AMP General Insurance Ltd v Victorian Workcover Authority (2006) 15 VR 175

AS (by her litigation guardian Marie Theresa Arthur) v Minister for Immigration and Border Protection [2017] VSC 137

Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385

BMW…

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Details
Case
[2020] FCA 362
Decision Date

CaseChat Overview and Summary

The case of Mutch v ISG Management Pty Ltd involved the plaintiff, Mr Mutch, and the defendant, ISG Management Pty Ltd, with the proceedings initially commenced as a representative proceeding under the Federal Court of Australia Act 1976. The primary dispute centred on whether Mr Mutch and other group members were employees of ISG or if they were independent contractors of another corporation. The court was required to determine various legal issues, including whether the claims presented by the group members gave rise to a substantial common issue of fact or law, and if the proceeding should continue as a representative action.

The court found that the claims did indeed involve a common issue of fact or law, as the indicia of employment were common to all group members. However, ISG argued that the determination of whether each indicia supported the characterisation of the relationship as one of employment required an individual-by-individual assessment, thus negating the existence of a common issue. The court rejected this argument, finding that the common questions listed in the Amended Outline of Action were indeed common to all group members and did not necessitate an individual assessment of circumstances. Consequently, the court dismissed the application for the proceeding not to continue as a representative action.

In addition, the court examined the appropriateness of class closure orders and the making of a common fund order. It was held that the statutory preference for an opt-out process should not be undermined and no compelling reason was found to order class closure. Furthermore, the court found that it lacked the power to make a common fund order under section 33ZF of the Act, following the High Court's decision in BMW v Brewster Australia Ltd.

The court also dismissed the application for summary judgment for ISG's cross-claim, finding that the application was premature. The court did not make any order as to costs.

In summary, the court upheld the proceeding as a representative action, rejected the applications for class closure and common fund orders, dismissed the summary judgment application, and did not order costs.

Orders

Orders of the court

1. The defendant reinstate the registration of Mutch Better Communications Pty Ltd (ACN 168 580 292).

2. There be no order as to costs.

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

Full text does not contain this section.

Decision

Reasons for decision

In accordance with the holding in Brewster that this Court lacks the power to make a CFO, Mr Mutch’s application for a CFO is dismissed.MR MUTCH’S SUMMARY JUDGMENT APPLICATION Mr Mutch made an interlocutory application seeking the summary dismissal of ISGM’s cross‑claim in accordance with s 31A(2) of the FCA. Section 31A(2) provides that the Court may give summary judgment if it is satisfied that a party has no reasonable prospect of successfully prosecuting the proceeding. The cross-claim brought by ISGM is brought against each of Mr Mutch and MBC. The cross‑claim is premised upon the proposition that, contrary to ISGM’s Defence, Mr Mutch was an employee of ISGM or that Mr Mutch had a personal contractual relationship with ISGM pursuant to which he was an independent contractor. On that premise, ISGM makes 2 types of claims by its cross-claim – claims in restitution and claims for misleading and deceptive conduct. Broadly stated, ISGM’s claims for restitution are based on the payments it said it made to MBC in consideration for MBC providing I&M Services, being payments made under a mistake of fact or law. The mistaken belief being that ISGM had a contract with MBC pursuant to which I&M Services were provided to ISGM by MBC as an independent contractor and not provided by Mr Mutch personally as an employee or independent contractor. ISGM further claims that the payments made by it to MBC were made for consideration that has wholly failed, in circumstances where MBC did not provide the I&M Services. Again broadly stated, by its claims of misleading and deceptive conduct in contravention of s 18 of the Australian Consumer Law being Sch 2 of the Competition and Consumer Act 2010 (Cth), ISGM claims that MBC or alternatively Mr Mutch made representations to it that MBC was providing I&M Services to ISGM as an independent contractor and that those services were not being provided by Mr Mutch as an employee or personally as an independent contractor. Mr Mutch made the following submissions in relation to ISGM’s restitution claims. First, that the payments MBC received involved no unjust enrichment as the payments made by ISGM to MBC, even if made in a mistaken belief by ISGM, did no more than – on ISGM’s pleaded case – discharge ISGM’s contractual liabilities. Second, that ISGM has already been reimbursed by Telstra for all payments made to technicians so if the restitution claims are successful ISGM would itself be unjustly enriched. Third, relying on Linkhill Pty Ltd v Director, Office of the Fair Work Building Industry Inspectorate (2015) 240 FCR 578, that ISGM could not seek restitution payments made by it to Mr Mutch as consideration for provision of services as a “set-off” of payments owing by ISGM to Mr Mutch under the Award or the FW Act, unless the payments actually made by ISGM to Mr Mutch related to the various unpaid benefits. In relation to ISGM’s misleading or deceptive conduct claim, Mr Mutch submitted that the impugned representation is a representation as to Mr Mutch’s opinion and not a representation of fact such that if it were wrong it would unlikely constitute misleading or deceptive conduct, especially if it was honestly held as it was for Mr Mutch, who held the opinion on the basis of the Tickets of Work Agreements. Deliberation

Ratio Decidendi

Legal Principle Established

Most of the indicia referred to in Hollis and set out above are relied upon by Mr Mutch. The list there given is not exhaustive. Nor are any of the indicia necessarily determinative in any particular case. The weight which may be accorded to any particular indicator may vary from case to case: Lopez v Deputy Commissioner of Taxation (2005) 143 FCR 574 at [82] (Ryan, Lander and Crennan JJ). As Wigney J observed in Bywater at [61], the characterisation task is “essentially evaluative”, citing Hall (Inspector of Taxes) v Lorimer [1992] 1 WLR 939 at 944 where Mummery J emphasised that the task was a “matter of evaluation of the overall effect of the detail”.Deliberation - s 33C(1) To establish non-compliance with s 33C(1), ISGM relied only upon para (c) thereof and only upon the requirement made in s 33C(1)(c) that the claims of all group members must “give rise to a…common issue of law and fact”. ISGM contended that none of the common questions listed in the AOA could constitute a common issue. It was contended that from the manner in which Mr Mutch has pleaded his case, none of the asserted common questions are common questions “in the requisite sense”. That was so because “the alleged common questions can only be determined by reference to underlying premises which must be assessed on an individual-by-individual basis”. ISGM contended that each of the asserted common questions were dependent upon 2 questions – (1) whether each of the technicians and ISGM had entered into a contract and (2) whether that contract was a contract of employment. More specifically, although it is not entirely clear, ISGM contended that common questions 1-7 and 16-17 are dependent on the first question and common questions 1-15 are dependent on both of the questions. Relying upon the FASC’s assertion of a contract made between ISGM and each technician as being “a legal conclusion that follows after an examination of the whole of the relationship between the parties” and also the reference in that pleading to the “totality of the relationship” made in asserting that the relationship between each technician and ISGM was an employment relationship, ISGM contended that the 2 questions necessarily involved a fact specific exercise which would require a consideration of the individual circumstances of each technician. It was also asserted that a consideration of individual circumstances was mandated by the “very nature” of the assessment raised by the 2 questions. ISGM contended that the 2 questions of whether there was a contract and, if so, whether it was an employment contract, were individual to each technician and not common to all. On the basis that each of the common questions in the AOA was dependent on those 2 questions, ISGM contended that each of the common questions was individual and not common. There are a number of difficulties with that submission and it should be rejected. First, to some extent the submission impermissibly (for s 33C(1) purposes) travels beyond Mr Mutch’s pleaded case. As outlined already ISGM asserted that by its “very nature” the exercise involved in answering the 2 questions it identified necessarily requires an assessment of the individual circumstances particular to each technician. That assertion is not necessarily true. Nor is it consistent with Mr Mutch’s pleaded case which does not rely on individual circumstances naturally or otherwise arising.