Olson v Keefe (No 3)

Case [2018] FCA 2001

FEDERAL COURT OF AUSTRALIA

Olson v Keefe (No 3) [2018] FCA 2001

File number: NSD 1498 of 2016
Judge: BROMWICH J
Date of judgment: 18 December 2018
Catchwords: PRACTICE AND PROCEDURE – application for leave to file a further amended statement of claim (FASOC) – where claims arise out of an employment relationship dispute – where respondents object to leave being granted on basis that aspects of proposed FASOC are liable to strike out or summary dismissal for being fatally defective – whether unconscionability claim discloses any reasonable cause of action – whether profit interest claim can proceed – whether additional implied terms claim can proceed – whether claim based on financial reporting contraventions can proceed – held: unconscionability case insufficiently pleaded and does not rise higher than bare narrative and conclusory allegation – held: leave to bring unconscionability case in its entirety refused – held: leave to bring other additional claims relied upon refused – held: leave to file FASOC refused      
Legislation:

Australian Consumer Law (Competition and Consumer Act 2010 (Cth), Sch 2) ss 2, 18, 20, 21, 31

Corporations Act 2001 (Cth) ss 1317AC(2), 1317AC(3)

Federal Court of Australia Act 1976 (Cth) s 31A

Federal Court Rules 2011 (Cth) rr 16.01, 16.21, 16.43

Trade Practices Act 1974 (Cth) s 51AA

Cases cited:

Australia & New Zealand Banking Group v Karam [2005] NSWCA 344; 64 NSWLR 149

Australian Building and Construction Commissioner v Hall [2018] FCAFC 83; 277 IR 75

Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90; [2013] ATPR 42-447

Australian Parking and Revenue Control Pty Ltd v Reino International Pty Ltd (No 3) [2017] FCA 1273

Australian Securities and Investments Commission v Cassimatis [2013] FCA 641; 220 FCR 256

Banque Commerciale S.A., En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279

Blomley v Ryan (1956) 99 CLR 362

Bridgewater v Leahy [1998] HCA 66; 194 CLR 457

Christou v Stantons International Pty Ltd [2010] FCA 1150

Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337

Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447

Commonwealth Bank of Australia v Barker [2014] HCA 32; 253 CLR 169

Kakavas v Crown Melbourne Limited [2013] HCA 25; 250 CLR 392,

Olson v Keefe [2017] FCA 101

Olson v Keefe (No 2) [2017] FCA 1168; 122 ACSR 395

Paciocco v Australia and New Zealand Banking Group Limited [2015] FCAFC 50; 236 FCR 199

Texts cited: Story J, Commentaries on Equity Pleadings and the Incidents Thereof, According to the Practice of the Courts of Equity of England and America (Little, Brown & Co., 1865)
Date of hearing: 13 September 2018
Registry: New South Wales
Division: General Division
National Practice Area: Employment & Industrial Relations
Category: Catchwords
Number of paragraphs: 46
Counsel for the Applicant: Mr G Hatcher SC with Mr H Stitt
Solicitor for the Applicant: Mills Oakley Lawyers
Counsel for the Respondents: Mr Y Shariff with Mr…

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Details
AGLC
Olson v Keefe (No 3) [2018] FCA 2001
Case
[2018] FCA 2001
Decision Date

CaseChat Overview and Summary

In Olson v Keefe (No 3), the applicant, Mr Olson, sought leave to file a further amended statement of claim against the respondents, Hilco USA, Hilco Australia, Hilco Management, and Mr Keefe. The proceedings stem from a dispute arising out of an employment relationship. The respondents opposed the application on the grounds that certain claims in the proposed further amended statement of claim were fatally defective and would likely be struck out or summarily dismissed.

The primary legal issues before the court were whether the applicant's unconscionability claim under the Australian Consumer Law (ACL) was sufficiently pleaded, whether the claim for a profit interest in the sale of the Australian business could proceed, whether an implied term in the contract of employment to facilitate compliance with statutory obligations and act with fidelity could be alleged, and whether a claim based on financial reporting contraventions could proceed. The court had to determine if the additional claims disclosed any reasonable cause of action and if there was any utility in permitting the re-pleading of the defective claims.

The court found that the unconscionability claim was insufficiently pleaded and did not rise above a bare narrative and conclusory allegation. The court also held that the claim for a profit interest, which was previously struck out, could not be reintroduced. The claim for an implied term in the contract of employment to facilitate compliance with statutory obligations and act with fidelity was deemed unnecessary for debate, and the financial reporting claim was found to pertain to the breach of contract claim. Consequently, the court refused leave to file the further amended statement of claim in its entirety, finding no utility in permitting the re-pleading of the defective claims.

The orders of the court included refusal of leave to file the further amended statement of claim, direction for the applicant to pay the respondents' costs, and provisions for further costs applications and procedural orders to be submitted by the parties. The proceedings were provisionally listed for a case management hearing.

Orders

Orders of the court

1. The applicant be refused leave to file a further amended statement of claim in the draft form provided to the Court on 25 June 2018.

2. The applicant pay the costs of the first, third and fourth respondents as agreed or assessed.

3. The first, third and fourth respondents be granted leave to make an application for a further or different costs order by 4.00 pm on 30 January 2019.

4. The parties furnish draft agreed or competing procedural orders outlining the future conduct of the proceedings by 4.00 pm on 30 January 2019.

5. The proceeding be provisionally listed for a case management hearing at 9.00 am on 1 February 2019.

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

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

If each of the additional pleading defects identified in the preceding paragraph were, each or together, the only problem, they might have been cured by re-pleading. However, the more fundamental defects detailed before the preceding paragraph mean that there is no utility in permitting such re-pleading to occur.Conclusion on unconscionability For the reasons set out above, Mr Olson’s entire case of unconscionability under the ACL cannot be permitted to proceed. Leave to file the FASOC in a form bearing those allegations cannot be granted. Profit Interest Claim: “profit interest” or equity share in the sale of the Australian business alleged at [42(c)], [85], [129] and [138] of the FASOC The respondents’ written submissions correctly point out that an earlier pleaded profit interest claim was struck out in Olson v Keefe (No 2) at [19]. In his submissions, Mr Olson accepts that that is so, but denies that he is attempting to reintroduce the substance of the same claim in another guise. That denial is, to say the least, curious when regard is had to the proposed pleading as follows (at [42(c)], emphasis added):In addition to the express terms referred to in paragraphs 39 to 41 above, the Employment also included the following relevant implied terms:…(c)Whether by way of implication or construction of the Contract of Employment, Hilco Aust and/or HMR LLC and/or both were required to do all that was necessary to afford to Olson the benefit of his equity share by way of Bonus Compensation and Profits Interest in Hilco’s Australian Business. This does not need to be debated further. The profit interest claim was abandoned at the hearing that took place on 14 June 2017, partly for the reason that the claim could only arise in the event of the sale of Hilco’s Australian business, which it has never been suggested took place. That claim cannot now be reintroduced, whether as a particular to another claim or otherwise. Leave to make a claim for profits interest in any guise must be refused. Implied Terms Claim – an implied term in the “Contract of Employment” to facilitate compliance with statutory obligations alleged at [42(b)] and [47-[49] and to act with fidelity to “the bargain” alleged at [42(d)] and [80] of the FASOC The key paragraphs of the FASOC for which leave is sought and opposed are as follows:42.In addition to the express terms referred to in paragraphs 39 to 41 above, the Employment also included the following relevant implied terms:…(b)Statutory Obligations: As part of the Contract of Employment, and pursuant to the statutory obligations of companies as set out in the Corporations Act. The Respondents would take all steps necessary to ensure that Olson could comply with the obligations imposed upon him as the Managing Director of Hilco Aust, including providing accurate financial information to Olson concerning Hilco Aust.…(d)Fidelity: Both parties to the Contract of Employment would act honestly and with a fidelity to the bargain, as well as not to act dishonestly or to undermine the bargain entered and/or undermine the substance of the contractual benefit bargained for.…80.This action by HMR LLC was a breach of the implied term of the Contract of Employment to act honestly and with a fidelity to the bargain, as well as not to act dishonestly or to undermine the bargain entered and/or undermine the substance of the contractual benefit bargained for.

Ratio Decidendi

Legal Principle Established

The pleaded case that Mr Olson already brings, and additionally seeks to bring, alleges:(1)failure by Hilco USA to pay him commission to which he was entitled arising out of his prior work as a consultant in obtaining the Borders transaction in Australia;(2)breach of express terms of his contract of employment in Australia with Hilco Australia, with Hilco USA, or with both companies;(3)breach of implied terms of his contract of employment, including as to conduct that he asserts deprived him of bonus compensation and a profits interest by reason of not giving him information, in breach of statutory obligations;(4)in the alternative to his contract of employment claims, misleading or deceptive conduct contrary to ss 18 and/or 31 of the Australian Consumer Law in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (ACL) in relation to asserted representations made by Hilco USA and Hilco Australia to persuade him to take up employment with Hilco Australia, including representations that he would obtain shares in Hilco Australia, and as to his remuneration and expenses;(5)short payment of commission to which he was entitled in Australia;(6)victimisation by Mr Keefe, as a director of Hilco Australia, by way of termination of his employment for the proscribed reason of Mr Olson making a “protected disclosure”, contrary to ss 1317AC(2) and 1317AC(3) of the Corporations Act 2001 (Cth); and(7)unconscionable conduct in a variety of ways, largely focusing on deprivation of his bonus compensation and profits interest.The respondents’ opposition to the filing of the FASOC The respondents’ primary opposition to the filing of the FASOC is upon the basis that key aspects of what is sought to be litigated is liable to be summarily dismissed, or to be struck out in several critical respects: see s 31A of the Federal Court of Australia Act 1976 (Cth) (Act) and rr 16.01 and 16.21 of the Federal Court Rules 2011 (Cth) (Rules). The respondents contend that the following paragraphs of the FASOC are fatally defective:(1)[124] to [162], which allege contraventions of ss 20 and 21 of the ACL (Unconscionable Conduct Claim);(2)[42(c)], [85], [129] and [138], which allege rights to a “profit interest” or equity share in the sale of the Australian business (Profit Interest Claim);(3)[42(d)] and [80], which allege an implied term in the “Contract of Employment” to act with fidelity to “the bargain” (Implied Terms Claim); and(4)[51] to [66], which allege contraventions of the Corporations Act based on financial information that was not provided to Mr Olson (Financial Reporting Claim). (At the hearing of this leave application, senior counsel for Mr Olson advised that there was no separate financial reporting claim, and that this aspect of Mr Olson’s pleading went to his breach of contract claim.) The respondents’ above objections to the grant of leave to file the FASOC are advanced in the nature of a pre-emptive strike, seeking to prevent the filing of that amended pleading in the first instance, rather than standing by while it is filed and later seeking summary judgment or strike out. In this circumstance, as the above-cited authorities indicate, the principles applicable to the grant or refusal of leave to file the FASOC in its present form include, as a matter of logic, principles pertaining to summary judgment or strike out. That is because a court will not grant leave to amend a pleading that is shown to be liable to be struck out or summarily dismissed.