Rees v Worthington Services Pty Ltd
[2017] FCCA 2245
•15 September 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| REES v WORTHINGTON SERVICES PTY LTD & ANOR | [2017] FCCA 2245 |
| Catchwords: PRACTICE AND PROCEDURE – Application by employer for leave to file a cross-claim out of time – consideration of discretionary factors. |
| Legislation: Fair Work Act 2009 (Cth), ss.340, 352, 570 Federal Circuit Court Rules 2001 (Cth), rr.1.05, 1.06, 28.04 |
| Cases cited: Amponsem v Laundy (Exhibition) Pty Ltd [2014] FCCA 2206 Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 |
| Applicant: | JOEL REES |
| First Respondent: | WORTHINGTON SERVICES PTY LTD |
| Second Respondent: | BRAD WORTHINGTON |
| File Number: | SYG 1087 of 2016 |
| Judgment of: | Judge Barnes |
| Hearing date: | 27 July 2017 |
| Delivered at: | Sydney |
| Delivered on: | 15 September 2017 |
REPRESENTATION
| Solicitors for the Applicant: | Swaab Attorneys |
| Counsel for the Applicant: | Mr Kane |
| Solicitors for the Respondents: | Yates Beaggi Lawyers |
| Counsel for the Respondents: | Mr Martin |
ORDERS
The First Respondent’s Application in a Case filed on 10 May 2017 be refused.
Any further application by the First Respondent for leave to file a cross-claim be filed within 21 days of today’s date.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1087 of 2016
| JOEL REES |
Applicant
And
| WORTHINGTON SERVICES PTY LTD |
First Respondent
| BRAD WORTHINGTON |
Second Respondent
REASONS FOR JUDGMENT
On 3 May 2016 the Applicant, Mr Rees, commenced proceedings in this court against his former employer, Worthington Services Pty Ltd (Worthington BMW) and against Mr Worthington under the general protections provisions of the Fair Work Act 2009 (Cth) (the Act). He alleged contraventions of ss.340 and 352 of the Act and seeks declarations, compensation and pecuniary penalties. He filed a statement of claim on 10 June 2016. The Respondents filed a Response and a Defence on 21 September 2016.
On 10 May 2017 Worthington BMW filed an Application in a Case seeking leave to file a cross-claim in the form annexed. In support of such application Worthington BMW relied on an affidavit of Mr Worthington of 18 April 2017 and an affidavit of Tamara Rabadi (a solicitor employed by its solicitors) sworn 13 July 2017.
Mr Rees opposed the grant of leave. He relied on an affidavit of his solicitor, Simon Obee, affirmed 16 June 2017.
Leave to file a cross-claim is necessary because the cross-claim was not included in Worthington BMW’s Response or its Defence.
Under r.28.04 of the Federal Circuit Court Rules 2001 (Cth) (the FCC Rules) a cross-claim must be included in a Response. While there is no express provision in the FCC Rules for the grant of an extension of time or leave to file a cross-claim other than in a Response, the Court may, in the interests of justice, dispense with compliance, or full compliance, with any of the FCC Rules (see r.1.06(1)).
However in this case, having regard to the fact that the matter is proceeding by way of pleadings and to r.1.05 of the FCC Rules, it is appropriate to apply the Federal Court Rules 2011 (Cth) (the FC Rules) insofar as those Rules require a cross-claim to be filed at the same time as a Defence (r.15.04(a)) and provide in r.15.05 that a respondent who has not complied with r.15.04 must apply for leave to file a notice of cross-claim. That is the nature of the present proceedings. Rule 15.05(2) of the FC Rules requires that such an application be accompanied by an affidavit stating the nature of the cross-claim, its relationship to the subject matter of the proceedings and why it was not filed at the requisite time, and a draft of the notice of cross-claim.
As indicated, the Applicant commenced these proceedings on 3 May 2016. The FCC Rules require a Response to be filed within 14 days of service of the application. While the Respondents filed a notice of appearance on 31 May 2016, the Response was not filed until 21 September 2016. The delay in filing a Response and Defence is to some extent explained by Ms Rabadi’s evidence. As early as 6 June 2016 the solicitors for the Respondents indicated to Mr Rees’ solicitors that they required further time to complete their Response. On 10 June 2016 Mr Rees filed a statement of claim pursuant to orders made on 7 June 2016. In essence, it was alleged that he exercised workplace rights (including to make inquiries and complaints, to exercise responsibilities under a workplace law and to take personal leave in accordance with s.97 of the Act) and that various adverse actions (including, ultimately, termination of his employment) were taken against him by Worthington BMW because of the exercise of the pleaded workplace rights. It is also alleged that Worthington BMW dismissed Mr Rees because he was temporarily absent from work because of illness or injury in contravention of s.352 of the Act and that Mr Worthington was involved in the asserted contraventions of the Act.
The Respondents were then ordered to file and serve a Defence and Response by 8 July 2016. The matter was referred to mediation on the assumption that the pleadings would be complete by the date of mediation, so that the nature and extent of the dispute between the parties would be apparent and hence the matter would be ready for and amenable to mediation. The Defence and Response were not filed until 21 September 2016.
While the delay in filing a Defence is addressed in Ms Rabadi’s affidavit by reference to the time taken for provision of Mr Rees’ response to a request for particulars, there is no explanation for the failure to include the proposed cross-claim in the Response or Defence filed on 21 September 2016.
Nor has any explanation been provided to the Court as to why the proposed cross-claim was not filed, or at least foreshadowed, prior to the appointed date for mediation. That is so notwithstanding Worthington BMW’s submission that the matters raised in the cross-claim arise out of matters pleaded in the Defence.
Rather, on Mr Worthington’s own evidence, it was only during the mediation conducted on 21 February 2017 that Worthington BMW’s solicitors advised Mr Rees’ solicitors that Worthington BMW intended to pursue a cross-claim.
The matter did not settle at mediation. Since that time there has been further delay, including failures by Worthington BMW to comply with Court timetables, as described in Mr Obee’s affidavit. On 3 March 2017 I made orders by consent that the First Respondent serve the Applicant with a copy of the proposed cross-claim by 8 March 2017 and consequential orders. After further delay, including what Mr Obee described as the provision of a draft cross-claim which was bound to fail and was not ultimately pressed, a further proposed cross-claim was provided to the Applicant’s solicitors on 18 April 2017. The correspondence between the parties in this period is described in Mr Obee’s affidavit. Eventually, on 10 May 2017 Worthington BMW filed the Application in a Case seeking leave to file a cross-claim in the form annexed. In anticipation of such an Application in a Case (which on 19 April 2017 I had ordered should be filed before 28 April 2017) I had listed it for hearing on 1 June 2017. However on 10 May 2017 Worthington BMW sought a later date on the basis that their Counsel was unavailable on 1 June 2017. The application for leave was ultimately listed for hearing on 27 July 2017.
Mr Worthington’s affidavit contains a brief statement of the nature of the cross-claim from which its relationship to the subject matter of the proceedings can be discerned (albeit it is not stated). However there has been no explanation, whether in affidavit evidence or otherwise, for the fact that the cross-claim was not included in the Response or filed at the same time as the Defence. When asked about the absence of any explanation, Counsel for Worthington BMW suggested that Ms Rabadi’s affidavit addressed the position inter partes.
Ms Rabadi’s evidence related to matters such as Mr Rees’ initial stated intention to amend his original application (by filing a statement of claim); a subsequent delay in the provision of further and better particulars prior to the Respondents filing a Response and a Defence in September 2016; and rescheduling of the subsequent mediation and directions hearings. However it does not explain why the cross-claim was not filed in September 2016. Nor does it explain (in any meaningful sense) the extent of the delay thereafter, including after Worthington BMW’s solicitors informed Mr Rees of their intention to file a cross-claim during the mediation conducted on 21 February 2017.
Neither party cited any authority in relation to the principles to be applied in considering whether to grant leave to file a cross-claim out of time (other than in relation to the jurisdiction of the Court to consider the proposed cross-claim). As indicated, under r.1.06 of the FCC Rules the Court “may in the interests of justice” dispense with compliance with r.28.04. The interests of justice must also be the paramount consideration in relation to an application for leave to file a cross-claim out of time. Worthington BMW bears the onus of satisfying the Court that the grant of leave is appropriate.
In considering whether or not to grant leave to Worthington BMW it is relevant to consider first whether this court has jurisdiction to determine the claims raised in the cross-claim. The proposed cross-claim asserts breaches of Mr Rees’ contract of employment and what are described as fiduciary duties to act in the best interests of Worthington BMW and to avoid conflicts of duties and interest.
As acknowledged by Worthington BMW and pointed out by Judge Manousaridis in Amponsem v Laundy (Exhibition) Pty Ltd [2014] FCCA 2206, this court does not have jurisdiction to deal with a claim for damages for a breach of a contract of employment and/or a breach of fiduciary duty unless such claims form part of a single justiciable controversy (including claims within the Court’s jurisdiction) arising out of a common substratum of facts (see Re Wakim; Ex parte McNally (1999) 198 CLR 511; [199] HCA 27 at [140] per Gummow and Hayne JJ) and on that basis fall within what is sometimes referred to as the “accrued jurisdiction” of the Court (but see the discussion in Amponsem at [12] and Houghton v Arms (2006) 225 CLR 553; [2006] HCA 59 at [27]). This is said to be such a case.
It is not in dispute that the Court has jurisdiction to determine Mr Rees’ general protections claims under the Act and to make the orders sought in that respect. The cross-claim seeks damages for alleged breaches of contract and of fiduciary duty which are said to have resulted in the termination of Mr Rees’ employment. The termination of Mr Rees’ employment is one of the actions which he alleges constitutes adverse action by Worthington BMW. The reason for such termination (in particular whether it was for one of the reasons in s.340 of the Act) is a central part of the Fair Work Act claim (and see s.361 of the Act). In this sense the matters raised in the cross-claim form part of a single justiciable controversy arising out of a common substratum of facts.
Mr Rees did not dispute that the Court has jurisdiction in relation to the cross-claim. In these circumstances, I accept that, as contended for by Worthington BMW, the Court has jurisdiction to entertain a cross-claim of this nature in these proceedings (and see Welsh v Allblend Holdings Pty Ltd [2010] FMCA 281).
Counsel for Worthington BMW acknowledged that it must be accepted that the cross-claim could, and probably should, have been filed a lot earlier and that the matter had a “perhaps unfortunate history” which had led to delay in filing the Application in a Case. Indeed, Worthington BMW accepted that the Court could and should make orders under s.570 of the Act in favour of Mr Rees for the costs in relation to the particular defaults in compliance with the timetabling orders made this year.
Despite Worthington BMW’s acknowledgment that there was a delay in the time taken to seek leave, for which it provided no explanation beyond Ms Rabadi’s evidence, it was submitted that such delay was not a basis on which to refuse leave, having regard to the nature of the cross-claim.
Worthington BMW also appeared to submit that even if the cross-claim as pleaded did not constitute a valid pleading or did not set out valid causes of action (as Mr Rees submitted), this was not a reason for it not to be filed (or, rather, not a reason to refuse leave), but instead was properly the subject of a request for particulars and/or a strike out application by Mr Rees.
Initially, Counsel for Worthington BMW suggested that there should not be any additional expense as a result of the grant of leave to file the cross-claim, because the factual matters raised in the substantive application were very likely to be those raised in the cross-claim. It was subsequently acknowledged that the trial would probably be longer if the cross-claim was included. As Counsel for Worthington BMW was not briefed in the substantive proceedings he was unable to be specific in this respect.
Mr Rees opposed leave being granted to file the cross-claim. It was submitted that, if filed, the proposed cross-claim would be liable to be struck out, because large parts of it were bound to fail and because it had otherwise not been pleaded in a way which allowed him to understand the case put against him. It was contended that the statement of cross-claim was in a form that would be liable to be struck out pursuant to r.16.02(1) of the FC Rules (made applicable by virtue of r.1.05(3)(b) in Part 2 of Schedule 3 of the FCC Rules). This is discussed further below.
There were also said to be discretionary factors weighing against the Court exercising its discretion to allow the cross-claim to be filed, in particular the absence of any explanation for why it was not included in the Response or of any explanation, let alone an acceptable explanation, for the delay thereafter or for why the cross-claim was first mentioned at the mediation and not prior to that time. It was submitted that the costs for the Applicant (and for the Court) in preparing for and attending the mediation in these circumstances had been wasted. It was also contended that this conduct had placed a strain on the Applicant and had caused him to incur completely unnecessary costs beyond those attributable to the delays and non-compliance with orders.
Consideration
As indicated, Worthington BMW submitted that even a justified assertion that the cross-claim as pleaded did not constitute a valid pleading or set out valid causes of action was not a reason for it not to be filed, but rather should properly be the subject of a request for particulars and/or an application to strike out the cross-claim. Worthington BMW did not accept that there were such deficiencies, but also did not provide any direct response to the pleading issues raised by Mr Rees.
This is not the occasion to determine whether an application to strike out part of the cross-claim would necessarily succeed. However in my view such matters are relevant as part of all the circumstances in determining whether it is in the interests of justice to grant the leave sought by Worthington BMW in proceedings of this nature.
There is authority to the effect that if a proposed claim is “plainly untenable” this may in itself provide a reason to refuse leave (see Trade Practices Commission v Allied Mills Industries Pty Ltd & Ors (No.2) (1980) 33 ALR 127 at 136). Note 2 to r.15.06 of the FC Rules provides that a cross-claimant’s statement of cross-claim must comply with r.16.02, which deals with the content of pleadings. The proposed cross-claim pleads two causes of action: breach of contract and breach of fiduciary duty. Properly pleaded, Worthington BMW’s case may well be arguable (at least in part). A claim asserting breach of contract in conventional terms and (at least in some respects) breach of fiduciary duty against a former employee is a claim which may be arguable as part of a single dispute between an employer and former employee (notwithstanding the precise nature and extent of some of the asserted breaches in this case).
However as contended by Mr Rees, there are undoubtedly some deficiencies in the manner in which these claims are pleaded which were not addressed in submissions for Worthington BMW.
First, it is pleaded in paragraph 4 of the cross-claim that pursuant to the terms of a written employment contract (particularised as constituting documents entitled “Terms of Employment”, “Job Description” and “Employment Handbook”) Mr Rees was employed by Worthington BMW as a New Car Sales Manager from 2010 to 2016.
Nine alleged contractual terms are pleaded (without limitation) in paragraph 5 of the Statement of Cross-Claim. It is then generally pleaded in paragraph 6 that in addition to the terms of the contract Mr Rees “owed fiduciary duties to act in the best interests of [Worthington BMW] and to avoid conflicts of duties and interest”. However in paragraph 7 of the proposed cross-claim it is pleaded that “the duties pleaded in paragraphs 5 and 6 are collectively referred to as the Cross-Respondent’s Duties”. Paragraph 8 is as follows:
8. In breach of the Cross Respondent’s Duties, the Cross Respondent:
a. Incorrectly placed orders for new sales on the system and / or failed to ensure that employees of the Cross Claimant that fell within the scope of the Cross Respondent’s Duties correctly placed orders for new sales on the system;
Particulars
See Schedule 1 annexed hereto
b. misappropriated the Cross Claimant’s goods and services including provision of vehicles and provision of discounted vehicle servicing and parts to the Cross Respondent’s family;
Particulars
See Schedule 2 annexed hereto
c. failed to accurately document and / or ensure that employees of the Cross-Claimant that fell within the scope of the Cross Respondent’s Duties accurately recorded sale contracts with the Cross Claimant’s customers;
Particulars
See Schedule 3 annexed hereto
d. failed to include and / or ensure that employees of the Cross-Claimant that fell within the scope of the Cross Respondent’s Duties included, where it formed part of the purchase, a BMW Service Inclusive package or extended warranty at the time of entering new sales into the system;
Particulars
See Schedule 4 annexed hereto
e. failed to ensure that a vehicle lent to the Cross-Claimant’s customer for 12 months expiring on 13 August 2015 was returned on time;
f. failed to monitor new vehicle enquiries and pursue customer sale enquiries;
g. failed to prepare, order and /or progress advertising press during peak motor vehicle sales promotion periods;
Particulars
The Cross Respondent failed to prepare, order and /or progress signs for the Annual BMW Summer Sales Event and Mini Sale Event
h. failed to report for duties in a timely and punctual manner and / or as required.
It is then generally pleaded in paragraph 9 of the proposed cross-claim that “as a result of the matters pleaded in paragraph 8”, Worthington BMW suffered loss and damage “including” loss described by reference to some of the Schedules and (in subparagraph 9(e)) “loss of customers and sales”. In this context it is stated (at subparagraph 9(f)) that Worthington BMW will serve expert evidence as to quantum in the proceedings in respect of the loss flowing from subparagraphs 8(f), (g), (h) and 9(e), and further quantum evidence in relation to damages flowing from subparagraph 8(a).
Finally as a consequence of the facts and matters pleaded Worthington BMW claims damages, interest and costs.
As pointed out by Counsel for Mr Rees, on its face the way the proposed cross-claim is pleaded involves a contention that each of the forms of conduct referred to in subparagraphs 8(a) to 8(h) is in breach of all the express terms of the contract of employment pleaded in paragraph 5 and also of both the pleaded fiduciary duties. This clearly cannot be so. There is no explanation as to which contractual term or terms or fiduciary duty or duties are said to be breached by particular forms of conduct. Indeed, to the extent that Mr Rees is alleged to have breached a fiduciary duty or duties, subparagraphs 8(a) to (h) are drafted in a manner which asserts breaches in all cases of both a fiduciary duty to act in the best interests of Worthington BMW and (inexplicably in some respects) a fiduciary duty to avoid conflicts of duties or interest.
There is a failure to plead the material facts that would be necessary to establish that the particular asserted conduct referred to in each subparagraph to paragraph 8 constitutes a breach of contract and/or of a particular fiduciary duty. The pleading alleges that all of the conduct constitutes breaches of all of the alleged “duties” without making it apparent how particular conduct would fall within one “duty” or another. An obvious example is the absence of pleading of material facts to support any contention that each of these alleged breaches is said to be a breach of a duty to avoid conflicts of duties and interests. The pleading of damages in the Schedules does not overcome these issues.
These are fundamental concerns as the cross-claim should articulate the claims therein with sufficient adequacy for Mr Rees to know the case he is required to meet so that he can provide a meaningful response. It does not do so.
While some of the issues raised by Mr Rees could be addressed by the provision of further particulars, there is a particularly significant lack of clarity in the pleading of a misappropriation of Worthington BMW’s goods and services by Mr Rees. This is a serious assertion. However it is generally pleaded (in paragraph 8(b)) that Mr Rees “misappropriated [Worthington BMW’s] goods and services including provision of vehicles and provision of discounted vehicle servicing and parts to [his] family” (emphasis added). The particulars refer to Schedule 2, which in turn refers to provision of two vehicles (for 12 days and 9 days) to one member of Mr Rees’ family and to 6 occasions on which there was said to be the provision of discounted or free vehicle servicing to another member of Mr Rees’ family. A general allegation of misappropriation of goods and services “including” certain instances is completely inadequate. There is also a disconnect between the pleading of “discounted vehicle servicing and parts” in subparagraph 8(b) and the particulars in Schedule 2 which refer to provision of vehicles and of “discounted or free vehicle servicing”. Moreover the proposed cross-claim does not particularise exactly how it is said that Mr Rees has been involved in some misappropriation.
Mr Rees also took issue with the pleading of loss and damage and the reference to Worthington BMW’s intention to adduce expert evidence as to quantum. However the possibility that a respondent may face difficulties in proving and quantifying some of the asserted aspects of loss and damage arising from the conduct complained of is not a reason for refusing leave to file a cross-claim. It is also open to a party to plead that particular conduct of an employee constitutes a breach of some particular “duty” notwithstanding that a successful claim may have potentially far-reaching consequences or raise a “novel” legal issue. Mr Rees asserted that the nature of some of the breaches alleged in the context of a former employer bringing a cross-claim against a former employee were “extraordinary” and would create an “astonishing” precedent. Even if that is so, it is not in itself a matter that would support the contention that leave should not be granted. However if a party wishes to take such a course it must carefully plead the material facts it alleges give rise to such a breach and clarify which “duty” is said to be breached so that the other party understands the basis for such an allegation and can respond.
It is a well-established principle that it is necessary to balance the question of whether the impact on the proceedings of allowing a respondent such as Worthington BMW to prosecute a proposed cross-claim would cause injustice to an applicant such as Mr Rees out of proportion to that caused to the respondent by a failure to grant it the leave (see St George Bank Ltd v MJK Pty Ltd [1999] FCA 1752 at [25] per O’Loughlin J).
If leave were to be granted to Worthington BMW to file the proposed cross-claim in its present form, it is all but inevitable that Mr Rees would be put to the cost of a strike-out application and/or a request for extensive particulars. While I am conscious that this is not an application to strike out pleadings, there has been more than adequate time for such matters to be clarified by Worthington BMW. These factors weigh against the grant of leave.
Mr Rees submitted that the Court should also give serious consideration to what was said to be the strain and the unnecessary costs that Worthington BMW’s conduct had occasioned to him. While there is no evidence in relation to strain, Mr Rees is an individual who has commenced proceedings against his former employer. He has been subjected to delay, to the fact that the prospect of a cross-claim was raised at a mediation, and thereafter to additional delay occasioned by the (late) provision of a proposed cross-claim which was then replaced by the version now sought to be filed which continues to incorporate significant pleading deficiencies, despite issues having been raised by his solicitors with Worthington BMW’s solicitors (as attested to by Mr Obee).
Insofar as it was submitted for Worthington BMW that having regard to the nature of the cross-claim as part of a dispute between the parties, delay was not a basis on which to refuse leave, I do not accept that an application of this nature should be approached on the basis that a party is “entitled” to raise a cross-claim (even if it is an arguable claim) out of time (see Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 at [111] per Gummow, Hayne, Crennan, Kiefel and Bell JJ).
Even if the unexplained delay should not in itself prevent leave being granted, it is of significant concern that no explanation at all has been provided for Worthington BMW’s failure to include the proposed cross-claim in its Response as required by r.28.04 of the FCC Rules or to file it at the time its Defence was filed. The implications for the conduct and timely completion of these proceedings (and hence for the Applicant), the extent of, and lack of explanation for, the delay, the circumstances in which the prospect of a cross-claim was raised and the costs consequences are factors which weigh against the grant of leave.
The fact that such a new claim was raised for the first time at mediation is of concern. The Applicant submitted that his costs and time in preparing for the mediation in such circumstances were wasted. If a mediation is conducted before issues between the parties are properly identified this involves an unjustifiable drain on the Court’s resources.
Moreover, even after the cross-claim was foreshadowed and the parties proposed consent orders which contemplated that Mr Rees may consent to the filing of a proposed cross-claim and that the need for a formal application for leave could be avoided, the timetables of 3 March 2017 and 30 March 2017 were not observed by Worthington BMW. Nor did it file the foreshadowed Application in a Case by the date ultimately ordered (28 April 2017). This has occasioned further delay. This must inevitably have an impact on when this matter will be heard and on the costs incurred by the parties, although, as indicated, a limited concession has been made by Worthington BMW in relation to costs.
A party to proceedings such as these in relation to a matter arising under the Act may be ordered to pay costs incurred by another party to the proceedings only in the limited circumstances provided for in s.570(2) of the Act (and see CFMEU v Director of the Fair Work Building Industry Inspectorate (No.2) (2013) 209 FCR 464; [2013] FCAFC 25). The fact that the Fair Work jurisdiction is a “no costs” jurisdiction (subject to s.570(2)) must be borne in mind when considering the extent to which any prejudice to the Applicant by the grant of the leave sought could be adequately compensated by costs. In these circumstances, it is also relevant to consider the likelihood of further expense to the Applicant and delay if leave is granted to file the cross-claim in its present form.
The Applicant has foreshadowed a further application for costs under s.570 of the Act (even if leave is granted). In general, the availability of an ordinary costs order to address any prejudice suffered by a party is a matter that can be taken into account in considering whether injustice to an applicant if leave were to be granted to rely on a cross-claim would outweigh the injustice to a respondent if its application was refused. In the present case such “availability” is circumscribed by s.570 of the Act.
Given the pleading in relation to loss and damage, it is very likely that the cross-claim would increase the trial time, although I accept that, in itself, the need for a longer trial would not be a reason for refusing to grant leave, having regard to the desirability of enabling the real issues to be determined between the parties.
As indicated, the proposed cross-claim is so deficient that the grant of leave to file it in its present form would occasion ongoing expense and further interlocutory proceedings which ought not to be necessary having regard to the time and resources available to Worthington BMW to prepare a cross-claim which properly puts Mr Rees on notice of the case he has to meet and enables him to provide a meaningful response. While it is open to Worthington BMW to make allegations which may take a very broad view of the “duties” of an employee, breaches of contract or fiduciary duty and the damages that flow therefrom, it is incumbent on it to plead the material facts it alleges give rise to the existence of any particular asserted breach of a particular contractual term or fiduciary duty so that the Applicant may understand the source of the claim and the legal basis on which damages are sought. This would ameliorate the prospect of future prejudice to Mr Rees.
While I have not gone beyond a preliminary assessment of the proposed cross-claim at this stage of the proceedings and have not given detailed consideration to all of the issues raised by Counsel for Mr Rees (especially in relation to the need for further particulars), the general inadequacies are clear. Nothing said by Counsel for Worthington BMW addressed these issues. His submissions as to the pleading of damages do not overcome the obvious deficiencies and lack of clarity in the pleading of the causes of action and breaches. It is reasonable to expect that Worthington BMW would have addressed such matters (particularly given the history of this matter) without inevitably putting Mr Rees to the time and expense of a strikeout application or an application for particulars were leave to be granted, particularly as the availability of costs orders would be circumscribed by the limits in s.570 of the Act.
On the other hand, no evidence has been filed in the substantive proceedings and the matter has not been set down for final hearing. There is time available for a properly formulated cross-claim to be filed and served and for appropriate directions to progress the matter. However if pleading inadequacies were to result in further delays and necessitate further interlocutory applications this would involve further costs and would potentially have a further negative effect on the time at which the matter would otherwise be listed for hearing.
What is in issue is what the interests of justice require in this particular case. Having regard, in particular, to the significant issues arising from the unexplained delay on the part of Worthington BMW in seeking leave to rely on a cross-claim and the inadequacies in the proposed cross-claim, on balance I am of the view that the present application for leave should be refused. However, Worthington BMW ought to have the opportunity to bring a properly formulated cross-claim arising out of essentially the same facts as those raised in the substantive proceedings (in particular having regard to its pleading in the Defence in apparent recognition of the possibility of a need to meet the s.361 reverse onus) provided it does so promptly. There could then be a single hearing of all the issues that have been raised by the parties at this point in the proceedings. I bear in mind that in Austral Dutch Kaolin Pty Ltd v Hanjin P&C Co Ltd (No.2) [2011] FCA 1241 Greenwood J stated (at [13]) in the context of considering an application for leave to file a cross-claim under r.15.05 of the FC Rules “…the guiding consideration in exercising the discretion is determining that course which would best enable the controversy and all matters sought to be put in controversy, to be determined on the merits so that the entirety of the controversy between the parties can be quelled as an exercise of judicial power.”
In these circumstances, having regard to the interests of justice, it is appropriate to refuse the present application for leave, but also to order that any further application by Worthington BMW for leave to file a cross-claim be filed within 21 days of today’s date. Such a time limit is appropriate having regard to the past history of these proceedings. If Worthington BMW were to act promptly and to properly formulate and particularise its intended claim then, despite my considerable concern at the total absence of an explanation for the significant delay and whether any prejudice to the Applicant can be addressed by a costs order, the interests of justice in having the entirety of the dispute between the parties resolved in the one proceeding would seem to me to support the view that Worthington BMW should be given another, limited, opportunity to raise such a cross-claim.
I would expect such a cross-claim to be properly pleaded and fully particularised in order to avoid the need for further interlocutory hearing, delay and expense. If that is not the case, a further application is unlikely to be successful and may leave Worthington BMW open to a further s.570(2) costs application.
I certify that the preceding fifty-four (54) paragraphs are a true copy of the reasons for judgment of Judge Barnes
Associate:
Date: 15 September 2017
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