Thomson v Kimberly College Limited
[2020] FCCA 3361
•9 December 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| THOMSON v KIMBERLY COLLEGE LIMITED & ORS | [2020] FCCA 3361 |
| Catchwords: HIGH COURT AND FEDERAL COURT – Federal Circuit Court – procedure – other matters – application for stay of proceedings pending criminal proceedings. |
| Legislation: Australian Education Act 2013 (Cth) Corporations Act 2001 (Cth) ss. 181, 182 Fair Work Act 2009 (Cth), ss.351(1), 550(1) Federal Circuit Court Rules 2001 (Cth), rr.17.01, 17.02, 17.03 |
| Cases cited: Australian Securities Commission v Kavanagh (1993) 12 ACSR 69 |
| Applicant: | PAUL THOMSON |
| First Respondent: | KIMBERLY COLLEGE LIMITED |
| Second Respondent: | PAUL WILTON |
| Third Respondent: | GREGORY O’DONNELL |
| Fourth Respondent: | WARWICK STEEN |
| File Number: | BRG 873 of 2018 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 9 April 2020 |
| Date of Last Submission: | 9 April 2020 |
| Delivered at: | Brisbane |
| Delivered on: | 9 December 2020 |
REPRESENTATION
| Solicitors for the Applicant: | Australian Law Partners |
| Counsel for the Respondents: | Mr Herbert |
| Solicitors for the Respondents: | Minter Ellison |
ORDERS
The application in a case filed on 6 February, 2020 be dismissed.
The question of the costs of that application be reserved to the next hearing date.
The application be adjourned for directions to 9:30am on 18 December, 2020.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 873 of 2018
| PAUL THOMSON |
Applicant
And
| KIMBERLY COLLEGE LIMITED |
First Respondent
| PAUL WILTON |
Second Respondent
| GREGORY O’DONNELL |
Third Respondent
| WARWICK STEEN |
Fourth Respondent
REASONS FOR JUDGMENT
By his application in a case filed on 6 February, 2020 the applicant seeks, amongst other things, the following orders:
1. Pursuant to rule 17.02 of the Federal Circuit Court Rules 2001 (Cth), the following questions be heard and decided separately from the balance of the claims in the proceeding:
(a) Was the Applicant paid his long service leave entitlements while in the employ of the First Respondent?
(b) If the answer to question (a) is ‘no’, did the First Respondent fail to pay the Applicant his long service leave entitlement upon his termination?
(c) If the answer to question (b) is yes, has the First Respondent contravened s.323 of the Fair Work Act 2009 (Cth)?
2. Pursuant to s.545(2)(b) of the Fair Work Act 2009 (Cth), an order awarding compensation for loss that a person has suffered because of the contravention of s.323 of the Fair Work Act 2009 (Cth), in the sum of $209,127.60
3. Pursuant to rule 17.0S(c) of the Federal Circuit Court Rules 2001 (Cth), following the hearing and determination of the questions in paragraph 1, the hearing and deciding of all other questions in this proceeding be stayed until further order.
Each of the orders sought in the application is opposed by the respondents.
Background
The first respondent conducts an independent non-state school which has been established as a registered unlisted company limited by guarantee. The first respondent is governed by a board comprised of voluntary unpaid directors and members of the company. The applicant was a director of the first respondent and a member of the company for various periods relevant to these proceedings.
The second, third and fourth respondents were also directors of the first respondent. The applicant pleads that each of the second, third and fourth respondents were involved in dealings with the first respondent that put them in conflict with the duties that they owed to the first respondent as its directors. To the extent that the applicant’s claim against the first respondent is for breaches of the Fair Work Act 2009 (Cth), the applicant alleges that the second third and fourth respondents were involved in those contraventions for the purposes of s.550 of the Fair Work Act and are therefore liable as if they had contravened the Act themselves.
The applicant was employed as the principal of the first respondent’s school from about January, 2000 until 12 June, 2018. Although the applicant claims that his employment was subject to a formal contract of employment, none is in evidence before me. The terms and conditions upon which the applicant was employed are in issue on the pleadings between the parties.
The applicant was also the chief executive of the first respondent and he made the day to day decisions about the operation of the school and the first respondent, including financial management decisions, with minimal input from the first respondent’s Board of Directors.
On 12 June, 2018 the applicant was dismissed from his employment for what the respondents allege was serious misconduct, including the misappropriation of significant funds. The respondents contended that the applicant had caused himself to be paid significant amounts of money, particularised in their defence, without the authority of the first respondent or the first respondent’s Board of Directors.
On 3 July, 2018 the applicant commenced these proceedings – a general protections court application involving dismissal. In it he claims that the first respondent breached the Fair Work Act in that the first respondent took adverse action against him on two occasions – first when it suspended him from his employment on 3 June, 2018 and second when it terminated his employment on 12 June, 2018. It is said that both occasions of adverse action were taken because of the applicant’s political opinion and that the taking of adverse action for that reason was in contravention of s.351(1) of the Fair Work Act. He alleges that the second, third and fourth respondents are liable for those contraventions by reason of s.550(1) of the Act.
The applicant also alleges that, at the time his employment was terminated, he had accrued but was not paid certain entitlements, namely long service leave entitlements and annual leave entitlements. His case is that over the 18 years of his employment with the first respondent he did not take any annual leave or long service leave. Further, he claims that certain amounts were deducted or withheld from his pay and he is entitled to reimbursement of those amounts.
Pleadings have been delivered between the parties. The applicant has filed a statement of claim on three occasions. I have assumed that the most recently filed statement of claim is that upon which the applicant is proceeding.
Having regard to the pleadings, it is not in dispute that the applicant was employed by the first respondent and that that employment came to an end on 12 June, 2018.
It is also common ground that the first respondent did not make any payments to the applicant upon the termination of his employment on account of accrued annual or long service leave. The applicant claims that it is common ground between the parties that the “applicant’s leave entitlements including long service leave have never been paid by the first respondent to the applicant”. However, that is not common ground. The respondent’s case is that it does not know what, if any leave entitlements had accrued but remained unpaid at the time the applicant’s employment was terminated. It is clear from the respondents’ defence that their case is that during the course of his employment the applicant received many unauthorised lump-sum payments which the respondents contend were either on account of his leave entitlements (long service and/or annual leave) or were simply unauthorised payments to him which he caused to be made by the first respondent.
The respondents deny that the applicant is entitled to any payment as claimed by him, or alternatively is not entitled to payment of the amount claimed by him in the proceedings. The respondents oppose an award of compensation.
The applicant’s long service leave entitlements have been determined by the Queensland Office of Industrial Relations to be in the sum of $208,997.72. Although that assessment has been made, the respondents contended that the assessment creates no entitlement on the applicant’s part in the absence of the determination of the issues raised in the present proceedings.
The parties have filed affidavits of evidence in chief of each witness that the party intends to call in the proceedings. The parties have attended a mediation in the proceedings which occurred on 18 October, 2019. There was a directions hearing held in relation to the proceedings on 8 November, 2019 and there was a further directions hearing held in relation to the proceedings on 16 December, 2019.
In his proceedings, the applicant claims that he was dismissed for expression of his political opinions rather than for the reasons contained in the letter in which the termination of his employment was communicated. The relevant political opinions relied upon by the applicant concerned his approach to what he pleads were conflicts of interest that existed between each of the second, third and fourth respondents in their positions as directors of the first respondent and their personal business dealings or financial relationships with the first respondent. The applicant alleges impropriety on the part of each of the second, third and fourth respondents and pleads that he directed that their conduct towards the first respondent be investigated. It is his case that those directions constituted political opinions on his part and he claims that those political opinions informed the first respondent’s decision to first suspend his employment and then to terminate it.
The respondents deny that the applicant was dismissed for reasons that included expression of his political opinion. They plead that the applicant was dismissed for the reasons set out in the termination letter. In particular, they plead that the applicant had been found by all of the directors of the first respondent to have:
a)engaged in wilful and deliberate behaviour that was inconsistent with the continuation of his contract of employment, causing a serious and imminent risk for the reputation, viability and profitability of the first respondent’s school;
b)breached his duties under s.181 of the Corporations Act 2001 (Cth) by failing to exercise his powers and discharge his duties in good faith and in the best interests of the first respondent, and for a proper purpose;
c)breached his duties under s.182 of the Corporations Act by improperly using his position to gain substantial advantage for himself and/or others, causing a detriment to the first respondent;
d)breached his duties under the Australian Education Act 2013 (Cth) and associated regulations by not ensuring the first respondent and the applicant met the “fit and proper person requirement”;
e)caused or failed to prevent irregular and/or fraudulent financial transactions as set out in two reports by GT Advisory provided to the applicant, which financial transactions personally benefited individuals (including the applicant and members of his family) from the first respondent’s funds;
f)caused, or failed to prevent, unauthorised financial transactions from being processed; and
g)failed to ensure that proper financial records, policies, procedures and delegations were implemented, maintained and retained.
They deny that the applicant is entitled to accrued annual leave and long service leave upon the termination of his employment. The first respondent alleges that the applicant took various periods of paid leave by way of long service leave during his employment and received entitlements, or payments, or benefits to the equivalent value, during his employment. The first respondent denies that the applicant was entitled to be paid the rate of pay upon which the applicant says his accrued leave entitlements (if any) should be calculated, because during his employment, the applicant purported to have unilaterally determined and awarded himself significant remuneration increases and caused the first respondent to pay such amounts to himself, without recourse to, or authority from, the Board or any other person with authority to approve such salary increases. The respondents allege that the applicant set his own wages or salary and caused the first respondent to pay that wage or salary, but was not authorised to do so by any term of his contract written or otherwise.
The applicant submits that there are no factual issues to be determined at the hearing of the applicant’s long service leave entitlements “apart from the following:
a)The terms of the contract upon which the applicant was employed;
b)The calculation of LSL pursuant to the terms of the applicant’s employment; and
c)The determination of whether certain cash payments were not in respect of LSL long service leave and whether any long service leave has in fact been paid to the applicant”.
The applicant submits that “These are all discrete issues which will assist the Court and the parties in terms of determination of the balance issues in the main proceedings concerning the balance of unpaid leave claimed by the applicant and the adverse action claim of the applicant dealing with the basis upon which he was terminated under his contract”.
The first respondent submits that the long service leave and compensation claim cannot be determined separately because the resolution of these claims will require a determination by the Court of evidentiary questions that relate to all of the claims before the court. In particular, the respondents identify the following factual issues that will require determination in the substantive proceedings as well as the separate issue if tried separately:
a)whether the substantial periods during which the applicant took paid leave from his duties were taken as long service leave or the equivalent;
b)whether substantial lump sum cash payments recorded in the first respondent’s accounts as being paid to the applicant during his employment, which are closely equivalent to then current long service leave entitlements, and which are not apparently reflective of wages or any other lawful entitlement, represent the payment out of long service leave entitlements during the course of employment;
c)whether and to what extent the paid leave periods and/or the substantial cash payments, if not long service leave or payments on account of long service leave, represent unauthorised or dishonest payments to, and at the direction of, the applicant;
d)whether the applicant and the first respondent were parties to an employment contract which cannot now be found, in which (as the applicant asserts) he was entitled to set his own salary rate without recourse to or authority from the Board; and
e)the legal and practical consequences for the identification of a correct salary for the applicant, in circumstances in which the Court may determine that the salary claimed by the applicant was set by the applicant without any legal authority from his employer.
Consideration – a trial of separate issues
The law developed in relation to Order 29 Rule 2 of the former Federal Court Rules (now r.30.01 of the Federal Court Rules 2011 (Cth)) has been held in by this Court to guide the discretion provided for in rr17.01 – 17.03 of Federal Circuit Court Rules2001 (Cth): White v Westfield Vet Hospitals & ORS [2018] FCCA 3833 applying Devonshire v Magellan Powertronics Pty Ltd & Ors [2013] FMCA 207.
The applicant, having filed the application in a case for a separate hearing of an issue prior to the hearing of the substantive matter, bears the onus of demonstrating that there should be the preliminary hearing contended for: State of Western Australia v Galati [2017] FCA 236 per Gilmore J at [10].
In general, it is preferable that all issues of fact and law in a proceeding be determined at one time. The preliminary determination of separate matters may be appropriate where determination of the issues identified in a separate question will dispose of the action or contribute to the saving of time and cost by substantially narrowing the scope of issues to be decided. But I am not satisfied that will happen here if I make the orders sought by the applicant.
The submissions of each of the parties recognise that the evidence necessary to determine the applicant’s long service leave and his related compensation claim, is directly relevant to and intertwined with the evidence, facts and circumstances of the substantive application.
There is a critical dispute between the parties regarding the terms and conditions of the applicant’s employment by the first respondent. Findings about those matters will necessarily inform determinations about the entitlement and quantum of the applicant’s accrued but unpaid long service leave.
The respondents’ allegations about the financial irregularities in the conduct of the affairs of the first respondent insofar as they concern the payments alleged to have been made to the applicant concern not just that aspect of the case dealing with unpaid entitlements, but also that aspect of the case dealing with the termination of the applicant’s employment. The issues revealed in the pleadings concerning:
a)the taking of substantial periods of paid leave without any apparent reduction in his accrued leave entitlements;
b)making substantial cash payments to himself without any proper explanation for such payments being recorded in the first respondent’s records; and
c)making unilateral decisions as to significant financial matters in relation to which he had an intractable conflict of interest, such as the setting of his own salary, without informing, or seeking the approval of, the Board of Directors.
The applicant submits that evidence will be adduced that the cash payments about which the respondents complain, can be explained by the applicant and the applicant and first respondent’s accountant. That explanation, will be relevant to both the adverse action claims and the claims for underpayment or non-payment of entitlements. It is difficult to see how a determination of that issue in respect of the claim for unpaid long service leave alone will determine or help to determine all of the other issues in the case. The applicant asserts that there is no basis in law for the first respondent to withhold the applicant’s “lawful entitlements under the fair work act” but, that submission ignores the respondents’ case that there is no entitlement because of the payments that have been made to the applicant during the course of his employment. Critically, the Court will be asked to determine what payments have been made to the applicant and whether those payments were authorised and if so, whether they were payments in respect of the applicants accrued leave. If they were, then there is presently no outstanding entitlement.
Moreover, the determination of the questions posed by the applicant in the present application will not result in a final determination of the matters in the substantive proceedings. Even if the applicant succeeds on the separate questions, the rest of the substantive application will remain to be determined by the Court and that will involve further factual enquiry and determination. I accept the respondent’s argument that resolving the long service leave questions will have little impact on narrowing the issues to be determined at the substantive hearing.
In addition, I accept that there will be significant overlap between the evidence adduced at any preliminary hearing of the separate question and at the substantive hearing involving many of the same witnesses. I accept that a determination of the remainder of the proceedings relies upon the same alleged facts and evidence relating to the financial administration of the first respondent and the school and the inappropriate and irregular financial recordkeeping by the applicant or at his direction, as those which relate to the long service leave and compensation claim.
I am not persuaded that a separate trial and determination of the long service leave issue will contribute to the saving of time and cost by any of the parties. It is likely to prolong the matter causing a duplication of costs.
I am not persuaded that it is appropriate to severally try the issues identified by the applicant. That application will be dismissed.
Consideration – stay
There are present the two other proceedings that are relevant to the litigation before me. The first is a civil action in the Supreme Court of Queensland on which the first respondent claims damages from the applicant arising from allegations of misappropriation by the applicant.
The second criminal charges which are pending against the applicant in respect of those same allegations. The applicant and members of his family were arrested and charged with various offences on about 19 September, 2019.
The applicant argues that the determination of the issues in the Supreme Court proceedings may well result in disposition of these proceedings and have a direct bearing on the outcome of these proceedings because if those proceedings are dismissed than the proceedings before this Court will likely be determined. However, if the Supreme Court proceedings are successful and the applicant’s adverse action claim before this Court, at least in respect of the adverse action claims themselves, will be resolved. The applicant also submits that leaving aside the civil proceedings in the Supreme Court, it is appropriate in circumstances where there are criminal proceedings on foot which concern the same or similar issues of fact concerning some proceedings that the court consider granting a stay of those proceedings.
The respondents submit that the application for a stay of the present proceedings should be dismissed because:
a)the originating application was lodged with the Fair Work Commission on 3 July, 2018;
b)the respondents have incurred significant costs defending the application and agreed to numerous requests for extensions of time made by the applicant at various stages of the proceedings;
c)further delay in the matter will cause additional stress and disruption for the witnesses, and all of the respondents, many of whom are no longer employees, directors, or associated with the first respondent;
d)the respondents will be prejudiced as further delay will impact the ability of witnesses to recall important information and details the longer the proceedings are delayed;
e)the first respondent relies on Government funding to operate, and is suffering significant prejudice as a result of this application remaining unresolved. In accordance with the generally accepted accounting principles, the applicant’s claim in the amount of $1,312,124.23 has been reflected in the balance sheet of the first respondent as a contingent liability, and this liability will remain a significant detriment to the first respondent for a variety of obvious reasons until such time as the application is determined. The first respondent is also required to report quarterly to the Non-State Schools Accreditation Board specifically on the progress of these proceedings, thus incurring the ongoing necessary time, cost and effort to do so; and
f)the dismissal of the applicant from his employment and the subsequent proceedings have attracted significant media attention and caused concern and stress for members of the first respondent’s teaching staff, students, parents and the broader college community, to which the hearing of the proceedings will bring finality.
Both parties referred me to McMahon v Gould (1982) 7 ACLR 202 as providing relevant guidance in the exercise of the discretion to grant a stay in the present circumstances. The matters relevant to the exercise of the Court’s discretion on an application to stay civil proceedings pending the outcome of criminal proceedings are generally accepted as follows:
(a) prima facie a plaintiff is entitled to have his action tried in the ordinary course of the procedure and business of the court;
(b) it is a grave matter to interfere with this entitlement by a stay of proceedings, which requires justification on proper grounds;
(c) the burden is on the defendant in a civil action to show that it is just and convenient that the plaintiff’s ordinary rights should be interfered with;
(d) neither an accused nor the Crown are entitled as of right to have a civil proceeding stayed because of a pending or possible criminal proceeding;
(e) the court’s task is one of ‘the balancing of justice between the parties’, taking account of all relevant factors;
(f) each case must be judged on its own merits, and it would be wrong and undesirable to attempt to define in the abstract what are the relevant factors;
(g) one factor to take into account where there are pending or possible criminal proceedings is what is sometimes referred to as the accused’s ‘right of silence’, and the reasons why that right, under the law as it stands, is a right of a defendant in a criminal proceeding. I return to this subject below;
(h) however, the so-called ‘right of silence’ does not extend to give such a defendant as a matter of right the same protection in contemporaneous civil proceedings. The plaintiff in a civil action is not debarred from pursing action in accordance with the normal rules merely because to do so would, or might, result in the defendant, if he wished to defend the action, having to disclose, in resisting an application for summary judgment, in the pleading of his defence, or by way of discovery or otherwise, what his defence is likely to be in the criminal proceeding;
(i) the court should consider whether there is a real and not merely notional danger of injustice in the criminal proceedings;
(j) in this regard factors which may be relevant include:
(i) the possibility of publicity that might reach and influence jurors in the civil proceedings;
(ii) the proximity of the criminal hearing;
(iii) the possibility of miscarriage of justice eg by disclosure of a defence enabling the fabrication of evidence by prosecution witnesses, or interference with defence witnesses;
(iv) the burden on the defendant of preparing for both sets of proceedings concurrently;
(v) whether the defendant has already disclosed his defence to the allegations;
(vi) the conduct of the defendant, including his own prior invocation of civil process when it suited him;
(k) the effect on the plaintiff must also be considered and weighed against the effect on the defendant. In this connection I suggest below that it may be relevant to consider the nature of the defendant’s obligation to the plaintiff;
(l) in an appropriate case the proceedings may be allowed to proceed to a certain stage, eg, setting down for trial, and then stayed.
As the respondents point out, McMahon was decided in a context where the applicant for the stay was the defendant in civil proceedings. A stay was sought so as to avoid the necessity of defending those civil proceedings by reason of a pending prosecution. Here, the situation is different because the applicant for the stay is the applicant in the civil proceedings before me.
I accept the respondents’ submissions that this matter is more correctly characterised as one in which an applicant, who has a duty and onus to conduct proceedings which they have commenced promptly and expeditiously, no longer finds it in their interests to do so by reason of parallel criminal prosecutions in which they are the defendant.
The respondents also directed my attention to the decision in Australian Securities Commission v Kavanagh (1993) 12 ACSR 69 where Hayne J stated (footnotes omitted):
In my view it is therefore clear that unless reason is shown to the contrary, a plaintiff is entitled to have its action tried in the ordinary course of the procedure and business of the court and that it is a grave matter to interfere with that entitlement by a stay of proceedings, the grant of which would require justification on proper grounds. In the end the task is one of the balancing of justice between the parties taking account of all relevant factors judging the case on its own merits. Similarly, a respondent is entitled to have its day in court and to defend a claim and it is a “grave matter” to interfere with the respondent’s rights in that regard. In Gallaher v Collins & Ors Hargrave J said that the applicant for a stay must show a real, and not merely notional, risk of prejudice to him in the criminal proceedings.
There is no evidence before me as to the timeframe in which the criminal proceeding against the applicant or the civil proceedings in the Supreme Court will be heard and determined. The first respondent here is the applicant in the Supreme Court proceedings. There is no suggestion in the material before me that those proceedings have been stayed because the applicant before me is the defendant to some criminal proceedings arising out of the same factual matrix common to all three proceedings.
I accept that the respondents are entitled to have the proceedings in this court resolved as expeditiously as the business of this Court will allow.
The applicant submits that if the present proceedings continue, there is a risk that the applicant may be required to answer questions or produce documents which may expose the applicant to self-incrimination in relation to the ongoing criminal proceedings against him. However, as the respondents point out, at no time after the applicant’s arrest, but before the present application was filed on 6 February, 2020 including at the mediation and the two directions hearing in late 2019 did the applicant raise his concerns about self-incrimination despite having already been arrested and charged.
The applicant, as well as his wife and daughter each swore and filed additional documents on 24 December, 2019 in relation to the substantive proceedings without any reference to a stay, or the risk of self-incrimination. The applicant has in fact complied with the Court’s directions to file all of the evidence in chief upon which he intends to rely at the trial of these proceedings. In that sense, it might be said that he has already given his evidence in chief.
The respondents drew my attention to Cameron’s Unit Services Pty Limited v Whelpton & Associates Pty Limited (1984) 59 ALR 754 where Wilcox J considered a case in which the director of a company had been charged with fraud arising out of the same events that were the subject of the civil proceedings. His Honour said, at 760:
The ‘right of silence’ is a right which a person has in relation to present or anticipated criminal proceedings. As a matter of everyday experience, suspects or accused persons waive the right by giving an explanation of their conduct during the course of interrogation by police or other investigating authorities or in evidence at their trial. No doubt the right is often waived incautiously or through ignorance, but is also deliberately waived by informed persons who take the view that waiver will best serve their interests overall. The conflicts of interest which give rise to waiver already exist; the law does not step in to prevent those conflicts or to deny the ability to waive the right. The existence of a civil action which an accused person may wish to defend provides simply another example of a conflict of interest between maintaining silence and disclosing the substance of the defence in the criminal proceedings. I see no basis for the view that the court should intervene to relieve against this particular conflict, when it does not relieve against others. The fact that the existence of the civil action may result in a decision by the accused person to waive his right of silence is not, in itself, a sufficient reason to stay that action. The real question must be the likelihood of causing injustice in the criminal proceedings...
I am not satisfied that the applicant holds genuine concerns regarding the risk of self-incrimination. The applicant has chosen to meet the courts directions for the filing of evidence without any suggestion that doing so would impinge upon any right that he might have to remain silent in respect of the issues before the court. In fact, in my view he has actively waive that right by engaging in these proceedings to the extent that he has.
The application is, I accept, at a stage where it is ready to be set down for hearing and no further production of documents will be required creating any new risk of self-incrimination for the applicant or his witnesses.
Finally, and most tellingly, the applicant is prepared to participate in the hearing of the separate issues concerning his long service leave claim. Given the commonality of issues between that claim and the balance of his proceedings by reason of the respondents defence to those claims it cannot rationally be said that the applicant is concerned about any risk of self-incrimination or any impingement upon his right to silence.
The application for a stay of the present proceedings too, must be dismissed.
I will hear the parties further as to costs.
I certify that the preceding fifty (50) paragraphs are a true copy of the reasons for judgment of Judge Jarrett delivered on 9 December, 2020
Associate:
Date: 9 December 2020
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