Toole v Flexihire Pty Ltd

[1992] QCA 148

IN THE COURT OF APPEAL	[1992] QCA 148
SUPREME COURT OF QUEENSLAND	No. 115 of 1991
BETWEEN:

ROGER CLEVELAND TOOLE

(Plaintiff) Respondent

AND:

FLEXIHIRE PTY LTD

(Defendant) Appellant

REASONS FOR JUDGMENT OF THE COURT

Delivered the 17th day of June 1992

The appellant is the unsuccessful defendant in an action for moneys due under a contract of service between it as employer and the respondent as its employee manager. The appellant seeks to argue as its only substantive grounds of appeal:

1.   that the trial judge erred in law and in fact in failing to find that that contract was procured by the respondent in circumstances which made it inequitable and unconscionable on the part of the respondent to seek to enforce it; and

2.   that the trial judge erred in law and in fact in failing to find that, as a result of the actions of the respondent in preferring his own interests over those of the appellant in procuring the execution of that contract, the contract was not enforceable against the appellant.

There are some consequential grounds which follow only if the appellant succeeds on these grounds. Unless it succeeds on those grounds, its counsel conceded before us that it was not entitled to succeed at all on appeal. He also conceded that these grounds were not pleaded in the action and were not argued in the action. The action, and consequently the judgment from which the appeal is brought, concern alleged invalidity, on other grounds, of resolutions passed at meetings of the board of directors of the appellant on 15 and 19 November 1990.

The appellant also sought before us for the first time to amend its defence to raise the grounds referred to above. Its counsel acknowledged the difficulty which faced the appellant in seeking to so amend and argue the grounds which it sought to argue. He accepted as correct, as he was bound to, the following statement of principle from Coulton v. Holcombe (1986) 162 C.L.R. 1 at 7:

"It is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial. If it were not so the main arena for the settlement of disputes would move from the court of first instance to the appellate court, tending to reduce the proceedings in the former court to little more than a preliminary skirmish. The powers of an appellate court with respect to amendment are ordinarily to be exercised within the general framework of the issues so determined and not otherwise. In a case where, had the issue been raised in the court below, evidence could have been given which by any possibility could have prevented the point from succeeding, this court has firmly maintained the principle that the point cannot be taken afterwards: see Suttor v. Gundowda Pty. Ltd.; Bloemen v. The Commonwealth."

The appellant therefore undertook the onerous task of showing that, had the point raised in the grounds referred to above been raised in the court below, evidence could not have been given which by any possibility could have prevented that point from succeeding.

The question litigated and decided below may be shortly stated. That question was whether the appellant was bound by a resolution of the board of directors of 15 November 1990 and, perhaps, by a resolution of that board of 19 November 1990, to employ the respondent according to the terms of those resolutions. His Honour gave an affirmative answer to that question.

The resolution of 15 November was, as his Honour held, one by which the directors resolved to employ the respondent upon the terms of a three page document which was before them. The only basis upon which the appellant pleaded at the trial that it was not bound by that resolution was that the resolution was invalid by reason of the fact that no or no proper notice of intention to propose and pass that resolution was given to all of the directors of the appellant at any or any reasonable time prior to the meeting on that day. His Honour rejected that argument and there is no appeal from that.

The resolution of 19 November authorised the affixing of the common seal of the appellant to a written agreement in terms of the resolution of 15 November. The only argument pleaded or submitted at the trial against its validity was that no valid notice of the meeting was given. His Honour rejected that argument and there is no appeal from that.

The directors at all material times were the respondent, a Mr Kele, a shareholder, and a Mr Wilson, who appears to have had control of a company which, at least indirectly, was the majority shareholder of the appellant. At the meeting of 15 November all three were present. The motion was passed with both the respondent and Kele voting in favour and Wilson abstaining. On 19 November only the respondent and Kele were present although Wilson was given notice of the meeting. Both voted in favour of the motion. The result is that at each of these meetings there was a quorum and a resolution passed on the votes, even if the respondent's vote is disregarded.

The question now sought to be argued is what was the substantial object the accomplishment of which formed the real ground of the board's decision; see Mills v. Mills (1938) 60 C.L.R. 150 at 186 per Dixon J. In particular in this case, was it self-interest of the respondent or the interest of the appellant? The appellant must therefore establish that if this question had been pleaded and presented at the trial the respondent could not have adduced evidence which could possibly have proved that the substantial object was the benefit of the company rather than the benefit of the respondent.

The main reasons advanced for the contention that it had established this were the terms of the employment agreement, the circumstances in which it was executed and the evidence given by the respondent and Kele as to reasons why it was made.

The terms of the agreement which the appellant said provided most support for its argument were cl. 13(5) which required the appellant, if it desired to determine the agreement prior to the expiration of the term of five years, to pay the respondent by way of liquidated damages an amount equal to three-quarters of the salary which he would have earned had the agreement continued for that term, and sub-cl. (2) of the same clause which allowed the respondent to terminate the agreement upon giving one months' notice. The appellant also pointed to the starting salary of $57,200 which was a substantial increase over the respondent's then salary of $45,032.

The circumstances relied on were discussions which had taken place, at least among the directors, about the sale by the substantial shareholder of shares in the appellant to a third party in the context of which, it was said, the resolutions were passed. Coates Hire was mentioned, though apparently there had been no approach made to Coates.

Before we go to the evidence given by the respondent and Kele as to reasons for causing the appellant to enter into the agreement with the respondent, we should mention how that evidence came to be called. Paragraph 8 of the appellant's defence, until it was withdrawn during the course of the trial, alleged that on 29 January 1991 the appellant summarily dismissed the respondent from his employment on the ground that the respondent had been guilty of misconduct in relation to his employment that amounted to a fundamental breach of contract between the parties and that as a consequence the appellant had lost confidence in the respondent and his ability to perform his assigned duties. One of the particulars of that allegation was the procuring of the passing of the resolution of 19 November 1990 in circumstances where he preferred his own interest over those of the appellant of which he was a director.

That allegation was withdrawn during the course of the evidence of the respondent's first witness and before his re-examination. Some of the evidence touching on this question was called before that allegation was withdrawn and presumably with respect to it. It is difficult to see how any such evidence could have been relevant to any other issue in the action and consequently how any such evidence could have been adduced after that allegation was withdrawn.

It was apparently admitted on the bases that it reflected on the relationship between Wilson and the respondent, and consequently upon the reasonableness of notices, and also that it went to the question of credit.

The respondent, when asked in evidence in chief why he thought of getting in place an employment contract, mentioned friction between himself and Wilson, the possible sale of the appellant, that he wanted to be sure that he was going to be able to do the right thing for the appellant and conflict concerning the competing claims of the appellant and a company owned and controlled by Wilson in respect of the assets of a third company, Keppel Corporation. He expanded on his concern about this conflict by saying that Wilson was claiming that all of the remaining assets of Keppel Corporation were his and that he, the respondent, doubted that claim and believed that in fact quite a number of those assets would realise funds for Keppel Corporation creditors which, of course, included the appellant. He said that he had never been able to find out a lot of things about what was going on with the receiver of Keppel Corporation and that he was party to an application for a liquidator to have these matters investigated. There must at least be the possibility that this was or reflected his main concern that unless the appellant was obliged to employ him as manager, Wilson would ensure his dismissal thereby preventing a proper investigation of matters in which Wilson had an interest which conflicted with that of the appellant.

In cross-examination he expressed his concern in these

terms:

"I was worried that Mr Wilson was going to try and get rid of me because I was standing up to what I am claiming against Keppel and I disagreed with him."

We should add that when he spoke of his claim against Keppel he was speaking of the appellant's claim. Mr Wilson was cross-examined on this issue after paragraph 8 of the defence was withdrawn.

Mr Kele, the other director, who gave evidence after the withdrawal of paragraph 8, was also asked how having a contract with the respondent was of benefit to the appellant. He said that the respondent was a vital part of the appellant; he was a hands-on operator; he had full knowledge of the industry in Central Queensland; he was personally involved with the major accounts of the appellant and was a real asset to the appellant.

It was argued correctly by the appellant that the employment agreement did not secure the respondent's services to the appellant because it was capable of termination by the respondent upon one months' notice. However, there was evidence from the respondent which indicated such a close emotional bond between him and the appellant as to make it most unlikely that he would willingly leave. Mr Kele's concern therefore may have been, as the respondent's apparently was, that unless the appellant was contractually committed to retain the respondent Mr Wilson might use his majority control to dismiss the respondent for a wrong reason, thereby causing loss to the appellant.

Such evidence as there was on this question establishes that, if the question had been raised by the pleadings, the appellant would have had an arguable case. But it does not establish that, if that had occurred, the respondent could not have adduced further evidence which would possibly have proved that the substantial objects were the protection of the appellant against a conflicting interest of Mr Wilson and making it more difficult for the appellant, when the board came to be controlled by Wilson, to dismiss the respondent for a wrong reason thereby depriving the appellant of the benefit of his perceived ability, experience and independence to assert the appellant's best interests.

Consequently, the application to amend the defence should be refused and the appeal dismissed with costs.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND	No. 115 of 1991
Before the Court of Appeal
Mr Justice McPherson Mr Justice Davies Mr Justice Derrington
BETWEEN:

ROGER CLEVELAND TOOLE

(Plaintiff) Respondent

AND:

FLEXIHIRE PTY LTD

(Defendant) Appellant

REASONS FOR JUDGMENT OF THE COURT

Delivered the 17th day of June 1992

MINUTE OF ORDER:	Application to amend defence refused. The appeal dismissed with costs
CATCHWORDS:	APPEAL AND NEW TRIAL - POINTS AND OBJECTIONS NOT TAKEN BELOW - appellant sought to raise new ground in support of action on appeal - whether court ought allow amendment to pleading to allow argument - whether had issue been raised below the defendant could have defeated the point raised by evidence
Counsel:	Keane Q.C., Daubney for the Appellant J. Douglas Q.C., McMeekin for the Respondent
Solicitors:	McCullough Robertson for the Appellant Grant & Simpson for the Respondent
Hearing Date(s):	25 May 1992

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND	No. 115 of 1991
BETWEEN:

ROGER CLEVELAND TOOLE

(Plaintiff) Respondent

AND:

FLEXIHIRE PTY LTD

(Defendant) Appellant

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MCPHERSON JA
DAVIES JA
DERRINGTON J
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Reasons for Judgment of the Court delivered the
17th day of June 1992
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"APPLICATION TO AMEND DEFENCE REFUSED. APPEAL
DISMISSED WITH COSTS"
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