Workplace Ombudsman v AM Retail Solutions & Anor

[2009] FMCA 1046

FEDERAL MAGISTRATES COURT OF AUSTRALIA

WORKPLACE OMBUDSMAN v AM RETAIL SOLUTIONS & ANOR [2009] FMCA 1046

INDUSTRIAL LAW – Contravention of employee entitlements provisions – case management of application for penalties – delays arising from referral for mediation and non-compliance with time-table – whether binding agreement for agreed statement of facts was reached at mediation – respondent’s application for specific performance not pursued – interlocutory application dismissed – failure adequately to instruct legal representatives – costs resulting from unreasonable act or omission – award to applicant of costs of preparing for hearing.

Corporations Act 2001 (Cth), s.471B
Federal Magistrates Act (Cth), s.34
Workplace Relations Act 1996 (Cth), ss.719, 728, 824

Armstrong v Healthcare Recruiting [2008] FMCA 357
Australian and New Zealand Banking Group Ltd v Ciavarella [2002] NSWSC 1186
Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1
Dennington v Pee Cee Pty Ltd (No.2) [2008] FMCA 336
Donaldson Coal Pty Ltd v Pacific National (NSW) Ltd [2007] NSWSC 1446
Johnston v ANZ Banking Group Ltd & Ors [2004] NSWSC 363
Masters v Cameron (1954) 91 CLR 353

Applicant: WORKPLACE OMBUDSMAN

First Respondent: AM RETAIL SOLUTIONS
ACN 103 251 038

Second Respondent: ADIL MAGAR

File Number: SYG 3333 of 2008

Judgment of: Smith FM

Hearing date: 20 October 2009

Delivered at: Sydney

Delivered on: 20 October 2009

REPRESENTATION

Counsel for the Applicant: Mr P Newall

Solicitors for the Applicant: Fisher Cartwright Berriman

Counsel for the Respondents: Mr V Dragomirovic

Solicitors for the Respondents: Law Partners

ORDERS

1. The second respondent’s application in a case filed on 28 August 2009 is dismissed.

2. Pursuant to s.824(2) of the Workplace Relations Act 1996, the second respondent must pay the applicant’s costs incurred in relation to its preparation for and attendance at today’s hearing of that application, as agreed or taxed in accordance with Federal Court Rules O.62.   Pursuant to r.21.02(2)(c), refer those costs for taxation under O.62.

3. The proceedings in relation to the first respondent are adjourned for further directions on 16 March 2010 at 10.15.

4. The second respondent must file and serve a defence to the statement of claim no later than 17 November 2009.

5. The applicant’s affidavits must be filed no later than 14 January 2010.

6. The second respondent’s affidavits must be filed no later than 11 February 2010.

7. Any affidavits in reply must be filed no later than 4 March 2010.

8. If the second respondent fails to comply with orders 4 and 6, then he shall not be permitted to lead any evidence in chief in the proceedings, and the hearing will proceed on an undefended basis in relation to all issues of contravention.

9. If any party is in default in relation to the above time-table for more than 4 working days, the other party must immediately request the Associate to appoint a directions-hearing.  Alternatively, the parties may forward to the Associate consent orders signed by all parties, which varies the timetable except in relation to listings.

10. Any party may request that the proceeding be listed for further directions or for the hearing of an interlocutory application on a date allowing 5 working days notice to the other parties.  The appointment shall be obtained from the Associate on 9377 5528.

11. The proceeding is listed for pre-hearing directions on 8 March 2010 at 9.30am. The parties must forward by email to the Associate on the preceding day short minutes of any proposed directions preparatory for a final hearing.

12. The proceedings in relation to the second respondent is listed for hearing on all issues on 16 March 2010 at 10.15am, 3 days allowed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG 3333 of 2008

WORKPLACE OMBUDSMAN

Applicant

And

AM RETAIL SOLUTIONS ACN 103 251 038

First Respondent

ADIL MAGAR

Second Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

1. This is a judgment explaining the interlocutory orders I have made today in an effort to ensure that the claims against the second respondent will be brought to trial in March next year, with or without his cooperation. The claims against the first respondent will remain stayed pursuant to s.471B of the Corporations Act 2001 (Cth).

2. The principal application was filed on 16 December 2008, seeking the imposition of pecuniary penalties and compensatory orders under s.719 of the Workplace Relations Act 1996 (Cth). The application was accompanied by a statement of claim with schedules. This alleges, with detailed particulars, that twenty three employees of the first respondent at a Holbrook petrol station were substantially underpaid their entitlements in relation to a wide variety of matters, including minimum basic rates of pay, accrued annual leave, personal or carers leave, pay in lieu of notice of termination, casual loadings including overtime loadings, weekend loadings, holiday loadings, shift work loadings, overtime penalty rates, and long service leave entitlements. The statement of claim also makes allegations of failure to keep required employment records, to make records available to a workplace inspector, and to issue written pay slips. The schedules to the statement of claim particularise the employees and their underpayments, and the statement of claim concludes:

   The accumulative value of the underpayments by the First Respondent to the Employees (including annual leave of $56,892.84, long service leave of $5239.44, pay in lieu of notice of $2,910.80 and underpayments to employees of the First Respondent who worked at the Holbrook Petrol Station) is $514,530.64.

3. The statement of claim alleges that the second respondent was the sole director, shareholder and company secretary of the first respondent, and was responsible for the carriage and control of the business of the first respondent. The application seeks the imposition of penalties upon him for the contraventions of the first respondent as a ‘person who is involved’ in those contraventions, pursuant to s.728 of the Workplace Relations Act. It seeks recovery of the outstanding wages and entitlements from either or both of the respondents pursuant to s.719(6), and other relief under the Act.

4. Unfortunately, despite my efforts at case management over the ensuing ten months, the principal application has not progressed beyond the documents originally filed by the applicant.  The reasons for this will emerge from the following chronology. 

5. At the first court date on 30 January 2009, the two respondents were represented by a solicitor, who subsequently filed an address for service.  I made a timetable for the full preparation of the case, including a referral for mediation or conciliation under the powers of this Court, with a further directions hearing in August 2009, anticipating that a hearing would then be appointed.

6. Mediation was ordered with the consent of both parties.  Its purpose was to allow the parties, in a structured environment, an opportunity to discuss whether the complexities of the allegations brought to the court could be simplified, if not resolved, by the preparation of agreed statements of facts or other admissions or procedural agreements, which might ease the task of the Court and reduce the substantial expenses which both parties were facing if the matter were fully litigated. 

7. However, that timetable was not followed.  The respondents’ solicitor withdrew on 27 February 2009, no defence was filed on the part of either of the respondents, no affidavits were filed by either party, and at the request of the applicant the matter was listed for directions on 24 April 2009. 

8. On that occasion, the second respondent’s brother, Mr Mark Magar, sought leave to appear for the two respondents.  He disclaimed knowledge of what was happening in relation to the preparation of the respondents’ defences.  I made directions amending the timetable requiring the filing of defences and affidavits, and required the mediation to be completed by 14 August 2009.  I appointed a final hearing in the matter for today.  A copy of my orders was given to Mr Magar at the directions hearing, and I assume that it was subsequently also brought to the attention of the respondents formally by the applicant.  A mediation was appointed before the District Registrar on 9 July 2009. 

9. The respondents failed to file their defences before 8 May 2009, and remain in default.  The time table for affidavits also stalled.  However, two days before the mediation, on 7 July 2009, the second respondent filed a notice of appearance by the firm of solicitors who are at present still on the record.  The second respondent attended the mediation personally, accompanied by a solicitor and counsel.

10. The Registrar’s attention was drawn, at that time, to the fact that the first respondent had entered a creditor’s voluntary winding up, with a liquidator appointed on 23 June 2009. The proceedings against that respondent were, therefore, automatically stayed by s.471B of the Corporations Act 2001 (Cth). However, the allegations against the second respondent could proceed.

11. The mediation proceeded with the participation of legal representatives from both sides. I have no records before me showing what happened in the course of the discussions. That is appropriate, since s.34(4) of the Federal Magistrates Act, provides:

    Evidence of anything said, or of any admission made, at a conference conducted by a mediator in the course of mediating anything referred under subsection (1) is not admissible:

    (a)in any court…

12. The bar is not expressly subject to the exclusions, for example, found in section 131(2) of the Evidence Act.  However, on a reasonable construction, it is difficult to see that it would exclude evidence of a concluded agreement entered into at the end of a mediation, based on reasoning which has been applied in relation to similar provisions (compare Johnston v ANZ Banking Group Ltd & Ors [2004] NSWSC 363 at [14]-[15], and Australian and New Zealand Banking Group Ltd v Ciavarella [2002] NSWSC 1186 at [20]). The listing report for the mediation, found on the court file, notes only “Refer to terms of settlement in heads of agreement”, without attaching or identifying those terms. 

13. The proceedings were then listed before me for directions on 17 July 2009, at the request of the applicant.  The solicitor for the applicant ‘mentioned’ the matter for the solicitor for the second respondent, and the directions hearing was adjourned by consent to 28 July 2009.  I was, on my recollection, informed only that there had been progress at the mediation, and that it was anticipated that an agreed position in relation to the future of the proceedings would be presented to the court. 

14. At the adjourned directions hearing on 28 July 2009, the second respondent appeared by counsel and a solicitor, being the two legal practitioners who had attended the mediation.  The transcript of what transpired on that occasion is in evidence.  From what I was told, it appeared to me most unclear whether in fact any agreement had been arrived at with meaningful content, in particular as to the preparation of an agreed statement of facts containing admissions by the second respondent as to the contraventions, penalties and compensation for which he might be liable.  I was not shown on that occasion the terms of the “terms of settlements in heads of agreement”, but was invited, and did, stand the matter down throughout the morning to allow further discussions to occur between legal advisers as to the future of the proceeding.  I was told that the parties had agreed that the appointed hearing should be vacated, and were proposing an adjournment of the proceedings for a penalty hearing in April 2010, in the expectation that before that time an agreed statement of facts would be entered into, and other documents signed and payments made in relation to the unpaid entitlements of the employees.  The terms under which the latter events might occur were not shown to me. 

15. As the transcript shows, I was unhappy with such a lengthy adjournment without evidence that, indeed, a firm agreement had been reached in which the second respondent made admissions allowing the matter to proceed by way only of a brief penalty hearing.  I therefore declined to make the adjournment and vacating orders requested, but directed the matter to be further listed for directions on 28 August 2009.  I gave a direction that “the parties must file and serve an agreed statement of facts no later than 4pm on 25 August 2009”.  I fixed that date, taking into account the position which I was given by both practitioners appearing before me as to their agreement at the mediation, as modified in the course of discussions on that day.  Counsel for the second respondent told me:

    As I understand the position, your Honour, the parties have agreed to enter into an agreed statement of facts and issues.  The applicant will particularise the breaches as against the second respondent, and the second respondent will make admissions in respect of those breaches.  We propose to do all that by 21 August. 

16. On 28 August 2009, the second respondent appeared by way of his previous counsel, who pressed for the vacating of today’s hearing, and invited the Court to list on that day an interlocutory application in a case which he filed in court on that day.  This sought the following orders:

    1A declaration that there is on foot a binding and enforceable settlement agreement between the applicant and the second respondent in terms of the document entitled “Terms of Settlement in Principle” dated 9 July 2009 and signed by the parties which is annexed hereto and marked letter “A”..

    2.An order that the said agreement be specifically performed.

    3.An order that the applicant pay the second respondent’s costs of and incidental to this application.

17. The affidavit in support attached a document headed “Terms of Agreement in Principle” signed by legal representatives of the parties, a representative of the applicant, and the second respondent personally.  I shall not set out the content of this document but, in short, it provided that “the parties agree to enter into an agreed statement of facts and admissions by 1 August 2009”, a proposal for the second respondent to make payments into a trust account with the first payment to be made on 1 October 2009, an agreement that the matter would proceed to a penalty hearing in April 2010, and an agreement that the parties would enter into a “deed of release drafted by the applicant or their legal representative”.

18. There is also evidence of subsequent correspondence which occurred between the legal representatives in relation to this “Agreement in Principle”, the further discussions concerning its terms that occurred during the adjournment of my directions hearing on 28 July 2009, and the subsequent correspondence.  In short, that evidence reveals that a draft agreed statement of facts was prepared by the applicant’s solicitors, which essentially repeated the allegations of contravention contained in the statement of claim.  This was sent to the second respondent’s solicitors, but attempts to arrange a meeting at which it could be discussed and settled came to nothing.  No admissions by the second respondent were ever made as invited or envisaged.  Similarly, although a draft deed of release was eventually presented to the second respondent’s solicitors, the settlement of that document never achieved any progress.  There is no evidence that any of the envisaged payments by the second respondent were made into a trust account, as foreshadowed in the agreement in principle.

19. Whether the ‘agreement in principle’ made at the end of the mediation was, in fact, a binding contract, or became a binding contract as a result of the further negotiations occurring on 28 July 2009, is a matter upon which I have received written submissions from counsel for the applicant prior to today’s hearing, but upon which I have received no written submissions from the second respondent, nor oral submissions from either party.  As I shall recount, I can dismiss the interlocutory application without it becoming necessary for me to reach conclusions upon these issues.  However, it appears to me that the parties’ dealings, as they are now in evidence, suggest that there are significant difficulties establishing a binding contract, in the face of the principle that courts will not recognise a contract to enter into a contract, and also under principles concerning intention to contract, uncertainty of agreement, and illusory terms (see Masters v Cameron (1954) 91 CLR 353 at 362, Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 at 4, 17, 22, 27, 40, and 43, and Donaldson Coal Pty Ltd v Pacific National (NSW) Ltd [2007] NSWSC 1446 at [89]-[91]). There also appear to be significant difficulties facing the enforcement of any agreement which was reached, due to the events which subsequently occurred, and the implicitly conditional nature of the agreement upon the court’s procedural discretions.

20. The reason why I have not found it necessary to arrive at firm conclusions about the effect and enforceability of the parties ‘agreement in principle’, arises from events at the commencement of today’s hearing of the interlocutory application. The solicitor appearing for the second respondent, who was not a person who had appeared before me previously for the second respondent, indicated to the court that the solicitors on the record had been unable to obtain instructions from the second respondent allowing them to present any evidence in support of the interim application.  He therefore felt unable to present any submissions in support of the interlocutory application, and accepted that it must inevitably be dismissed. 

21. Upon this announcement, the applicant’s counsel abandoned any prospect of persuading the Court to find something enforceable in the parties’ post-mediation exchanges, and also accepted that the court should dismiss the interim application and make orders bringing the matter on for a contested hearing. Although he pointed to the continuing desirability that the second respondent should make admissions in relation to the complex factual allegations concerning the numerous employees, he accepted that the Court should not allow further opportunities for this to happen within the new timetable bringing the matter to a hearing.  It would remain open to the parties within that time-table, to arrive at an agreed statement of facts, but this should not be allowed to delay their compliance with the time-table now directed nor support any further vacating of a hearing date.

22. That submission was, in my opinion, very sensible, and in view of the history of the matter which I have sketched above I propose to make very firm directions bringing the matter on for hearing, including a guillotine in relation to the time table for the second respondent to file a defence and his evidence.  If he does not comply with that time-table, the effect of my order is that the penalty hearing will proceed without him being permitted to lead evidence by way of defence to the allegations made in the statement of claim.  I make that order because the history of the matter which I have sketched above shows, if not deliberate stalling on the part of the second respondent, a failure by him to give necessary instructions to the legal representatives whom he has employed from time to time, which has occurred for too long.

23. Counsel for the applicant sought an order for the immediate costs thrown away by today’s listing of the interlocutory application, but not his cost arising from the vacating of the hearing in the principal application, nor his costs in filing material which responded to the interlocutory application. It was accepted that these costs could not be characterised as resulting from conduct of the second respondent which was so unreasonable as to support, a costs application within the exceptions allowed under s.824 of the Workplace Relations Act. However, it was submitted that the failure by the second respondent to give instructions to his solicitors which would have allowed them, at least, to inform the court and the applicant of their client’s inability or unwillingness to prosecute the hearing of the application today should be characterised as “an unreasonable act or omission” which has “caused another party to the proceedings to incur costs in connection with the proceeding” within s.824(2), those costs being the applicant’s legal costs immediately involved in the preparation for, and attendance at, today’s aborted hearing.

1. In relation to the court’s power to award costs under s.824(2) I was referred to the judgment of O’Sullivan FM in Dennington v Pee Cee Pty Ltd (No.2) [2008] FMCA 336, where his Honour referred to previous authority at [23]. I was also referred to my own judgment in Armstrong v Healthcare Recruiting [2008] FMCA 357, where I awarded costs against a respondent in a similar proceeding, due to her unreasonable actions leading to the vacating of a fully prepared hearing.

2. In the present case, it appears to me that the conduct of the second respondent at the hearing today does disclose “an unreasonable act or omission”, in his failure properly to instruct his solicitor in relation to the conduct of today’s hearing, giving rise to their inability to press the application brought on his instructions, and wasted costs of preparation and professional attendances incurred by the applicant.  I note that the hearing of the interlocutory application was specially listed today at the second respondent’s request, and that no adjournment application has been made nor explanation given as to his failure to provide instructions to his solicitors. 

3. The applicant was, I accept, given no notice of this situation prior to attendance at court.  I also note that the applicant had foreshadowed in correspondence, including as recently as 16 September 2009, that costs would be sought at today’s listing.  I therefore propose to make an award of costs in the course of giving further directions today for the listing of the matter.

I certify that the preceding twenty-six (26) paragraphs are a true copy of the reasons for judgment of Smith FM

Associate:  Michael Abood

Date:  29 October 2009