FEDERAL COURT OF AUSTRALIA Citigroup Pty Ltd v Mason [2008] FCAFC 151 APPEALS – order allowing appeal by consent – whether demonstrated error by primary judge condition of power to allow appeal Allesch v Maunz (2000) 203 CLR 172 referred to Telstra Corporation Ltd v Minister for Broadband, Communications and the Digital Economy (2008) 166 FCR 64 considered Hewlett Packard Australia Pty Ltd v GE Capital Finance Pty Ltd (2003) 135 FCR 206 cited Telstra Corp Ltd v Treloar (2000) 102 FCR 595 cited A2 v Australian Crime Commission (2006) 235 ALR 264 cited SZEEU v Minister for Immigration and Multicultural and Indigenous Affairs (2006) 230 ALR 1 cited Sok v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 218 ALR 617 cited Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79 cited Federal Court of Australia Act 1976 (Cth), s 24 CITIGROUP PTY LTD (ACN 004 325 080) v BRAD MASON NSD 2185 of 2007 MOORE, FINN AND DOWSETT JJ 19 AUGUST 2008 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 2185 of 2007 BETWEEN: CITIGROUP PTY LTD (ACN 004 325 080) Appellant AND: BRAD MASON Respondent JUDGES: MOORE, FINN AND DOWSETT JJ DATE: 19 AUGUST 2008 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 12 August 2008 we made orders allowing an appeal and dismissing an application that had been brought in the District Court of New South Wales. The orders were consent orders agreed to by the parties who requested us to make them. These are our reasons for making those orders. 2 In the proceedings in the District Court, orders had been made in late 2007 and early 2008 giving effect to the conclusions of the primary judge in reasons published on 24 September 2007 that the appellant, Citigroup Pty Ltd, was liable to pay the respondent, Mr Brad Mason (who was a former employee of Citigroup) an amount in excess of $50,000 reflecting unpaid annual leave entitlements payable on termination. The primary judge concluded that Citigroup was liable for two reasons. The first was that Mr Mason was entitled to be paid annual leave by reference to the provisions of the Annual Holidays Act 1944 (NSW). This meant that the calculation of his entitlement should be based on significant commissions he had earned in his employment. The primary judge came to this conclusion notwithstanding an argument advanced by Citigroup that the Workplace Relations Amendment (Work Choices) Act 2005 (Cth), which effected significant amendments to the Workplace Relations Act 1996 (Cth), operated to the exclusion of the state Act rendering inapplicable, in effect, its provisions. The learned primary judge concluded that the provisions of the state Act continued to have an indirect legal operation under Part 3 of Schedule 8 of the Commonwealth Act. The second conclusion was that the provisions of the state Act had been incorporated by reference into the contract of employment of Mr Mason. 3 Senior counsel for the appellant accepted the burden of persuading us that the consent orders should be made having regard to the judgment of a Full Court in Telstra Corporation Ltd v Minister for Broadband, Communications and the Digital Economy (2008) 166 FCR 64. To that end, he relied on a statement agreed to by senior counsel for Mr Mason: The Respondent concedes that the appellant's submissions demonstrate arguable appellable error of law in respect of the District Court's judgment and orders, and consents to the orders proposed by the appellants (sic) having the appeal upheld and the District Court proceedings in case number 5509 at 2006 dismissed with no order as to costs. It is necessary for us to say something about what was decided by the Full Court in Telstra in order to explain why this statement was made. Telstra concerned an application for leave to appeal against orders made by a single judge dismissing an application for preliminary discovery. By the time of the hearing of the application for leave to appeal (and argument on the appeal if leave was granted), the parties had reached an agreement. Their agreement was that consent orders should be made granting leave to appeal, allowing the appeal and ordering preliminary discovery. 4 In their reasons for judgment, the Full Court addressed the power of the Full Court to make consent orders in the Court's appellate jurisdiction. After reviewing the statutory framework and several authorities including, as centrally relevant, the judgment of the High Court in Allesch v Maunz (2000) 203 CLR 172, the Full Court expressed the following general conclusion ( at [51]): In our opinion none of the preceding authorities relieves this Court of the duty to be satisfied, as a condition of the exercise of its power to allow an appeal by consent, that there was an appellable error. 5 The Full Court then proceeded to consider whether there was appellable error in the approach that had been adopted by the primary judge. Their Honours said (at [52] – [54]): Whether appellable error was identified in the present case [52] The parties were asked by the Court to indicate whether there was any agreement as to the existence of an appellable error in the judgment of the learned primary judge. Subsequently the Court was informed that the parties were agreed that an arguable appellable error had been identified in Schedule 1 to the proposed amended notice of appeal. That was in the following terms: 1. The trial judge erred in failing to find an arguable breach of the Guidelines issued by the Commonwealth on 21 September 2006 (Guidelines) with respect to the Broadband Connect Infrastructure Program (Program) arising out of the conduct by the Department of Communications, Information Technology and the Arts (Department) at a briefing session held on 24 November 2006, in telling one potential applicant that the Government may commit further funds in excess of $600 million if it believed additional funding was justified and would bring significant benefits (allegedly being a general statement, not specific to the Program). 2. The trial judge erred in failing to find, based on the second affidavit of Mr Smith sworn 4 September 2007, that it was arguable that if Telstra had been informed prior to lodgement of its bid that the Government may commit funds additional to $600 million, Telstra would have developed a proposal which was additional to and different to the proposals actually lodged by Telstra, and in particular which would have covered more under-served areas and premises. 3. By reason of the error in 2, the trial judge erred in failing to find that it was arguable that there was a real possibility that the internal exclusion of Telstra under the Program on 14 February 2007 might have been different had Telstra been given the opportunity to lodge a different bid from the outset, and that this was sufficient to establish an arguable case for denial of procedural fairness for the purposes of O15A r6(a) of the Federal Court Rules. It must be said that when the parties were asked by the Court to identify the error or errors to justify allowing this appeal, no immediate response was forthcoming. The matter was adjourned briefly to allow counsel to obtain instructions after which an agreed position as to the existence of 'arguable error' was reached and communicated to the Court. [53] His Honour went extensively into the merits of the existence of a possible cause of action which Telstra might bring against the Minister. In so doing it might be said he went further than was necessary in the context of an application for preliminary discovery under O 15A. It was not necessary for him to form any concluded view about the legal merits of the Telstra claim. That might well have to be assessed in the light of a range of facts including the context in which the decision to allocate funding to OPEL was made. There was no evidence before his Honour or before us of any Appropriation Act under which the necessary funding could have been provided. This raises a question about the status of the ministerial decision and the extent to which it could be amenable to judicial review. Related to that is the status of the funding agreement. [54] In our opinion and without descending into the merits of the appeal, there is sufficient basis for the existence of error by his Honour to enliven the power of the Court to allow this appeal. Essentially the error related to the absence of certain findings of fact said to bear upon a determination of the merits of any cause of action by Telstra against the Minister. This is relevant to his Honour's extensive consideration of the legal merits of Telstra's posited cause of action which would, at trial, be considered in a more detailed factual context. The Court acknowledges, in reaching the conclusion that it does, that there was no contradictor before it. 6 The passage at [51] suggests that it is necessary for the Court to determine that there is appellable error as a condition precedent to the exercise of the power to make consent orders disposing of an appeal, at least in circumstances where the appeal was being allowed and there was to be variation or revocation of the orders made by the primary judge. In the later passage, the Full Court recounts how the parties agreed that there had been "arguable error" and then concluded that "there [was] sufficient basis for the existence of error by his Honour to enliven the power of the Court to allow [the] appeal". In context, it is not clear whether this indicates that the Full Court concluded there was error or only that there was, and it was sufficient that there be, arguable error. Indeed it is possible that the Full Court was only satisfied there was "sufficient basis for the existence of error" and that was sufficient, although if this is the approach to be adopted, the precise standard to be applied is not clear to us. 7 We wish to emphasise that senior counsel for the appellant expressly eschewed an argument that the decision in Telstra was plainly wrong and should not be followed. In the absence of that contention being advanced and detailed submissions made by the parties on that question, we are constrained to follow the earlier Full Court's judgment. The need for Full Courts to follow the judgment of an earlier Full Court has been amply discussed in the authorities: see, for example, Telstra Corp Ltd v Treloar (2000) 102 FCR 595; A2 v Australian Crime Commission (2006) 235 ALR 264; SZEEU v Minister for Immigration and Multicultural and Indigenous Affairs (2006) 230 ALR 1; Sok v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 218 ALR 617; and Hewlett Packard Australia Pty Ltd v GE Capital Finance Pty Ltd (2003) 135 FCR 206. Accordingly we have made the orders in this matter only because of the concession made by senior counsel for Mr Mason recorded earlier in these reasons (at [4]). 8 However there may be, in our respectful opinion, a basis for concluding that the judgment of the Full Court in Telstra was plainly wrong and should not be followed. As we noted earlier, the reasoning in Telstra was substantially founded on the judgment of the High Court in Allesch v Maunz. In particular, the Full Court relied on the following passage from the joint judgment of Gaudron, McHugh, Gummow and Hayne JJ (at [23]): For present purposes, the critical difference between an appeal by way of rehearing and a hearing de novo is that, in the former case, the powers of the appellate court are exercisable only where the appellant can demonstrate that, having regard to all the evidence now before the appellate court, the order that is the subject of the appeal is the result of some legal, factual or discretionary error, whereas, in the latter case, those powers may be exercised regardless of error. At least that is so unless, in the case of an appeal by way of rehearing, there is some statutory provision which indicates that the powers may be exercised whether or not there was error at first instance. And the critical distinction, for present purposes, between an appeal by way of rehearing and an appeal in the strict sense is that, unless the matter is remitted for rehearing, a court hearing an appeal in the strict sense can only give the decision which should have been given at first instance whereas, on an appeal by way of rehearing, an appellate court can substitute its own decision based on the facts and the law as they then stand. (Footnotes omitted) 9 These observations were made in the context of a discussion about the nature of an appeal heard by a Full Court of the Family Court of Australia. For our part, we do not view them as having been intended to be a definitive determination of the circumstances in which any and all powers might be exercised in the appellate jurisdiction of the Family Court and thus the Federal Court (there being, at a level of generality, no relevant material difference between the appellate jurisdiction in this Court and the Family Court). Indeed, at the time the Full Court of the Family Court gave judgment (26 November 1998), which led to the proceedings in the High Court and the judgment in Allesch v Maunz, there was no provision in Part X of the Family Law Act 1975 (Cth), which deals with appeals, expressly conferring power to make orders by consent. 10 The appellate jurisdiction of the Federal Court is conferred by s 24 of the Federal Court of Australia Act 1976 (Cth). Subsection (1) confers jurisdiction to "hear and determine" a range of appeals. We have little doubt that the observations in the joint judgment in Allesch v Maunz quoted earlier were directed, and only directed, to the exercise of adjudicative powers in an appellate jurisdiction. That is, they were directed to the powers of a Full Court when hearing and determining a contested appeal, which might involve the reception of further evidence, leading to the exercise of the powers to vary or revoke orders made by the primary judge. 11 We also have little doubt that those observations were not directed to a power to make a consent order, namely a power of the type exercisable under s 25(2B)(b) by a single judge or a Full Court. Such a consent order is, in the words of the Act, made to dispose of an appeal. It does not involve, other than in the loosest sense, a determination of the appeal and certainly does not involve the determination of the appeal after a contested hearing. The fact that a consent order can be made by a single judge militates, in our opinion, against the conclusion that, as a matter of construction, the power to make the order can only be exercised if the Court, in exercising appellate jurisdiction, is satisfied there is error on the part of the judge whose judgment is the subject of appeal (often, in practice, a single judge of the Federal Court). 12 Depending on what the Full Court meant in Telstra, a range of practical problems emerge. If it is necessary for a Full Court (we will not continue to refer to the exercise of the power to make a consent order by a single judge, although it should not be lost sight of) to be satisfied there is error, how can that be done short of hearing and assessing full submissions that would otherwise have been put had the appeal not been settled? It is true that the Full Court indicated in Telstra that there is a principle of judicial restraint that would apply to the consideration of consent orders, referring to Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79. However, it is difficult to discern what the middle ground might be between being satisfied that there is error before making consent orders in an appeal and making them without regard to whether there was error at all. Indeed, the passage from Allesch v Maunz does not suggest that the power to make orders is conditioned by anything short of satisfaction of error. 13 If it is contemplated that something short of a full contested hearing is necessary to persuade a Full Court that there is appellable error so as to enliven the power to make consent orders, what happens if, after a brief hearing, the Full Court is not satisfied there is appellable error? Is it then necessary, if the appeal is not discontinued, for the parties to put full submissions (which may take days) in order to persuade the Full Court to give effect to their agreement? 14 Also, what is the duty of a Full Court when publishing reasons for making orders by consent conformable with the approach in Telstra? We have not endeavoured to explain the basis on which the concession was made by the respondent. Indeed senior counsel for the appellant expressly requested us not to provide an explanation To do so would almost certainly have involved an examination of a potentially important legal issue concerning the effect of the Workplace Relations Amendment (Work Choices) Act 2005 (Cth) amending the Workplace Relations Act 1996 (Cth). Is it intended that any reasons which would explain why the Court accepted there that there was appellable error would have precedential status? Almost certainly not. 15 Some of these problems are particularly acute in litigation that can truly be characterised as inter partes litigation, that is, where one party is asserting a legal right and seeking a remedy against another party and nothing more. The approach in Telstra may substantially inhibit parties reaching agreement and requesting a Full Court to give effect to their agreement in an appeal by making consent orders. Even if it does not inhibit parties in reaching settlement, it requires them to undertake, in some cases probably, at additional expense, the burden of establishing appellable error. We accept there may be classes of cases heard in the appellate jurisdiction where it is appropriate for the parties to explain or justify the outcome to which they have agreed, as there are in relation to some classes of cases in the Court's original jurisdiction. However, we find it difficult to accept that, as a matter of principle of general application, parties to an appeal must be required to justify their settlement (by demonstrating error) as a condition precedent to the exercise of a power in the appellate jurisdiction to make consent orders. 16 However these issues need not be explored further because, as we noted earlier, we have not been invited to conclude that the judgment of the Full Court in Telstra was plainly wrong. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore, Finn and Dowsett JJ. Associate: Dated: 19 August 2008 Counsel for the Appellant: B Walker SC with A Moses Counsel for the Respondent: J Phillips SC with D Shoebridge Solicitor for the Appellant: Allens Arthur Robinson Solicitor for the Respondent: Employment Lawyers Date of Hearing: 12 August 2008 Date of Judgment: 12 August 2008 Date of Publication of Reasons for Judgment: 19 August 2008