FEDERAL COURT OF AUSTRALIA PRACTICE AND PROCEDURE - application to amend pleadings - application to withdraw an admission Trade Practices Act 1974 (Cth) s 52, Workplace Relations Act 1996 (Cth) Wheeler Grace and Pierucci Pty Ltd v Wright & Anor (1989) ATPR 40-940 Refd Butt v M'Donald (1896) 7 QLJ 68 Appl Secured Income Real Estate (Australia) Ltd v St Martin's Investments Pty Ltd (1979) 144 CLR 596 Appl Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235 Refd Foran v Wight (1989) 168 CLR 385 Refd Gollan v Nugent (1988) 166 CLR 18 Refd Fitzgerald v FJ Leonhardt Pty Ltd (1997) 189 CLR 215 Refd Hardy v Motor Insurers' Bureau [1964] 2 QB 745 Refd Nelson v Nelson (1995) 184 CLR 538 Refd Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 Appl Patrick v Steel Mains Pty Ltd (1987) 77 ALR 133 Refd Concrete Constructions (NSW) Pty Limited v Nelson (1990) 169 CLR 594 Refd Simon Gregory Booth v Gordonstone Coal Management Pty Ltd, Arco Coal Australia Inc, Mitsui Gordonstone Investment Pty Limited and MLC Coal Investment Pty Limited QG 170 of 1997 Kiefel J Brisbane 7 August 1998 IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QG 170 of 1997 BETWEEN: SIMON GREGORY BOOTH Applicant AND: GORDONSTONE COAL MANAGEMENT PTY LTD First Respondent ARCO COAL AUSTRALIA INC MITSUI GORDONSTONE INVESTMENT PTY LIMITED and MLC COAL INVESTMENT PTY LIMITED second respondents GORDONSTONE COAL MANAGEMENT PTY LTD cross-claimant AND: SIMON GREGORY BOOTH & ORS FIRST TO SIxTY-EIGHTH CROSS-RESPONDENTS JUDGE: KIEFEL J DATE: 7 August 1998 PLACE: BRISBANE REASONS FOR JUDGMENT Each of the applicant and the respondents and cross-claimant seek leave to amend their pleadings and, in the case of the respondents, to withdraw an admission earlier made. Background - The Pleadings The proceedings are brought by Mr Booth as a representative of a group, being former employees of the first respondent ("Gordonstone"). Gordonstone was a wholly owned subsidiary of the second respondent ("Arco"). It is alleged that, in order to attract employees to its mine at Emerald, or to retain them as employees there, Gordonstone promoted the advantages of home purchase schemes conducted by it: the Home Ownership Plan, the Home Equity Benefits Scheme and the Home Loan Benefits Scheme. In particular it is alleged that Gordonstone conveyed to employees, or prospective employees, that the mine would continue in operation into the next century and that their employment was secure; that it did not explain to them the risk that employment with Gordonstone might be terminated in the event that Arco no longer regarded its coal mining operations in Australia as part of its core business and that it might wish to sell them, or that Arco might direct Gordonstone to terminate employment of its workers. The latter direction was said to be possible even if the mine were operating profitably and to be connected to Gordonstone's obligations to employees pursuant to certain industrial agreements which, it is elsewhere alleged, it or Arco sought to avoid. The failure to qualify the representations in question is relied upon as misleading and deceptive conduct within s 52 Trade Practices Act 1974 and damages are sought in respect of it. Those damages are not yet particularised and may differ as between members of the three schemes. This issue forms the focus of paragraph 36 of the proposed second amended statement of claim, the first issue to which I shall refer. Orders are also sought in connexion with the Home Ownership Plan and to have that part of it, or documents executed in connexion with it, which purports to grant Gordonstone an irrevocable option to "buy back" houses from employees following upon termination of their employment, declared void or unenforceable. This forms the basis for the application for determination of a preliminary issue. Paragraph 36 Amended and proposed Second Further Amended Statement of Claim It is necessary to set out each of pars 35 and 36: "35. In the premises the representations referred to in paragraphs 12-23 hereof were positive unqualified and conveyed in substance and effect the perception that the First Respondent would continue the operation of the Gordonstone Mine and provide employment for "its people" including the group members, well into the 21st century, which perception was misleading and deceptive unless there was disclosed by way of qualification, the qualification that the First Respondent was at liberty to there was a risk that the First Respondent would close the Gordonstone Mine and terminate in mass its employees, including the group members:- (a) if ARCO no longer regarded its coal mining operations in Australia as part of its core business and desired to sell such coal mining operations; (b) or further or alternatively, if it received directions from the Second Respondents to do so on the basis that the Gordonstone Mine was not achieving the results required by the Second Respondents notwithstanding that the Gordonstone mine was earning for the Second Respondents a return on investment at least commensurate with the cost and risk of investments; (c) further or alternatively, whether or not such terminations were harsh, unjust, or unreasonable; (d)(c) or, further or alternatively, in order to avoid the First Respondents obligations pursuant to industrial instruments binding upon it; (e)(d) or, further or alternatively, in order to de-unionise or further or alternatively to decrease the influence of the CFMEU, a union upon its workforce. 36. On or about 1 October 1997 the First Respondent closed the Gordonstone Mine and termination in mass its employees, including the group members:- (a) because ARCO no longer regarded its coal mining operations in Australia as part of its core business and desired to sell such coal mining operations; (b) because or further or alternatively it received directions from the Second Respondents to do so on the basis that the Gordonstone Mine was not achieving the results required by the Second Respondents notwithstanding that the Gordonstone mine was earning for the Second Respondents a return on investment at least commensurate with the cost and risk of investment; (c) further or alternatively, did so harshly, unjustly or unreasonably; (d) (c) further or alternatively, in order to avoid its obligations under an industrial instrument; Particulars The First Respondents obligations under the Gordonstone Mine UNW Enterprise Agreement 1995 which Enterprise Agreement was certified on 21 October 1996 by the Australian Industrial Relations Commission and more particularly Clause 4, Clause 6 (in so far as it relates to honesty, fairness and dignity), Clause 21, Clause 22, Clause 24, Clause 27, Clause 33 and Appendix 4 (in so far as it relates to home purchase assistance) thereof; (c) (d) further or alternatively, to de-unionise or, further or alternatively to decrease the influence of the CFMEU, a union in its workforce;" The respondents do not take issue with the principal allegations in par 36 that the mine was closed and that employment was terminated on about 1 October 1997. They contend, however, that what follows as particulars are not facts material to that allegation, or indeed any issue, and amount only to statements of evidence as to the reasons for the termination of employment referred to in par 36. The applicant submits that the matters set out in par 36, as to subsequent conduct on the part of Gordonstone, are relevant to the representation alleged in par 35 and refer to Wheeler Grace and Pierucci Pty Ltd v Wright & Anor (1989) ATPR 40-940, 50,239 (Full Court). The question there was whether the applicant needed to show that the representor did not have sufficient reasonable grounds for believing that a premium paid would be returned to investors, when making the representations in question and when failing to warn of risks in the investment, as was alleged. Lee J considered that in some cases misleading and deceptive conduct, with which s 52 is concerned, may be found in a failure to qualify statements or to disclose the risk of non-fulfilment and, further, that in some circumstances the non-fulfilment of a prediction or promise may itself provide evidence, or enable an inference to be drawn, that at the time it was made a relevant risk existed and that some qualification was required. The test is, as their Honour's noted, objective and not dependent upon intent. It may be accepted, for present purposes, that there is some support for the conclusion that there was a need to qualify the representations as to the continuance of the mine and job security at the time when the various representations were made and when group members entered into the plan or the schemes in question, from the fact and timing of the closure of the mine in 1997. Paragraph 36 however goes much further. Subparagraphs (a) to (d) are concerned to state the reasons why Gordonstone effected that closure and terminated employment and in doing so seek to attribute not only commercial decisions on the part of Arco, but improper motives on the part of Gordonstone in connexion with its obligations under industrial agreements. It was not suggested that the respondents' motives were necessary to qualify the conduct as falling within s 52 and it is difficult to see that that could be. In my view the subparagraphs neither plead material facts nor facts relevant to the issues and I will disallow that part of the amendment sought. There is no issue taken with respect to the grant of leave otherwise to amend the statement of claim in terms of the "second further amended statement of claim" which is SEN1 to the affidavit of Mr Nall filed 22 July 1998 and there will be an order to that effect excepting subparagraphs (a) to (d) of paragraph 36. The Reply and Defence to Cross-claim With respect to members of the Home Ownership Plan, Gordonstone claims to be entitled to buy back houses purchased under the Plan, and in the case of the Home Equity Benefits Scheme, to pay out the lender, which in turn gives its further rights under securities over the house property in question. I shall refer to both the Plan and Scheme as the "house schemes". In each case the rights Gordonstone seeks to enforce are dependent upon the cessation of employment. It was agreed in submissions that pars 19 to 31 of the proposed amended reply and defence to the cross-claim raised three legal issues: illegality of purpose affecting Gordonstone's rights under the house schemes, referred to above; Gordonstone's breach of an implied term of the agreements relating to the house schemes; and discretionary bars to Gordonstone's claim for specific performance. The focus of the defences sought to be raised is the termination of employment of members of the schemes, which is characterised as wrongful and unlawful in the sense that it constitutes breaches of industrial agreements or a repudiation of them. From that point the applicant and cross-respondents seek to use the wrongfulness of that conduct to deny any right in Gordonstone to enforce or derive a benefit from the agreements in connexion with the house schemes. The plea of a discretionary bar to any relief to be given to Gordonstone is, in these circumstances, at least arguable. So much was conceded by counsel for Gordonstone who submitted only that there would be no practical outcome for the cross-respondents, since Gordonstone would in those circumstances simply pursue its remedy at law for damages. In neither case have damages yet been quantified. In any event the submission is insufficient to deny the cross-respondents their right to plead the defence. Of greater difficulty are the other two claims sought to be advanced. In the case of the implied term, that may be because of the way in which it is presently pleaded. The conclusion sought to be reached which would deny relief based on the wrongfulness of Gordonstone's conduct is that Gordonstone "may not rely on the termination of members of the group … to found …the cause of action raised … in its Cross-claim …ex turpi causa non oritur actio." (pars 25 and 26). The basis for that conclusion is said to be that Gordonstone's conduct in terminating the employment was "unlawful, immoral and in breach of public policy". It is not alleged that the termination itself was invalid. The bases for those descriptions appears variously to be derived from: the breach or repudiation of the enterprise agreement, to which I have referred, although the particulars of that diverge into other areas; contraventions of the Workplace Relations Act 1996 rendering Gordonstone liable to a penalty; "unlawfulness" in the context of that Act, because the conduct in question was harsh and unreasonable although the conclusions which follow from this specific allegation are not pointed to; the terminations having been effected for ulterior purposes, namely to avoid obligations under the industrial agreements and to decrease the influence of a union of which the employees were members; misleading and deceptive conduct. I shall return to questions relating to these allegations shortly. The pleading then proceeds to set up an implied term, that Gordonstone would do all that was necessary to enable persons in the house schemes to have the benefit of them, and that it would not act in such a way as to deny them their benefit. To this point there would not seem to me to be any difficulty with such an allegation: see Butt v M'Donald (1896) 7 QLJ 68; Secured Income Real Estate (Australia) Ltd v St Martin's Investments Pty Ltd (1979) 144 CLR 596, 607. The difficulty which arises is what is said to flow from the breach of those terms. The claims which follow by way of defence, apart from that relating to the discretionary bar, are that Gordonstone's claim is not maintainable against employees in the Schemes because it seeks to assert rights under the option agreement and provisions in the Home Equity Deed: "which arise by reason of the breach of the implied term referred to … by reason of the matters alleged in pars 19 to 23 hereof." The reference to pars 19 to 23 are to the allegations of conduct characterised above. From this, I infer, that the conduct in terminating employment is relied upon as the breach. It is not really necessary to refer to all of the other allegations, material and immaterial, in those paragraphs, but I leave this to one side. In submissions the applicant and cross-respondents explained that the claim with respect to the implied term means that Gordonstone will not be able to show, as it must, that it was ready and willing to perform all of its obligations under the agreement when it comes to enforce its rights: Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd. (1954) 90 CLR 235 and Foran v Wight (1989) 168 CLR 385, 405-6. Viewed in that way what is sought to be derived from this plea is another basis for a discretionary bar to specific performance. That would appear to be consistent with the claim that the cross-claim is "not maintainable" on those grounds, and upon the grounds that relief ought to be withheld in the exercise of the Court's equitable jurisdiction. One would think, then, that it is not strictly necessary for the cross-respondents to have pleaded a breach of implied term. They could have simply pointed to the conduct itself, although perhaps the view has been taken that a breach of implied term strengthens the basis for a bar to relief. If however it is sought to make more of the breach of implied term than that, it seems to me that it would be necessary to further amend the reply and defence to cross-claim to make that plain. Any such application should be made within fourteen days. With respect to the cross-respondents' intended reliance on the principle that the law will not lend its processes for criminal, illegal or immoral purposes, Gordonstone submits that, in contract, relief will only be denied when a party must rely upon a transaction itself unlawful or immoral to establish the cause of action: Gollan v Nugent (1988) 166 CLR 18, 46; Fitzgerald v F J Leonhardt Pty Ltd (1997) 189 CLR 215, 220. Whilst that has been expressed as a rule of general application, no other indicia has been pointed to to show that such an approach would not be applicable in the present case. No relevant agreement can, or is, here pointed to as itself illegal. In these circumstances it would seem that the cross-respondents must be taken as saying that the relevant "transaction" for the purpose of application of the principle is the termination of employment. As I have said, that is the focus of its plea. However, whilst that conduct may amount to a breach of agreement and be wrongful on that account, I am unable to see that it could be characterised as illegal or immoral in a sense referred to in the cases. It is notable that the termination is itself not sought to be vitiated on such a ground. Rather a conclusion of wrongful conduct approaching impropriety is sought to be drawn from other complexions which may be given to the same act. In that sense the other bases for the conclusion referred to above do not advance the matter. None of them themselves involve any illegality of the kind referred to in the authorities nor such antisocial conduct such as could be described as "immoral" or contrary to public policy. The reference to unlawfulness in the context of the Workplace Relations Act or a breach of it were not relied upon in submissions as the foundation for a plea of illegality. The cross-respondents referred to the general statement taken from Hardy v Motor Insurers' Bureau [1964] 2 QB 745 by Brennan J in Gollan v Nugent, 35, that the courts would not enforce a right which is regarded by the Court as sufficiently anti-social to justify the courts refusing to enforce it. Such general statements have been described as unsound in legal policy, by reason that they are inflexible, at least with respect to the grant of or withholding a remedy: Nelson v Nelson (1995) 184 CLR 538, 611; Fitzgerald v FJ Leonhardt, 228-230. In any event, the broad statement does not convert the conduct here referred to such a kind that relief would be withheld. Indeed Brennan J went on to point out that such a statement is not a "charter for judicial idiosyncrasy in refusing to enforce private rights". I am conscious that a party ought be permitted to raise that which is arguable so long as there is no prejudice to the other party: Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146, 154. Here however I do not think it could be said that the qualification of the conduct as illegal or immoral has reached that level. Withdrawal of Admission The respondents seek to withdraw an admission previously made in their defence, that the conduct alleged against them, in connexion with the house schemes and the cessation of employment, was that "in trade or commerce" for the purposes of s 52 Trade Practices Act The issue involves a question of law only, and it seeks to distinguish dealings between Gordonstone and its employees who were members of the schemes, by reason of their being undertaken in the context of, and as an incident of, employment. The respondents submitted that there are no special rules governing leave to withdraw an admission under O 22 r 4 and that the ordinary rules relating to amendment, those set out in O 13 r 2(1) and (2), generally apply. There may well be considerations arising in some cases in connexion with the withdrawal of admissions which would take the matter out of the general enquiry as to whether amendment ought to be permitted, but this application does not in my view raise any such issue. The weight of authority would be against a restrictive approach to the construction of the phrase in s 52. The respondents themselves referred to decisions of single judges of this Court, including Patrick v Steel Mains Pty Ltd (1987) 77 ALR 133, to that effect. They contend however that some comfort is to be derived from the majority judgment in Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594, 602-3, referring to alternative constructions of s 52, that it might be seen to have regard to a "central conception" of trade or commerce, or alternatively to conduct which itself bears a trading or commercial character. Perhaps more importantly the Court referred to the requirement that the scope of the prohibition imposed by s 52 will be governed in each case by the particular context. Whilst it seems to me that the respondents' proposed ground of defence is not very likely to succeed I do not think it can presently be adjudged inarguable. I do not however consider that it is desirable, having taken this course, that the respondents should be permitted merely to put the matter in issue (see O 11 r 10(b)). Having accepted that there may be different approaches to the matter, I consider they ought be permitted to deny the allegation if they be so advised and in that process to plead specifically to the claim facts material to it. Leave to withdraw the admission and to amend will be so conditioned. Separate Determination of the Buy-back Issue As earlier mentioned, the Home Ownership Plan provided for the grant of an irrevocable option to Gordonstone to purchase homes from employees, members of the Plan, in the event that their employment ceased and upon notice. The cross-claim pleads the facts relevant to the exercise of that option. The applicant, by way of defence, pleads that the exercise of the option was conditional upon the payment of $10 by Gordonstone at a particular point, namely when purchases by the employees were completed. It is not in dispute that no such payment was ever made. Gordonstone nevertheless says, by way of reply, that the option was granted in consideration of its promise to pay, not to the payment itself, and further that the applicant and group members waived any such condition by executing and delivering to it a general consent to caveat, for which the terms of the Plan provided, in aid of the option. The applicant submits that this issue essentially involves only a legal argument about the construction of the Home Ownership Plan and the deed associated with it and as to what constitutes a waiver and that very limited evidence would be necessary for its determination. Gordonstone however submits that evidence would be necessary as to the evolution of the Home Ownership Plan, the benefits to be conferred by it and the extent to which the deed "gives legal expression" to the intention of the participants. I do not however see that the operation of the deed, including the benefit it confers, could require any or any substantial evidence; and so far as concerns the parties' intention, no claim is made that what is contained within the documents does not truly reflect them. The meaning to be given to a payment of $10 in the context of a transaction with a particular member should, I think, not require findings as to the value of each of the properties although perhaps a general understanding would be necessary. I take Gordonstone to say that the deposit means little, regardless of the value attributed to a house and that, in any event, it was intended that it be bound by its promise. It is also difficult to see that evidence of a particular employee's understanding is likely to be of much assistance in the case of a waiver constituted by an act contemplated as a step in a transaction process and where the issue put forward by the respondents will be what inference is to be drawn from that Act. I do not understand the applicant to raise any issue concerning lack of understanding. The real question with respect to this application, in my view, is what could practicably be achieved by separating this issue from the main trial. It is not suggested that it will dispose of all other issues. The claim for damages arising by reason of alleged contraventions of s 52 will remain, and that will concern group members apart from those connected with the Home Ownership Plan. The applicant submits however that if this issue is decided in his favour, he would no longer pursue the other defences to the cross-claim. In that event the saving of 10 days or so from the estimate of the final hearing is dependent upon his success and not upon the determination of the point. Moreover, there are the other members of the group to be considered in relation to those defences. The applicant also pointed to a benefit it perceived, namely that the determination of the issue would provide further impetus to the parties to negotiate an outcome to this litigation. This is a case where considerable attempts at mediation have already been effected, unfortunately without a successful outcome. Whilst the applicant says that a conclusion may facilitate the continuation of such a process the respondents do not agree and I take it that the applicant refers only to the position where, again, it is successful. In these circumstances I am not persuaded that there is any real efficiency or saving of cost to be achieved by separating this matter from the other claims. Particularly in the context of a group proceeding, there are good reasons not to do so. I am however conscious of any prospect of facilitating the parties' further discussion in this matter. With that in mind I would consider the possibility of a case management conference devoted to this particular issue either conducted by a Judge or a Registrar. I shall leave this to the parties to raise. Orders In addition to the orders the subject of these reasons, some orders were not in contention. The following orders are the result. The applicant's and cross-respondents' motion There will be leave to amend the statement of claim in terms of the second further amended statement of claim being SEN1 to Mr Nall's affidavit filed 22 July 1998 except for the particulars to paragraph 36; there will be leave to amend the reply and defence to cross-claim in terms of SEN2 to Mr Nall's affidavit filed 22 July 1998 except for pars 24-26; the cross-respondents will be at liberty to further amend their claims based upon breach of implied term in pars 27-30 within fourteen days. The respondents'/cross-claimants motion There will be leave to amend par 2 of the amended defence by deleting reference to par (iii) from the admission and to plead any denial of the allegation in par 2(a)(iii) of the amended statement of claim, with particulars of that denial. There will be leave to amend par 5 of the amended cross-claim in terms of par 1(b) of the motion and orders pursuant to par 3 of the notice, save that the affidavit referred to in sub-par (b) is to be sworn by the solicitors for the applicant. I will hear the parties as to costs. I certify that this and the preceding eleven (11) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Kiefel Associate: Dated: 7 August 1998 Counsel for the Applicant and First to Sixty Eighth Cross-respondents: Mr P A Keane QC Solicitor for the Applicant and First to Sixty-Eighth Cross-respondents: Nall and Payne Counsel for the First and Second Respondents and Cross-claimant: Mr J Sheahan SC Solicitor for the First and Second Respondents and Cross-claimant: Minter Ellison Date of Hearing: 23 July 1998 Date of Judgment: 7 August 1998