Industrial Relations Commission of New South Wales in Court Session CITATION : Della Marta v Rockcliff; Bailey v Rockcliff [2000] NSWIRComm 10 APPLICANT Simon Eugene Della Marta DEFENDENT Stephen John Rockcliff & anor PARTIES : APPLICANT Paul Anthony Bailey DEFENDENT Stephen John Rockcliff & anor FILE NUMBER: IRC2305 & 2353 of 2000 CORAM: Maidment J CATCHWORDS : Unfair contract - Interlocutory Judgment - Notice of motion - Application to set aside summonses - Whether summonses disclose any unfairness - Premature to determine question of unfairness - Claim goes beyond claim for damages for breach of contract - No abuse of process - Notice of motion dismissed CASES CITED : General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 HEARING DATES: 12/10/1999 DATE OF JUDGMENT: 02/08/2000 APPLICANT: Mr Stevens QC with Mr Newton of counsel LEGAL REPRESENTATIVES: RESPONDENT; Mr Scott of counsel JUDGMENT: - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: MAIDMENT J DATE: 8 FEBRUARY 2000 Matter No IRC99/2305 Simon Eugene Della Marta v Stephen John Rockcliff and anor. Application under s.106 of the Industrial Relations Act 1996. Matter No IRC99/2353 Paul Anthony Bailey v Stephen John Rockcliff and anor. Application under s.106 of the Industrial Relations Act 1996. INTERLOCUTORY JUDGMENT 1 During 1997 a partnership between Simon Eugene Della Marta, Paul Anthony Bailey, Stephen John Rockliff and Jeffrey Thomas Fai, under which the practice of Rockliffs Solicitors ("Rockcliffs") was conducted, was dissolved. 2 Gells Solicitors have commenced two proceedings under s.106 of the Industrial Relations Act 1996, on behalf of Messrs Della Marta and Bailey respectively, arising from alleged unfairness resulting from partnership agreements referrable to the practice. 3 In his application Mr Della Marta seeks relief against Messrs Rockliff, Fai and Bailey; in that matter Mr Bailey, c/- Gells Solicitors, has filed a notice of appearance. In his application Mr Bailey seeks relief against Messrs Rockliff, Fai and Della Marta; in that matter Mr Della Marta, c/- Gells Solicitors, has filed a notice of appearance. Thus Gells appears on both sides of the record in each matter. 4 The orders sought in each case are relevantly identical, those in Mr Bailey's case being as follows: 1. Order that the Articles of Partnership between the applicant and the respondents be varied as follows: (a) Clause 10 be deleted and the following clause 10.1 and clause 10.2 be inserted in its place: "10.1 Upon the dissolution of the partnership the Partners shall receive all monies relating to accounts rendered for work carried out by the partnership up to the dissolution of the partnership. All the partners will share in the benefit of all work done and all monies expended by the partnership up to the time of dissolution for matters in respect to which accounts have not been rendered at the time of the dissolution." 10.2 All income from the partnership is to be paid into an account in the name of each of the Partners and the signatures of all of the Partners is required to transact the withdrawal of any moneys from that account." 2. An order that the business of the partnership of the applicant and the respondents, which was known as "Rockliffs" Solicitors, and which was dissolved on 11 April 1997, be wound up under the direction of this Honourable Commission. 3. An order that the Commission take accounts of and enquire into – (a) all the dealings and transactions of the said partnership, and of the said partners or either of them in relation thereto, for the period 1 July 1996 to the present time; (b) the assets and liabilities of the said partnership; (c ) the respective interests of the said partners in the said assets; (d) what amount, if any, is to be brought to account by each partner. 4. An order that the first and second respondents pay the applicant such money as is determined by this Commission. 5. Costs. 6.Such further or other orders as this Honourable Commission thinks fit. 5 The grounds upon which relief is sought are also relevantly identical, those in Mr Bailey's case being: 1. The applicant is a solicitor and at all material times the applicant performed work within an industry, namely, the Legal Profession. 2. The applicant entered into the Articles of Partnership with the respondents dated 11 August 1993. 3. Clause 10 of the Articles of Partnership provides as follows: "10. Upon the dissolution of the partnership the Partners shall receive all monies relating to accounts rendered prior to the dissolution of the partnership but only the Capital Partner [ie, the first respondent] shall receive the benefit of work done by the partnership and monies expended by the partnership on matters partly completed at the time of the dissolution on which accounts have not been rendered at the time of the dissolution." 4. The third respondent, on 14 March 1997, gave notice to dissolve the partnership which dissolution took effect on 11 April 1997. 5. The applicant states that the following occurred: 5.1 Prior to the dissolution of the partnership the first and second respondents deliberately delayed in sending accounts to clients until after the dissolution when in the ordinary course of business such accounts should have been rendered to clients prior to the dissolution. This had the effect of reducing the amount of debtors of the partnership available on dissolution in which the applicant would have otherwise participated; 5.2 After the dissolution when accounts rendered prior to the dissolution were paid that money was attributed to income of the new trading arrangements of the first and second respondents by: 5.2.1 Not entering the particular account and income as rendered in the computer accounts system and when that account was paid the receipt of money was incorrectly and deliberately recorded as income of the first and second respondents' new trading arrangement.; 5.2.2 Writing off the income prior to dissolution and when the account was paid the receipt of money was incorrectly and deliberately recorded as income of the first and second respondents' new trading arrangement. 5.3 After the dissolution the first and second respondents had control of the accounts of the partnership and deliberately ensured that no debtors ledger was kept so as to confuse the applicant and make it difficult for the applicant to establish what entitlements were due to him upon dissolution of the partnership; 5.4 Before the dissolution the first and second respondents failed to render accounts to a principal client of the partnership, New Zealand Insurance Australia Limited, when directed by that client to send accounts to the client for all work carried out as at the dissolution of the partnership. After the dissolution accounts were rendered to that client for work carried out prior to the dissolution by the first and second respondents' new trading arrangement and the income did not form part of the income of the partnership in which the applicant should have shared. 5.5 After the dissolution the first and second respondents have used money of the partnership by using money receipted to the partnership in the sum of over $100,000.00 for their own purposes, creating a situation where the first and second respondents have received drawings from the partnership in excess of the amounts received by the applicant. 5.6 The terms of the Articles of Partnership are oppressive and have the effect of extracting from the applicant an inordinate work effort for the remuneration provided. 5.7 The applicant was forced into entering into the Articles of Partnership with the threat of having no way of effectively earning an income as a solicitor and with inducements of income to be earned in excess of what was realised in the operation of the partnership. 6. The applicant says these matters resulted in a situation where the applicant has been put out of pocket and has been placed in a situation where a proper accounting of his entitlements in the partnership has been placed in jeopardy because of the onerous task placed on the applicant to establish his entitlement made more difficult by the manipulation of the accounts of the partnership by the first and second respondents. 7. The applicant contends the only means by which a fair division of the partnership assets upon dissolution can be achieved is for the Article of Partnership to be varied to provide that the applicant has an entitlement to both work in progress and debtors generated and in existence at the time of dissolution and not just debtors. 6 The money order sought by Mr Bailey under s.106(5) is particularised as follows: It is estimated by the applicant that there was in the order of approximately $500,000.00 of work carried out by the partnership prior to the dissolution for which accounts were not rendered prior to the dissolution and income not attributed to the former Rockliffs partnership. The applicant should be entitled to a share of 22.5 % of this income which is approximately $112,500.00 7 The respondent, represented by Mr Stevens QC and with him Mr P T Newton of counsel, seeks to have the summonses for relief set aside. Alternative relief is sought including that the paragraphs seeking orders 2 and 3 be set aside. Mr Scott of counsel appeared for the applicants. 8 The arguments in each case are relevantly identical. It is contended that neither summons discloses any unfairness, that each is an abuse of process and that this Court has no jurisdiction to hear either claim. Mr Stevens accepted that the test is that in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 and that, for the purpose of the motion the affidavit evidence filed on behalf of each applicant should be taken at its highest in favour of the applicants. HISTORY 9 That as to Mr Della Marta will suffice for present purposes. 10 Mr Della Marta has practiced as a solicitor since 1981 and has wide experience. He became a partner in Rockcliffs in December 1990 having entered into a partnership agreement with Messrs Rockliff and Bailey in 1990. In 1993, he entered into a further agreement with Messrs Rockliff, Bailey and Fai. He had independent accounting and legal advice prior to entering the 1990 agreement. The 1993 agreement was very similar to the 1990 agreement and contained terms suggested by Mr Della Marta. 11 The partners agreed to dissolve the partnership on 11 April 1997. 12 In February 1999 Messrs Della Marta and Bailey commenced proceeings in the Equity Division of the Supreme Court against Messrs Rockliff and Fai. They sought inter alia that the proceedings be referred to the Master to take accounts of and to enquire into: 1. All the dealings and transactions of the 1993 Partnership as from 1 July 1996; 2. What are the assets and liabilities of the 1993 Partnership; 3. What are the respective interests of the said partners in the said assets; 4. What amount, if any, is to be brought to account by each partner. 13 On 25 March 1999 an affidavit of Mr Fai was served upon both Mr Bailey and Mr Della Marta. Consent orders were made on 30 March in relation to the filing of further affidavits and the matter was adjourned to 17 June for further directions. 14 The summonses herein were filed on 19 May and, on or about 24 May, Messrs Bailey and Della Marta filed a notice of discontinuance in the Supreme Court proceedings without leave of the Court, and without even notifying either Mr Rockcliff or Mr Fai let alone obtaining their consent. 15 I turn to the headings under which Mr Stevens puts his case. THE CONTRACT IS FAIR 16 Mr Stevens argues that the summonses do not disclose any unfairness in the terms of the contract and, bearing in mind the experience and professional attributes of the applicants no unfairness could arise from terms which they freely accepted. 17 Mr Scott contends that it is premature to determine this issue, he relies upon grounds 5.6, 5.7, 6 & 7 above, combined with order 1 which is sought, as providing an issue which should not be determined in limine. I agree with this proposition. The fact that the applicants may have a very difficult case should not result in it being summarily dismissed. I note in this regard that, for the purposes of s.106, the conduct of a party to a contract may be a relevant consideration in determining whether or not the contract is unfair. As I understand the claim it is that the terms of the contract were permissive of unfair conduct. Thus it would be inappropriate to summarily dismiss the claim on the basis that the terms of the contract appear fair on their face. THE CLAIM IS FOR BREACH OF CONTRACT 18 Mr Stevens contends that perusal of the grounds advanced by the applicants, particularly paragraphs 5.1 to 5.5 inclusive demonstrate that the applicants are seeking to give effect to clauses 10 and 2 of the partnership agreement. The terms of cl.10 are set out earlier in this judgment, cl.2 is as follows: The partners shall during the partnership diligently and faithfully employ themselves in and about the partnership business and carry on the same to the greatest advantage of the business and render just and faithful account of all their dealings one to the other. 19 Mr Scott accepts that paragraphs 1 to 4 of the grounds merely recite background and that paragraphs 5.1 to 5.5 assert breaches of the partnership agreements. He relies upon grounds 5.6, 5.7, 6 & 7 above, combined with order 1 which is sought, as providing issues which go beyond mere breach of contract. I accept that argument as, on its face, the variation sought to cl.10 of the partnership agreement would increase the benefits otherwise available to the applicants upon dissolution of the partnership. That part of the claim, as framed, goes beyond a mere claim for damages arising from breach of contract and is within the power of this Court. ABUSE OF PROCESS 20 Mr Stevens argues that the discontinuance of the Equity Division proceedings after the plaintiffs/applicants received notice of a cross claim and the subsequent invocation of s.106 evidences an attempt to avoid the cross claim. He contends that the Equity Division proceedings were used by the plaintiffs/applicants to inspect Rockcliffs' documents. These facts, he contends, lead to the inference that these proceedings are an abuse of process. Additionally he submits that as Gells Solicitors appears on both sides of the record in each s.106 case an abuse of process is apparent on the face of the record. 21 The material before this Court does not demonstrate that these proceedings were improperly instituted. No abuse of process is demonstrated. The fact that Gells Solicitors appears on both sides of the record in each s.106 case may raise questions in those proceedings however I know of no authority for the proposition that that fact should result in the matters being either struck out or allowed to proceed at this stage. JURISDICTION 22 Mr Stevens submits that the variation sought to cl.10 of the agreement is otiose in that such a variation would achieve no more than that required by the existing provisions of cl.2 and cl.10. He further argues that proposed orders 2 and 3 go beyond the jurisdiction of this Court. 23 Mr Scott contends that the variation sought to cl.10 would expand its effect beyond that currently contained in the partnership agreement. I accept that proposition which is plain upon the face of the document. He argues that proposed orders 2 and 3 are procedural and would give effect to order 1. 24 The suggestion of Mr Scott seems to be that the Court might grant order 1 without being favoured with the facts which would be established by an investigation into the partnership accounts. I doubt, however, that the applicants can reasonably expect this Court to vary cl.10 prior to receiving evidence as to that which the accounts disclose, however, that would be a matter for the trial judge to determine upon the state of the evidence at the end of the day. 25 I accept that the variation sought to cl.10 is on its face within jurisdiction and that it is premature to determine whether or not the evidence to be presented upon a hearing might demonstrate requisite unfairness. However, it seems to me that the applicants' case as to alleged unfairness would be at significant risk if they failed to present all available financial evidence in their substantive case. 26 That being so it is not necessary for me to determine at this stage whether or not, assuming cl.10 is varied, orders of the nature of that sought in orders 2 and 3 may be within power. I am of the view that the trial judge should determine that issue. 27 The fact that the Equity Division of the Supreme Court has jurisdiction in relation to the taking of accounts and the winding up of partnerships does not derogate from the authority of this Court to receive such financial evidence as may be put forward by a party in aid of a s.106 application. That of course is quite different to some notion that this Court might purport to direct the taking of accounts. CONCLUSION 28 It is my view that the summonses evoke the jurisdiction of this Court sufficiently for there to be no alternative but to allow the cases to be heard even though they are not without difficulty. The notices of motion are dismissed. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.