FEDERAL COURT OF AUSTRALIA

Combined Insurance Company of America trading as Combined Insurance Company of Australia v Trifunovski [2009] FCA 525

COMBINED INSURANCE COMPANY OF AMERICA T/AS COMBINED INSURANCE COMPANY OF AUSTRALIA v BLAGOJA TRIFUNOVSKI, HERACLEA PTY LIMITED, ROGER COLIN HASLER, R & L TRAINING SERVICES PTY LIMITED, JOSEPH VIVIL RIENZIE PERIES, SHANE PEREZ, STEPHEN WILSON, WILLIAM DICINOSKI and FETIE VICKI DICINOSKI

NSD 1860 of 2008

PERRAM J

20 MAY 2009

SYDNEY

THE COURT ORDERS THAT:

1.         The motion be dismissed with costs.

2.         Leave be granted to the applicant to proceed against the respondents jointly.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

Background

1                          The present applicants are five individuals who at one time or another were engaged by Combined Insurance Company of America (“Combined”) as insurance agents.  In recent times, the five have sued Combined in the Chief Industrial Magistrates’ Court of New South Wales claiming entitlements both to annual leave and long service leave.  One of the principal issues to be resolved in those proceedings is the question of whether the agents were employees of Combined, as they contend, or rather independent contractors, as Combined contends.  No doubt the resolution of that issue will involve a close consideration of a broad range of indicia.  One of the matters to which Combined points is a term in its contract with each agent by which each agreed, or appears to have agreed, that his relationship with Combined was not one of employment.

2                          That question is, therefore, now pending before the Chief Industrial Magistrates Court. Notwithstanding that circumstance, Combined has commenced the present proceeding in this Court seeking three heads of relief:

(a)        declarations that each of the agents is an independent contractor;

(b)        alternatively, indemnity from each agent either pursuant to the terms of each agent’s agreement or, as a remedy, for misrepresenting to Combined that each was an independent contractor when, in truth, each was not;  and

(c)        damages or compensation along similar lines.

3                          On 27 April 2009, the agents moved this Court peremptorily to dismiss the proceedings against them.  The basis upon which they sought that relief was:

(a)        none of the claims made by Combined was in federal jurisdiction so that the suit should be dismissed for want of jurisdiction;

(b)        insofar as Combined relied upon an indemnity to overcome the effect of the long-service entitlements, this argument was doomed to fail by reason of the terms of the Long Service Leave Act 1955 (NSW) and should be given its early quietus;

(c)        the claims of the agents (together with four other parties not yet mentioned) were insufficiently conjoint to justify their bringing together in one case.  This, of course, was a pleading point – if Combined’s proceedings were otherwise within the jurisdiction of the Court, this argument would result only in a splitting of the various claims.

Jurisdiction

4                          Presently before me on this first argument is only the question of jurisdiction.  I have not been asked to enter into the potentially difficult issues attending the relationship between the litigation in this Court and the overlapping litigation before the Chief Industrial Magistrate’s Court.

5                          Jurisdiction is conferred on this Court by a number of federal statutes.  These include s 39B(1A)(c) of the Judiciary Act 1903 (Cth).  It provides that the “original jurisdiction of the Federal Court of Australia also includes jurisdiction in any matter: … (c) arising under any laws made by the Parliament …”.

6                          The language of s 39B(1A)(c) is drawn directly from the words of s 76(ii) of the Constitution and has been often enough litigated.  There are, I think, for present purposes four matters which assist in the resolution of the agents’ motion for dismissal.

7                          First, it was of course possible that the drafters of s 76 of the Constitution could have chosen to confer jurisdiction on the High Court and the other federal courts by reference to actual suits, real causes or genuine controversies.  Such an approach, had it been adopted, would have required as its point of departure the search for, and identification of, some piece of litigation to which the description federal might appositely have been attached.  But court cases are readily initiated and where, as in the United States, the conferral of federal jurisdiction has been expressed in terms of “cases” or “controversies” the ensuing discourse has centred not so much upon whether the plaintiff’s cause is federal but, rather, on whether the plaintiff has standing to pursue that federal remedy: Lujan v Defenders of Wildlife 504 US 555 (1992) at 560-561; DaimlerChrysler Corp v Cuno 547 US 332 (2006); Sprint Communications Co v APCC Services Inc 128 S Ct 2531 (2008).

8                          In Australia the conferral of federal jurisdiction in ss 75-76 has not proceeded by reference to the suits or claims brought by a plaintiff but, instead, by reference to the more elusive concept of a “matter”.  Early on it was established that a “matter” in Chapter III was not synonymous with a legal proceeding but rather was the subject matter for determination in a legal proceeding:  In re Judiciary and Navigation Act (1921) 29 CLR 257 at 265.  The density of that expression is apt to obscure the critical disjunct it raises between, on the one hand, a suit whose content is largely in the hands of the party bringing it and, on the other, an abstraction whose end is not the identification of the features of a claim but instead the circumscription of the controversy’s outer bounds.  It is the difference between words used in conversation and topics discussed; between claims made and arguments had.  Necessarily, therefore, the identification of a matter is an inquiry which proceeds by reference to notions of substance rather than form.

9                          Secondly, once it is understood that a matter is constituted by the dispute which exists between the parties, the means by which its outline is to be discerned become clearer.  In an ordinary case, the various allegations contained within the parties’ pleadings will be as useful a place to start as any, for it is the purpose of pleadings to identify the issues in dispute.  But a matter may be broader then the pleadings suggest, for sometimes the controversy between disputants is not captured perfectly by the form of the proceedings they have selected.  This was explained in the majority’s judgment in Fencott v Muller (1983) 152 CLR 570 at 608 thus:

What is and what is not part of the one controversy depends on what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct and relationships.  The scope of a controversy which constitutes a matter is not ascertained merely by reference to the proceedings which a party may institute, but may be illuminated by the conduct of those proceedings and especially by the pleadings in which the issues in controversy are defined and the claims for relief are set out.  But in the end, it is a matter of impression and of practical judgment whether a non-federal claim and a federal claim joined in a proceeding are within the scope of one controversy and thus within the ambit of a matter.

10                        The authoritative nature of that statement has been repeatedly accepted: Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261 at 294 per Mason, Brennan and Deane JJ; Re Wakim; ex parte McNally (1999) 198 CLR 516 at 584 [135] per Gummow and Hayne JJ (with whom Gleeson CJ and Gaudron J agreed at 546 [25]-[26]), 563 [73] per McHugh J (“Re Wakim”).

11                        Thirdly, there will be occasions – the present case affords a convenient example – where the impressions and practical judgments contemplated by Fencott v Muller will lead to the conclusion that the matter is not so simply identified or even located.  Thus it is possible for one matter to find itself in several courts: Re Wakim at 575 [138] per Gummow and Hayne JJ (with whom Gleeson CJ and Gaudron J agreed at 546 [25] - [26]).  So much, in a sense, flows from the fact that circumstances may conspire to have different, perhaps even overlapping, parts of one dispute in several places.

12                        Fourthly, it is not necessary for there to be a matter arising under a law made by the Parliament that a claim be made by the moving party for federal relief.   No federal claim was made by any party in the proceedings the subject of the applications in the High Court in Re Wakim.  In that case, federal jurisdiction was attracted simply because the matter, properly understood, included not only the common law claims brought by Mr Wakim against Mr Darvall but also, by reason of a common substratum of fact, a dispute between Mr Wakim and the Official Trustee, the latter arising under the Bankruptcy Act 1966 (Cth)in federal jurisdiction. So too in Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212 the Full Court held that the non-federal components of a matter continued to be within the jurisdiction of the court notwithstanding the dismissal of the federal claim.

Consideration

13                        Each of the agents has commenced separate proceedings against Combined seeking orders that would require Combined to pay to each of them sums reflecting their alleged entitlements to annual leave and long service leave.  They each also seek the imposition upon Combined of a pecuniary penalty.  The Chief Industrial Magistrate’s Court’s jurisdiction to make orders vindicating those claims is conferred by s 719 of the Workplace Relations Act 1996 (Cth) (“the Act”).  Further, the claims for annual leave are expressly couched in terms which invoke s 232 of that Act.

14                        It follows that the proceedings before the Chief Industrial Magistrate’s Court are wholly in federal jurisdiction.  Those proceedings, however, reflect only part of the dispute between each agent and Combined.  That part concerns the question of whether each agent is an employee, whether each is entitled to the leave claimed and whether a penalty should be imposed upon Combined. 

15                        That, however, is not the whole of each of the disputes between Combined and its agents.  Each also involves a claim by Combined that the agent should be prevented – by estoppel and otherwise – from asserting that he is an employee.  Each includes Combined’s assertion of an entitlement to an indemnity from the agent for the costs and expenses of the proceedings before the Chief Industrial Magistrate’s Court together with its allegation that that agent has misled it.  Those claims are inextricably bound up with the issues before the Chief Industrial Magistrate’s Court in each agent’s case.  Clearly the claim by Combined against each agent in this Court and the claim by each agent against Combined in the Chief Industrial Magistrate’s Court arise largely out of the same substratum of fact.  The two substrata are not identical but it is not necessary that they wholly coincide: Re Wakim at 564 [75], 585 [140].    

16                        It follows that there is, as between each agent and Combined, a single matter comprising the basic question of whether each agent is an employee, related questions of estoppel and misleading conduct and remedial issues relating to money and penalties.

17                        Each of those single matters is currently, perhaps unfortunately, pending in two courts.  There is no doubt that each of these individual matters is federal – the agents’ claims under the Act permit of no other answer.  It follows that this Court has jurisdiction to entertain each of those matters.  So viewed each claim made by Combined against each agent forms part of a matter arising under a law of Parliament and, hence, is within the jurisdiction conferred by s 39B(1A)(c) of the Judiciary Act 1903 (Cth).

18                        It was submitted by the agents that because there was no federal claim being made in this Court that the claim could not be in federal jurisdiction.  However, for reasons already given that submission cannot be sustained – what is required is not a federal claim but, rather, a matter arising under a law of the Parliament.  In that regard it is to be noted that the agents could cross-claim against Combined in the present proceedings for their entitlements and seek the same relief sought before the Chief Industrial Magistrate’s Court.  That situation is analogous to that in Re Wakim at 586 [142].

19                        Combined also submitted that the proceedings were within jurisdiction because of a claim brought by it under s 52 of the Trade Practices Act 1974 (Cth)against two corporations through which two other agents conducted their businesses.  Those claims are brought in the present proceedings.  In light of my conclusion that the claims against each agent are part of a federal matter, it is not strictly necessary to consider the correctness of this argument.   

20                        However, if it were necessary to consider it, I would not think it well-founded. Combined’s points were, in effect, three:

(a)        each claim involving an agent involved a question about the operation of a clause in that agent’s contract which appeared to stipulate that the agent was an independent contractor;

(b)       the relationship between Combined and the agents had involved attendance by the agents at training courses conducted by Combined which were likely to have been in similar format or content;

(c)        the damages sought in this Court included amounts to compensate Combined for the costs of the proceedings before the Chief Industrial Magistrate’s Court.  Those proceedings are costs-free by reason of s 824 of the Act.  Combined submits that the costs of its preparation of certain common aspects of those claims is a species of loss which is caused to it by the agents’ commencement of proceedings in that court.  It would, so Combined submitted, be entitled to recover those commonly incurred costs from any, each or all of the agents.

21                        The matters in subparagraphs (a) and (b) above were said to go to a common substratum of facts; the matter in paragraph (c) was said to show that the damages claims against each agent were connected.  Such interconnectedness has been said more readily to permit the drawing of the inference that there is a common substratum of facts: Re Wakim at 588 [147].

22                        I do not think that the matters of commonality referred to in paragraphs (a) and (b) are sufficient to constitute all the claims as one matter.  On any view, the factual inquiries in relation to each employee will be different.  Accepting that there is some overlap, I do not think that it suffices to indicate the presence of a single matter. 

23                        The matter in paragraph (c) – the common costs question – has given me somewhat more pause.  However, I think it too should be rejected.  It is an interesting feature of the argument that Combined is entitled to these common costs damages whether or not all of the claims are heard together in the Chief Industrial Magistrate’s Court.  If those claims were to be heard separately, it is difficult to see how this Court could do otherwise than impose upon each agent his proportionate share of the common costs damages – any other result would appear to be quite unjust.  On the other hand, there are considerable problems of analysis in integrating that observation – which concerns the likely disposition of relief – with the issues of jurisdiction which are, at least in this context, concerned with whether there is a common substratum of fact.  

24                        The common costs damages are, it should be accepted, an additional element of commonality.  However, they lack the immediacy of the equivalent damages claims in Re Wakim.  There the damages award against Mr Darvall would immediately reduce the damages awarded against the Official Trustee and Mr McNally (and vice versa).  There was a direct, immediate and arithmetical relationship between them. In this case, it is, I accept, possible that the damages award against one agent may reduce the damages awarded against one or more of the others.  However, this result – unlike the position in Re Wakim –  is by no means inevitable.  If the Court decides to apportion the damages between the agents it will not occur.  It seems to me, in that circumstance, that this diminishes the commonality of the claims.

25                        Taking all of these facts, that is (a), (b) and (c) together, I do not think that the claims involving all of the agents constitute a single matter.

Contracting out

26                        The agents next submitted that Combined’s claim for indemnity under each of their agreements was precluded by the terms of the Long Service Leave Act 1955 (NSW).  I am prepared to assume in the agents’ favour that the presence of a clause in a contract between an employer and an employee which sought to relieve the former of its obligations under that Act would be unenforceable.  Indeed, as the agents noted, there is direct authority to that effect: Byrne v Australian Airlines Limited (1995) 185 CLR 410 at 421 per Brennan CJ, Dawson and Toohey JJ. 

27                        However, it is not self-evident that an indemnity amounts to a contracting out.  The High Court’s decision in Qantas Airways Limited v Aravco Limited(1996) 185 CLR 43 shows that an indemnity against liability incurred by reason of a breach of a statutory warranty imposed by the Trade Practices Act 1974 (Cth) did not “exclude, restrict or modify” a liability arising from the statutory warranty and hence did not fall foul of s 68(1) of that Act which rendered contractual provisions having that effect void.  Part of the reasoning of the Court was that the indemnity could not be pleaded as a defence to the claim for breach of warranty: 185 CLR 51-52 per Brennan CJ, Gaudron, McHugh and Gummow JJ.  A similar view may be applicable here.  In that circumstance, I would not be prepared to give summary judgment.

Order 6 rule 2

28                        The agents drew attention to this rule which provides:

Two or more persons may be joined as applicants or respondents in any proceeding:

(a)        where:

(i)        if a separate proceeding were brought by or against each of them, as the case may be, some common question of law or of fact would arise in all the proceedings; and

(ii)       all rights to relief claimed in the proceeding (whether they are joint, several or alternative) are in respect of or arise out of the same transaction or series of transactions; or

(b)        where the Court gives leave so to do.

29                        They submitted that subrule (ii) was not satisfied because the claims did not arise out of the same transaction or series of transactions.  A restrictive approach to this question has generally been taken in this Court: Commonwealth Bank of Australia v Peto (No 2) (2006) 152 FCR 362 at 374 [45] per Rares J.  I do not think that that restrictive approach is satisfied in light of my rejection of the argument that the claims against all respondents constituted a single matter.

30                        The question then arises whether, as Combined submitted, leave should be granted under subrule (b).  The matters relevant to the exercise of that power include, first, the need to avoid a multiplicity of proceedings; secondly, the need to ensure that parties are not swept up in proceedings which largely do not concern them; thirdly, a consideration of whether the claims, once severed, might nevertheless be heard together; fourthly, the interests of justice.

31                        Each of these matters points to a grant of leave.  The agents and Combined are locked in two substantive actions already.  Now further to divide the proceedings would be productive of unnecessary expense and delay.  Further, it is by no means clear that all of the claims, thus separated, would not be heard together.  As a practical matter, regardless of whether the proceeding takes the form of one or multiple applications, it or they will all travel together in my docket.  Accordingly, I see no sensible reason not to grant leave.  If circumstances change in a material way, leave may be revoked.

32                        The motion is dismissed with costs.  I grant leave to the applicant pursuant to O 6 to proceed against the respondents jointly.

Associate:

Dated:         20 May 2009