FEDERAL COURT OF AUSTRALIA

Lipson v Penrice Soda Products Pty Ltd [2012] FCA 172

THE COURT ORDERS THAT:

1.    The prospective respondent make discovery on oath of:

(a)    any document dated from 22 October 2002 to the present time which bears the heading “Conditions and Procedures Policy for Staff Redundancy” or a similar title, whether or not that document is said to apply to staff covered by an agreement or not (other than documents already discovered to the prospective applicants);

(b)    any document entitled “Redundancy Policy” or a similar title and dated between 22 October 2002 and 1 July 2011, which records a policy for redundancy payments;

(c)    any document which records the process of the decision to make redundant the prospective applicants or any of them (which may be redacted to delete or obscure the names of any other employees of the prospective respondent referred to in those documents); and

(d)    any document created or dated from 1 May 2011 that records the process by which the “Redundancy Policy” of 1 July 2011 came to be adopted, including in particular any draft of that document or memorandum prepared for, or submitted to, senior management for consideration and approval.

2.    The said discovery be given by 23 March 2012.

3.    The parties be at liberty to make such application as to costs as they may be advised within 14 days, to the intent that the issue of costs of the application then be resolved on their written submissions.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1        This is an application by three former employees of the prospective respondent for pre-action discovery under r 7.23 of the Federal Court Rules 2011.

2        The prospective applicants accept that the orders sought in the application are somewhat wide. They were refined in the course of argument to seek orders that the prospective respondent give discovery to them of all documentation, including but not limited to, reports, reviews, recommendations, memoranda, intra-office and external emails and Board Minutes relevant to:

1.    the timing of the decision to make redundant the roles of each of the prospective applicants;

2.    the timing of the decision to issue a redundancy policy on 1 July 2011; and

3.    the existence of a policy or policies addressing redundancy for staff employed by the prospective respondent from any time since 28 April 1982.

3        For reasons which appear below, I propose to make orders on the application, but they will be more confined than those sought.

4        Rule 7.23 of the Federal Court Rules 2011 provides:

(1)    A prospective applicant may apply to the Court for an order under subrule (2) if the prospective applicant:

(a)    reasonably believes that he or she may have the right to obtain relief in the Court from a prospective respondent whose description has been ascertained; and

(b)    after making reasonable inquiries, does not have sufficient information to decide whether to start a proceeding in the Court to obtain that relief; and

(c)    reasonably believes that:

(i)    the prospective respondent has or is likely to have or has had or is likely to have had in the prospective respondent’s control documents directly relevant to the question whether the prospective applicant has a right to obtain the relief; and

(ii)    inspection of the documents by the prospective applicant would assist in making the decision.

(2)    If the Court is satisfied about matters mentioned in subrule (1), the Court may order the prospective respondent to give discovery to the prospective applicant of the documents of the kind mentioned in subparagraph (1)(c)(i).

5        The application is supported by the material contained in, and exhibited to, two affidavits of a solicitor for the prospective applicants, of 21 December 2011 and 21 February 2012. The exhibited material included correspondence exchanged between solicitors for the prospective applicants and the prospective respondent. The prospective respondent did not adduce any evidence on the application, but having regard to the terms of r 7.23, that is of no moment in terms of resolution of the application.

6        The application was resisted by the prospective respondent on the grounds that:

(a)    the material in support of the application does not identify any cause of action or connection between the documents described and any potential cause of action, and alternatively that the potential cause of action is so vaguely expressed as to render it impracticable for the Court properly to apply the tests prescribed by r 7.23;

(b)    the prospective applicants have not adduced evidence to show that they have reasonable cause to believe that they have a right to claim relief in this Court from the prospective respondent, and that mere assertion of a belief of such a case is insufficient: John Holland Services Pty Ltd v Terranora Group Management Pty Ltd [2004] FCA 679 at [13]-[17];

(c)    the prospective applicants have sufficient information to decide whether to start a proceeding in this Court to obtain the relief claimed;

(d)    the prospective applicants have not demonstrated that they have reasonable belief that the prospective respondent has or is likely to have or have had in its control documents directly relevant to the question whether the prospective applicants have a right to obtain the relief and, alternatively, that the material available suggests that the prospective applicants are seeking to identify an unidentified cause of action rather than to seek material directly relevant to the proposed causes or cause of action; and

(e)    in any event, the documents sought are far too widely expressed, and could not satisfy the “directly relevant” test.

7        The clear identification of the potential causes of action which the prospective applicants seek to rely upon emerged only clearly in the course of the submissions, albeit based upon material in the evidence.

8        That material demonstrates that each of the prospective applicants was until 30 August 2011 employed by the prospective respondent for a period of some years varying between 29 and 6 years. Each was given notice on 17 or 18 July 2011 that they were to be retrenched from that date by reason of a need to reduce labour costs under which it was operating. There is no contest that the decision to reduce the staff, or to select the particular persons comprising the prospective applicants as persons to be retrenched, was an available one. At the time of the giving of the notice of retrenchment, a “termination pay calculation” was included. Relevantly, that included a “Severence (sic) payment” calculated in accordance with a document entitled “Redundancy Policy” of the prospective respondent issued on 1 July 2011. Under that policy, severance payment was to be paid to all retrenched employees with one year or more of continuous service on the basis of two weeks pay at the nominal pay rate for every completed year of service, or part of a year of service, to a maximum of 16 weeks. In the letters of 17 and 18 July 2001, the following appeared as part of the content of the letter explaining the severance pay:

You will be entitled to severance pay consistent with our policy of full redundancy in addition to the payment of your accrued statutory entitlements. A calculation is attached.

9        The retrenchments were each to take place from 30 August 2011 but with a notice period of four weeks (payment in lieu), therefore effectively from 30 August 2011. Each of the prospective applicants was paid any accrued long service leave and annual leave entitlements, with four weeks notice, and the mentioned severance payment.

10        The prospective claim concerns the asserted entitlement to a significantly increased severance payment in the case of each of the prospective applicants. That claim was advanced, as the argument exposed, on the basis that prior to 1 July 2011 the prospective applicants were entitled to a significantly higher severance payment. The evidence available suggests that the prospective respondent had in place a redundancy payment arrangement under the heading “Conditions and Procedures Policy for Staff Redundancy” issued on 22 October 2002 (replacing an earlier version of 21 August 1997) under which the redundancy or severance allowance was to be paid for forced redundancy on the basis of four weeks per year of service with a maximum payout capped at 104 weeks. An unsigned copy of that document, apparently bearing the name of the prospective respondent and a space for signature by the Manager, Human Resources, is in evidence.

11        In essence, as I understood the contentions by Senior Counsel on behalf of the prospective applicants, it was contended that:

(i)    it was an express or alternatively implied condition of the contract of employment in each instance that they were entitled to redundancy payments at the rate specified in that document, or alternatively that there would be no change or reduction in the entitlement expressed in that document on a unilateral basis (the contract claim);

(ii)    that the Human Resources Standard Code of Conduct (the Code of Conduct) of the prospective respondent represents a series of reciprocal obligations between employees and the employer, enforceable as terms of the contract of employment, and breached by the substitution of an earlier redundancy entitlement with that specified in the document of 1 July 2011;

(iii)    that the prospective respondent, by effecting the significant reduction in the severance payment entitlement by the document of 1 July 2011, breached a duty of good faith and fair dealing implied into that contract, or engaged in unconscionable conduct, or engaged in misleading and deceptive conduct, by failing to inform the prospective applicants of the intention to change and diminish the severance pay entitlement or failed to comply with the obligation of engaging in ethical business practices contrary to the Code of Conduct.

Consequently, the courses of action foreshadowed appear to be that:

    the contract of employment was breached by the prospective respondent;

    the respective prospective respondent contravened s 18(1) and/or s 31 of the Australian Consumer Law (ACL) ;

    the prospective respondent engaged in conduct that is unconscionable, contrary to the unwritten law from time to time (s 20(1) of the ACL or probably more relevantly s 21 of the ACL).

12        It is not necessary to refer to those provisions in detail. There are illustrations where an employer has been found to have contravened provisions such as s 18(1) of the ACL: see eg Barrick v Qantas Flight Catering Ltd [2007] FCA 835; Australian Competition and Consumer Commission v Zanok Technologies Pty Ltd [2009] FCA 1124 (ACCC v Zanok); O’Neill v Medical Benefits Fund of Australia (2002) 122 FCR 455. It should be noted that both ss 18, 20, 21 and 31 of the ACL apply only to conduct in trade or commerce. There is a serious question as to whether the conduct of which the prospective applicants complain does amount to conduct in trade or commerce: see Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594; Wright v TNT Management Pty Ltd (1989) 15 NSWLR 679; ACCC v Zanok. The submissions did not explore the refinement of meaning in the concept of trade or commerce in relation to the present circumstances.

13        I note also that s 31 of the ACL, concerning misleading conduct relating to employment, does not appear to apply to the present circumstances in any event because its focus is on the offer of prospective employment rather than conduct once the employment relationship exists.

14        In those circumstances, I am prepared to accept that the prospective applicants, more probably through ss 18 and 21 of the ACL, have reason to believe that they may have the right to obtain relief in this Court from the prospective respondent. Accordingly, r 7.23(1)(a) is satisfied. I turn to consider the other criteria of r 7.23.

15        If the prospective claim were to be confined to the claim for damages for breach of contract, I would doubt that the prospective applicants have demonstrated that they do not have sufficient information to decide whether to start a proceeding in this Court to obtain relief. Indeed, there may be some doubt as to whether they could commence that proceeding in this Court simply for damages for breach of an employment contract (without considering Pt 2-2, Div 11 of the Fair Work Act 2009, an issue not raised by the applicants). However, in my view, the prospective applicants have made reasonable enquiries to determine whether they may have a claim under ss 18 and 21 of the ACL, and they have satisfied me that they do not have sufficient information to decide whether to start such a proceeding in this Court to obtain an order under those provisions of the ACL. In the event that they did so, the Court would be properly possessed of the matter, and could hear and determine all the claims which arose in relation to the matter, including any claims for breach of contract: see eg Fencott v Muller (1983) 152 CLR 570 at 607-610 per Mason, Murphy, Brennan and Deane JJ; Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 at 512 per Mason J; Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261; Re Wakim; Ex Parte McNally (1999) 198 CLR 511 at 585-586 per Gummow and Hayne JJ.

16        In relation to the existence of a Severance Policy for the prospective applicants, which existed prior to the document of 1 July 2011, the prospective respondent through its solicitors asserts that no “long standing redundancy policy” applicable to the prospective applicants exists or, more accurately, “appears” on the policy database of the prospective respondent, and it could at that time find no evidence of such a policy ever existing. It says that the redundancy formula referred to by them is the formula contained in the various Enterprise Agreements of the prospective respondent, but none of the prospective applicants are covered by Enterprise Agreements.

17        In my judgment, it has been shown that the prospective applicants reasonably believe that the prospective respondent has, or is likely to have or have had, in its control documents directly relevant to whether the prospective applicants have a right to obtain relief under ss 18 and 21 of the ACL. The document entitled “Conditions and Procedures Policy for Staff Redundancy” indicates potentially the existence of such a document, albeit that it is referred to as applying to “all staff covered by this agreement”. There is some evidence that that document was shown at least to one of the prospective applicants at about the time it apparently came into existence. The prospective respondent accepts that the document of 1 July 2011 does apply to the prospective applicants. It has notations at the bottom of each of its pages in which there is a space to record the date of the instrument which it replaces. In that space is a question mark. It also has a space to record the reason for the amendment. It is unclear what is to be amended. Against that space is the word “update”. I note also that the letter to each of the prospective applicants giving notice of termination referred to them being “entitled” to the severance pay consistent with the respective respondent’s policy.

18        Those matters are sufficient to persuade me that the prospective applicants reasonably believe that the prospective respondent had prior to 30 August 2011 documents which may have provided a different level of redundancy entitlement to which, arguably, they may have been entitled. The timing of the redundancy notices (given on 17 and 18 July 2011) in relation to the date of the redundancy or severance policy of 1 July 2011 also raises, in my mind, the prospect that the policy of 1 July 2011 may have been changed from an earlier policy which may have applied to the prospective applicants. On the other hand, it may be (as the prospective respondent asserts) that in relation to its staff not covered by enterprise agreements, and in the face of the likely need for redundancies of such staff, it determined to introduce a policy where none previously existed. In other words, I do not make a finding that there are such documents which might support one or other of those perspectives. I do find that the prospective applicants have reason to believe that that is the case.

19        I am also satisfied that inspection of those documents by the prospective applicants would assist them in making the decision whether to bring a claim of the nature referred to above.

20        In my view, having regard to those matters, it is appropriate to make an order that the prospective respondent give discovery on oath to the prospective applicants of documents which the prospective applicants reasonably believe that the prospective respondent has or has had relating to the matters referred to. However, as I have indicated, the claim for discovery is expressed too widely. I think it should be considerably more focused. There is no reason to think that the prospective respondent will take a subtle and perhaps inappropriate interpretation of any order which is made. I propose to order that the prospective respondent make discovery on oath of:

1.    any document dated from 22 October 2002 to the present time which bears the heading “Conditions and Procedures Policy for Staff Redundancy” or a similar title, whether or not that document is said to apply to staff covered by an agreement or not (other than documents already discovered to the prospective applicants);

2.    any document entitled “Redundancy Policy” or a similar title and dated between 22 October 2002 and 1 July 2011, which records a policy for redundancy payments;

3.    any document which records the process of the decision to make redundant the prospective applicants or any of them (which may be redacted to delete or obscure the names of any other employees of the prospective respondent referred to in those documents); and

4.    any document created or dated from 1 May 2011 that records the process by which the “Redundancy Policy” of 1 July 2011 came to be adopted, including in particular any draft of that document or memorandum prepared for, or submitted to, senior management for consideration and approval.

21        I will make orders accordingly.

22        As the parties have requested, I will hear them as to the costs of this application.

Associate:

Dated:    2 March 2012