FEDERAL COURT OF AUSTRALIA

Sklavos v Australasian College of Dermatologists [2013] FCA 1065

THE COURT ORDERS THAT:

1.    As against the ninth to fourteenth respondents, the proceeding be dismissed.

2.    In respect of the eighth respondent, the parties notify the Court as soon as reasonably practicable whether, consistent with the reasons for judgment published today, the proceeding against him also ought to be dismissed.

3.    The proceeding be listed for further directions on 3 December 2013 at 9.30am or another date within 14 days of the completion of the mediation, whichever is the later.

4.    The parties notify the Associate to Jagot J by email of the completion of the mediation within 3 days of it being completed and the outcome of the mediation insofar as it is not confidential to the parties.

5.    Liberty to restore on three days be granted to all parties.

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

REASONS FOR JUDGMENT

1.    THE INTERLOCUTORY APPLICATION

1    These reasons for judgment relate to an interlocutory application by the second to sixteenth respondents to this proceeding to have the claims against them struck out on the grounds that: (i) they have been unnecessarily joined as parties (r 9.08 of the Federal Court Rules 2011 (the FCR)), (ii) the claims against them are likely to cause prejudice, embarrassment or delay in the proceeding (r 16.21(d) of the FCR) or they fail to disclose a reasonable cause of action or other case appropriate to the nature of the pleading (r 16.21(e) of the FCR).

2.    BACKGROUND

2    The applicant, Angelo Sklavos, is a doctor. In 2007 Dr Sklavos became a trainee of the first respondent, the Australasian College of Dermatologists (the College) with the objective of becoming admitted as a Fellow of the College which would enable him to practice in Australia as a specialist dermatologist. The College is a corporation and is the only body accredited by the Australian Medical Council under relevant State and Territory laws in Australia to educate, train and ensure the professional development of medical practitioners who wish to be recognised and practice as specialist dermatologists. The second to sixteenth respondents, at one time or another, were or are members of the Board of the College.

3    Under the constitution of the College a medical practitioner may become a Fellow of the College by either undertaking and completing a training program approved by the Board and passing an examination by the College or in lieu of the training program and examination having such other qualifications and experience as the Board considers appropriate.

4    Dr Sklavos’s relationship with the College deteriorated after certain allegations about his professional conduct were made, publicised, and then apparently withdrawn. Dr Sklavos contends that as a result of these and subsequent events he developed a psychiatric disorder, being a situational phobia which involves marked fear and anxiety about sitting any examination by the College. Dr Sklavos requested that the College make adjustments for this disability to enable him to sit the College’s exams. However, he was not satisfied with the adjustments the College was prepared to make and contends that, as a result, his condition worsened to the point where he is unable to sit exams by the College. Accordingly, Dr Sklavos sought admission as a Fellow based on the second alternative pathway of having such other qualifications and experience as the Board considers appropriate, which was declined.

5    On 29 June 2012 Dr Sklavos lodged a complaint of unlawful discrimination with the Australian Human Rights Commission (the AHRC) under s 46P of the Australian Human Rights Commission Act 1986 (Cth) (the AHRC Act). In Part B of the complaint form, under the heading “who are you complaining about? (the respondent)”, Dr Sklavos identified two organisations. First, the College. Second, the Board of the College “as constituted in the period commencing 10 February 2012 and subsequently” on the basis that the “the Board is the body that administers the College…”.

6    The date of 10 February 2012 is when, according to a subsequent letter dated 21 February 2012, the Board of the College met and considered Dr Sklavos’s application to be elected as a Fellow of the College by the second pathway of having such other qualifications and experience as the Board considers appropriate. The letter of 21 February 2012 from the College said that “the decision of the Board is that your application is declined” and to be eligible for election as a Fellow Dr Sklavos was required to undertake and complete a training program approved by the Board and pass an examination by the College (in other words, the first pathway to election as a Fellow in the College’s constitution).

7    On 17 April 2013 a delegate of the President of the AHRC terminated the complaint under s 46PH(2) of the AHRC Act on the ground that there was no reasonable prospect of the matter being settled by conciliation.

8    On 5 June 2013 Dr Sklavos commenced this proceeding.

9    In this proceeding Dr Sklavos claims against the College: (i) damages for breach of contract, (ii) damages for negligence, (iii) that the examination requirements involve unlawful restraints of trade which are void and unenforceable, and (iv) breaches of the Disability Discrimination Act 1992 (Cth) (the DD Act) for which he claims relief including compensation. As against the second to sixteenth respondents, Dr Sklavos claims breaches of the DD Act, and compensation.

10    Before the hearing of the interlocutory application Dr Sklavos conceded that the fifteenth and sixteenth respondents were not proper parties to this proceeding as they were not members of the Board of the College at any time Dr Sklavos contends to be material to this proceeding. Accordingly, I ordered that the claims against the fifteenth and sixteenth respondents be dismissed and that Dr Sklavos pay their costs as agreed or taxed. Dr Sklavos maintains that the second to fourteenth respondents are proper parties to this proceeding and they should neither be removed as parties nor the claims against them be struck out.

3.    THE CASE FOR REMOVAL OR STRIKE OUT

11    For the sake of convenience I shall use the term “respondents” from here on to refer to the second to fourteenth respondents. The first respondent has no role to play in this interlocutory application.

12    The respondents contend that they should be removed as parties and/or the claims against them be struck out on five separate grounds. First, that the provisions and operation of the AHRC Act do not permit the respondents to be respondents to this proceeding. Secondly, that the provisions on which Dr Sklavos relies, ss 22 and 27 of the DD Act, do not apply to the respondents. Thirdly, that the pleading does not disclose any conduct by the respondents capable of enlivening ss 6(1) and/or (2) of the DD Act. Fourthly, that in any event the members of the Board cannot be liable as individuals in circumstances where they are not alleged to have done anything other than perform their functions as members of the Board. Fifthly, that the claims against the respondents lack utility.

3.1    The AHRC Act ground

13    To the extent that the respondents relied on the argument that the complaint Dr Sklavos lodged with the AHRC did not nominate the members of the Board as individual respondents, the submission must be rejected. It was clear from the terms of the complaint lodged that Dr Sklavos contended that the members of the Board, as well as the College, had engaged in unlawful discrimination. It was not necessary for Dr Sklavos, in the complaint, to identify each Board member in order to ensure that his complaint was a complaint against members of the Board.

14    It is true that members of the Board change from time to time. In his complaint Dr Sklavos identified the respondents to his complaint as the College and the members of the Board “as constituted in the period commencing 10 February 2012 and subsequently”. There is no doubt from the terms of the complaint that, in so doing, Dr Sklavos was intending to refer to the Board as constituted on 10 February 2012 which had decided to reject his application for election as a member and notified him that he was required to undertake the training approved by the Board and pass examination by the College and the Board as subsequently constituted which, it is said, maintained that requirement. Again, to the extent that the respondents’ case relied on lack of identification of members of the Board as respondents to the complaint, the submission cannot be accepted.

15    The real issue, it seems to me, is whether the AHRC Act permits a complaint to be made in that form. It may be taken that, subject to the respondents’ other arguments to the contrary, the AHRC Act permitted Dr Sklavos to complain about unlawful discrimination by the members of the Board as at 10 February 2012, being the date that the Board rejected Dr Sklavos’s application for election as a Fellow of the College based on the alternative of having such other qualifications and experience as the Board considers appropriate. Hence, in terms of the AHRC Act at least, any person who was a member of the Board as at 10 February 2012 was properly identified as a respondent to the complaint when the complaint was lodged. However, some of the respondents were not members of the Board as at 10 February 2012. They became (and in some cases also ceased to be) members subsequently.

16    The respondents say that the complaint fails to identify any conduct of the Board subsequent to 10 February 2012. Dr Sklavos says that the imposition of the requirement that he undertake training approved by the Board and pass the examinations of the College is a continuing one maintained by the Board. The respondents say also that the “clock stops” when the complaint is lodged and the subject matter of the complaint is confined to the period up to 29 June 2012 and not beyond (citing in support Travers v State of New South Wales [2000] FCA 1565 at [8], Charles v Fuji Xerox Australia Pty Ltd (2000) 105 FCR 573; [2000] FCA 1531 at [35]-[36]; Haraksin v Murrays Australia Ltd (No 2) (2013) 211 FCR 1; [2013] FCA 217 at [83]; Rana v Commonwealth of Australia [2013] FCA 189 at [48]; Wu v University of Western Sydney [2011] FCA 1143 at [67]; Robinson v NSW Police Service [2011] FCA 1081 at [22] and [27] and Robinson v Commissioner of Police (NSW Police Force) [2013] FCAFC 64).

17    In Travers v State of New South Wales at [8] Lehane J said:

No doubt it was intended that a terminated complaint should not be used to launch an application to the Court, effectively bypassing the procedures provided by the legislation, alleging discrimination other than that of which a complaint had been made or covering a course of conduct substantially wider - or beginning substantially earlier - than that initially complained of. At the same time, it must be recognised that the terms of s 46PO(3) suggest a degree of flexibility ("or the same in substance as", "or substantially the same") and a complaint, which usually will not be drawn by a lawyer, should not be construed as if it were a pleading: Commonwealth v Sex Discrimination Commissioner (1998) 90 FCR 179 at 188. Indeed, the initial complaint may be in quite brief and general terms, the detail being elicited in the course of inquiries by the relevant Commissioner: Simplot Australia Pty Ltd v Human Rights and Equal Opportunity Commission (1996) 69 FCR 90 at 94. It may well be that the ambit of a complaint is to be ascertained, for the purpose of s 46PO(3), not by considering its initial form but by considering the shape which it had assumed at the time of its termination. Counsel for the State contended that the "complaint" to be considered for the purpose of s 46PO(3) in this case comprised the letter of 10 February 1997 and nothing else. Although there is no need to reach a firm conclusion about it, there is in my view much to be said for the applicant's submission to the contrary.

18    In Charles v Fuji Xerox Australia Katz J considered s 46PO(3) of the AHRC Act which provides that:

(3)    The unlawful discrimination alleged in the application:

(a)    must be the same as (or the same in substance as) the unlawful discrimination that was the subject of the terminated complaint; or

(b)    must arise out of the same (or substantially the same) acts ... that were the subject of the terminated complaint.

19    At [35] Katz J said:

Although that subsection only provides in terms for limits on what may be alleged in an application to this Court, I accept that it has the effect also of limiting by implication the ability of this Court to deal with allegations made in an application before it, including relevantly allegations of unlawful disability discrimination in employment.

20    The other decisions make points to the same effect.

21    In the present case, and despite some suggestions by the parties to the contrary, there is no issue about the complaint having been materially amended after lodgement. While Dr Sklavos did clarify the identity of the members of the Board in October 2012, as I have said, there is no doubt that his complaint as lodged alleged unlawful discrimination by members of the Board as constituted on 10 February 2012 and subsequently. The real issue is whether, having regard to the statutory scheme, the complaint could be framed so as to refer to members of the Board as constituted subsequently to 10 February 2012.

22    Dr Sklavos’s justification for framing the complaint in this way, as noted, is that at all times on and from 10 February 2012 he has wanted to be elected as a Fellow of the College and that the Board as constituted from time to time has maintained the decision that was made on 10 February 2012 to reject his application. I consider this purported characterisation of the conduct complained of contrary to the facts and the scheme of the AHRC Act. The characterisation incorrectly assumes that the Board has done something after 10 February 2012 (apart from notify Dr Sklavos of the decision by letter dated 21 February 2012) capable of being identified as an act, practice or omission. However, this is inconsistent with the scheme established by the constitution for election to the College as a Fellow. The constitution requires an applicant for election to make an application for election. It requires the Board to consider the application, as well as the report and recommendation of the Board of Education and all relevant information, and in its absolute discretion may decide to elect the candidate, reject the application or suspend final determination for further evidence as to the candidate’s qualifications (cl 11.1.1 of the constitution as in force at 10 February 2012). There is no provision in the constitution which requires or enables the Board to elect a person to membership as a Fellow without an application having been made. Nor is there a provision which requires or enables the Board, unilaterally, to continue to consider an application or take any action in respect of it after it has decided to accept or to reject the application. Accordingly, the Board has not continued to do anything after 10 February 2012. It has not maintained any requirement. It made a decision on 10 February 2012 which was communicated to Dr Sklavos on 21 February 2012 and nothing more. Accordingly, respondents who were not members of the Board on 10 February 2012 cannot have engaged in unlawful discrimination against Dr Sklavos. Framing the complaint by reference to the Board as constituted on 10 February 2012 and subsequently cannot change this fundamental fact.

23    For these reasons, properly construed (even with all due liberality), the complaint cannot in substance be a complaint against respondents who were not members of the Board on 10 February 2012. It follows from s 46PO(3) of the AHRC Act that those respondents cannot be parties to this proceeding. Alternatively, if I am incorrect in my approach to the AHRC Act the same analysis means that there is no arguable cause of action against respondents who were not members of the Board on 10 February 2012. The case against them is doomed to fail given the terms of the constitution of the College. The case is liable to be and should be struck out on the grounds that it is obviously untenable consistent with the principles identified in General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 at 129.

24    Respondents who were not members of the Board on 10 February 2012 (leaving aside the eighth respondent whose position is being clarified) are the ninth to fourteenth respondents. The proceedings as against the ninth to fourteenth respondents, accordingly, should be dismissed.

3.2    The DD Act grounds

25    I do not accept the respondents’ argument that s 22(1) and (2) of the DD Act are incapable of applying to the Board. The reason for this is that ss 22(1) and (2) refer to an “educational authority” and “educational authority” is defined in s 4(1) of the DD Act to mean “a body or person administering an educational institution”. It is arguable that the Board is an “educational authority” and that its conduct enlivens one or more of the provisions of ss 22(1) or 22(2). In any event, the respondents’ arguments do not enable any conclusion to be reached that the claims are so obviously untenable that they should not be permitted to go to trial.

26    In terms of s 27 of the DD Act, similarly, the claim that the College is a club within the meaning of the DD Act is reasonably arguable. So too is the claim that the Board is a committee of management of the club. I do not presently find the argument that ss 27(1) and (2) require a person to elect to complain of unlawful discrimination against either the club or the committee of management of the club or the a member of the committee, but preclude a complaint against all three classes, persuasive. Suffice to say the argument to the contrary is reasonable and thus the power to strike out is not enlivened and should not be exercised.

27    For these reasons I am not satisfied that there is a tenable basis for the claims that the respondents who were members of the Board as at 10 February 2012 contravened ss 6(1) and/or (2) of the DD Act. The claims are reasonably arguable which is sufficient to preclude a strike out.

3.3    The no liability as individuals ground

28    This is a difficult argument on which to base a strike out. While the principles of joint tortfeasorship of directors and companies are well established, there are two difficulties for the respondent in attempting to obtain a strike out on this basis. First, the ultimate outcome usually depends on an assessment of whole of the evidence. Even if it be the case (which I accept) that the current pleading does not allege that the Board members did anything other than vote on Dr Sklavos’s application for election that is not a reason to exercise the power to remove the respondents from the proceeding altogether. Second, the potential liability of the board members for breach of the DD Act may not depend on these common law principles. It is arguable that their potential liability is governed by the provisions of the DD Act and, in particular, the question whether the Board is an “educational authority” given the functions vested in it by the constitution of the College. As noted, I consider it reasonably arguable that the Board is an “educational authority”. The members of the Board thus may be liable under the DD Act without any need for recourse to principles about the potential liability of officers of a corporation.

3.4    The lack of utility ground

29    Board members are fully indemnified by the College for their conduct as Board members. Accordingly, to the extent that there is a claim for damages against the Board members for breach of the DD Act the utility of the proceeding against them is not immediately apparent. Insofar as the ninth to fourteenth respondents are no longer members of the Board they cannot practically take any action and thus no order to that effect would be made against them. At best there would be scope for a bare declaration that they had engaged in unlawful discrimination but, again, the utility of that is also not immediately apparent.

30    That said, I do not consider that the proceeding against the respondents may be simply struck out on this basis. Dr Sklavos has claimed damages for breach of the DD Act. Although the damage he alleges is wholly unparticularised and there is no pleading of how or why any individual Board member as at 10 February 2012 could be liable for any such damage, this is an inadequacy of the pleading. It does not support removal of any respondent. It indicates the need for the damages claim to be properly pleaded and particularised.

4.    CONCLUSIONS

31    The proceeding should be dismissed as against the ninth to fourteenth respondents as they were not members of the Board on 10 February 2012 which was the only date on which any respondent engaged in any act, practice or omission in respect of Dr Sklavos. Alternatively, the claims against the ninth to fourteenth respondent are simply untenable. Otherwise the proceeding against the individual respondents is reasonably arguable and not amenable to any exercise of power on the ground that the parties are unnecessary or the claims untenable. This is because the Board members as at 10 February 2012, by reason of the terms of the College’s constitution, arguably performed functions as an “educational authority” on that date which arguably involved unlawful discrimination against Dr Sklavos. Dr Sklavos should not be precluded from arguing his claims for damages against those Board members merely because the College has indemnified the members. Indemnities are matters between the Board members and the College and do not have any necessary effect on Dr Sklavos’s forensic decisions.

32    That said, these reasons for judgment should not be seen as any form of encouragement to the joinder of every possible party to a proceeding irrespective of the utility of any relief that might be obtained against them. In the present case there is a real issue about the utility of the claims against the second to seventh respondents (the question whether the eighth respondent was a Board member as at 10 February 2012 remaining open at this stage). To the extent they are no longer members of the Board, they cannot be ordered to take any practical action even if they are found to have engaged in unlawful discrimination. To the extent they are proved to have done anything attracting personal liability, they are indemnified by the College and Dr Sklavos cannot recover more than once for the same damage. While I am prepared to allow Dr Sklavos an opportunity to fully plead his damages claim against the remaining respondents in order to ascertain if there truly is any utility, Dr Sklavos and those who advise him need to be mindful of ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth).

33    Section 37M(1) provides that:

(1)    The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes:

(a)    according to law; and

(b)    as quickly, inexpensively and efficiently as possible.

34    Sections 37N(1) and (2) are in these terms:

(1)    The parties to a civil proceeding before the Court must conduct the proceeding (including negotiations for settlement of the dispute to which the proceeding relates) in a way that is consistent with the overarching purpose.

(2)    A party’s lawyer must, in the conduct of a civil proceeding before the Court (including negotiations for settlement) on the party’s behalf:

(a)    take account of the duty imposed on the party by subsection (1); and

(b)    assist the party to comply with the duty.

…

(4)    In exercising the discretion to award costs in a civil proceeding, the Court or a Judge must take account of any failure to comply with the duty imposed by subsection (1) or (2).

(5)    If the Court or a Judge orders a lawyer to bear costs personally because of a failure to comply with the duty imposed by subsection (2), the lawyer must not recover the costs from his or her client.

35    These provisions are not merely exhortatory. The duty is real and can be enforced, if necessary, by appropriate costs orders. The simple fact is that the utility of any claim by Dr Sklavos against individual Board members is by no means clear at the present. It is not apparent that Dr Sklavos cannot obtain all relevant relief from a claim against the College alone. As such, it is not apparent as matters presently stand that the constitution of this proceeding is consistent with the overarching purpose. Even if the pleading is particularised and the claims against the second to seventh (and possibly eighth respondents) are permitted to go to trial it may well be that the position remains that Dr Sklavos can obtain all relevant relief from a claim against the College alone. In that event, while the powers to remove parties and/or to strike out a claim may not be enlivened, the powers to make special orders for costs, including indemnity costs, by reason of a failure to comply with the overarching obligation may be enlivened. In a case where all relevant relief can be obtained against a single party, in this case the College, that circumstance warrants careful consideration by Dr Sklavos and those advising him.

36    I will make orders consistent with the reasons set out above.

Associate:

Dated:    23 October 2013