FEDERAL COURT OF AUSTRALIA

Katke v Brosnan [2014] FCA 1050

THE COURT ORDERS THAT:

1.    The applicants have leave to appeal from the judgment of Greenwood J given on 10 September 2014.

2.    The appeal be listed for hearing in the Full Court and Appellate Sittings of the Court in Brisbane in the period 9 February – 6 March 2015 before a Full Court.

3.    The hearing be listed for an estimate of one day.

4.    The appellants within 28 days of today submit to the Registrar a draft of the index to Part A of the Appeal Book and Part B of the Appeal Book.

5.    In accordance with Practice Note APP2, not later than 4.00 pm 20 business days before the hearing of the appeal, the appellants must file and serve on the respondents its outline of submissions.

6.    In accordance with Practice Note APP2, not later than 4.00 pm 15 business days before the hearing of the appeal, the respondents must file and serve on the appellants a copy of its outline of submissions together with a list of materials it requires to be included in Part C of the Appeal Book.

7.    In accordance with Practice Note APP2, not later than 4.00 pm 10 business days before the hearing of the appeal, the appellants must file and serve on the respondents a copy of any submissions in reply.

8.    In accordance with Practice Note APP2, not later than 5 business days before the hearing of the appeal, the appellants must:

(a)    file four copies; and

(b)    serve on the respondents an appropriate number of copies

of Part C of the Appeal Book.

9.    Outlines of submissions not exceed 10 pages in length, including any annexures and be easily legible using a font size of at least 12 points and one and a half line spacing throughout, including in any footnotes and annexures. Italics or underlining must be used for legislation and case citations and boldface or italics may be used for occasional emphasis.

10.    Each party file and serve a list of authorities and legislation in accordance with Practice Note CM 2.

11.    Costs be reserved to the Full Court.

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

REASONS FOR JUDGMENT

1    The application before the Court seeks:

(a)    leave to appeal against orders made by the primary judge granting certain mandatory interlocutory injunctions against Health World Limited (“HWL”);

(b)    an order that the application for leave to appeal be heard and determined by a Full Court;

(c)    an order that the application for leave to appeal be heard concurrently with or immediately before the appeal; and

(d)    an order that the hearing of the application for leave to appeal and the appeal be expedited.

2    The parties seeking leave to appeal and the other orders are the first to the fourth respondents in the principal proceedings. I will refer to them as “the applicants” throughout these reasons. The first to the ninth respondents to this application are the applicants in the principal proceedings, and I will refer to them as “the respondents”.

3    In the principal proceedings the respondents allege that they were induced by misleading representations made by the applicants to enter into an agreement under which they sold their shares in HWL to one of the applicants, Metagenics Australia Pty Ltd. One of the orders sought is the transfer of the shares in HWL back to the respondents.

4    On 8 August 2014, following a four week trial the primary judge reserved his judgment. Two of the respondents, Alan Gee (“Gee”) and Graeme Joiner (“Joiner”), continued to be employed by HWL after the sale. On 18 August 2014, the applicants filed an application for orders to the effect that the employment agreements between HWL and each of Gee and Joiner be “extended in duration” until 14 days after judgment in the principal proceeding is delivered.

5    The primary judge gave judgment upon the interlocutory application on 10 September 2014. It involved urgency because, under their express terms, each of the employment agreements expired on 11 September 2014. The respondents contended before the primary judge that Gee and Joiner had been instrumental in the development and conduct of the business and that if new management staff were appointed the value of the business could be significantly eroded. This would affect the utility of any order that the shares be transferred back to them.

6    The applicants pointed out that HWL was not a party to the proceeding and argued, inter alia, that there was a set of contractual arrangements in place which, without any unlawful conduct on the part of HWL or anyone else, were simply to take their course according to their terms. They also argued that there was no prima facie case against HWL that could enliven the consideration of the balance of convenience.

7    The primary judge held, inter alia, that:

(a)    there was no legal right or equity sought to be vindicated by the grant of the interlocutory injunctions, so that the case falls outside the parameters of Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at [15]-[16];

(b)    the Court has to ensure, and has the power to protect, the integrity of its processes once set in motion, which extends to preserving the efficacy of the relief that might be granted in the principal proceeding;

(c)    there was no principled basis upon which the Court could make the orders sought by the respondents to “extend the duration” of the contracts;

(d)    it was appropriate for the Court to fashion orders involving joining HWL as a party and directing HWL to retain Gee and Joiner in their present roles after the expiration of the employment contracts; and

(e)    section 23 of the Federal Court of Australia Act 1976 (Cth) (“the Act”) and s 80 of the Trade Practices Act 1974 (Cth) provided a sufficient statutory foundation for the Court to make an order in aid of final relief or in aid of protecting the integrity of its processes once set in motion.

8    The Court has discretion as to whether to grant leave to appeal, but such leave will usually not be granted unless the judgment is attended by sufficient doubt to warrant the grant of leave and substantial injustice would result from the refusal of leave to appeal: DÉcor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-399 (“DÉcor Corporation Pty Ltd v Dart Industries Inc”); Minogue v Williams [2000] FCA 125 at [19] (“Minogue v Williams”). Leave will more readily be granted where the interlocutory decision affects substantive rights: DÉcor Corporation Pty Ltd v Dart Industries Inc at 400; Minogue v Williams at [19]. In such a case, leave will generally be granted if there is any doubt about the decision at first instance: Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (2000) 104 FCR 564 at [43].

9    The proposed grounds of appeal do not assert that the Court lacks jurisdiction to make asset preservation orders against third parties. The applicants argue that in circumstances where the orders compel HWL, an entity against which the respondents assert no legal right or equity, to enter into a contractual relationship of employer and employee with Gee and Joiner, the power was improperly exercised. They also argue that the orders are not sufficiently clear and precise. They also assert that they were denied procedural fairness as the orders made were not those that had been sought by the respondents.

10    The respondents submit that leave to appeal should not be granted because the appeal would have insufficient prospects of success. I consider that the applicants have demonstrated that the proposed grounds of appeal are at least arguable. It is undesirable for me to say more about that issue.

11    As the orders compel HWL to enter into a contractual relationship with Gee and Joiner, its substantive rights are affected. It is also relevant that HWL may be liable to punishment for contempt if it acts in breach of the orders. That, at least, takes the case out of the ordinary run of cases involving matters of practice and procedure.

12    The respondents submit that it has not been demonstrated that HWL is making any complaint about its substantive rights being affected. It points out that in the hearing before the primary judge, HWL’s attitude was that it would simply abide by the orders of the Court. On the other hand, the shares in HWL are owned by Metagenics Australia Pty Ltd, one of the applicants, and its financial interests are or may be affected by the orders in dispute. In any event, the legal representatives of the applicants have now indicated that they have instructions to appear on behalf of HWL and to support the application for leave to appeal, implying that HWL is now concerned about the affectation of its rights.

13    The respondents also argue that no injustice would result from the refusal of leave to appeal because there would be no utility in a grant of leave. The primary judge has indicated that he is likely to deliver judgment in the principal proceedings in November 2014. The appeal in the normal course would not be heard and determined prior to the expected date of delivery of the judgment. The respondents argue that once judgment is delivered the appeal will be redundant. They also argue that there are undertakings as to damages in place which will suffice to protect the applicants’ interests.

14    I do not think the asserted lack of utility is an adequate reason for denying the applicants leave to appeal. Although it is likely that the judgment will be delivered in November, that is not certain. Further, it is not clear that the appeal will lack utility after the judgment is delivered. The applicants assert that lack of clarity in the orders made means that they cannot determine precisely what HWL’s rights and liabilities are under its Court imposed relationship with Gee and Joiner. There may be some dispute as to those rights and liabilities. There may not be. In any event, I am not persuaded that there will necessarily be a lack of utility once the judgment in the principal proceedings is delivered.

15    I consider that it is appropriate to grant leave to appeal. It is unnecessary to direct that the application for leave to appeal be heard and determined by a Full Court.

16    That leaves the question of whether the hearing of the appeal should be expedited. In the ordinary course, the appeal would be heard in the February 2015 Full Court sittings, as the sittings in November 2014 are full. The respondents oppose any order for expedition.

17    Order 52 rule 37(1) of the former Federal Court Rules specifically gave a judge of the Court the authority to make such orders as appear just for the expedition of an appeal. The present Federal Court Rules 2011 (Cth) do not contain an equivalent provision, but a single judge retains the power to make an order for expedition of an appeal under s 25(2B)(c) and s 37P of the Act and under r 36.11 and, more specifically, r 5.04(3) item 2 of the Federal Court Rules. The expression “proceeding” is defined in s 4 of the Act to include an appeal.

18    It is clear that an appeal will not be expedited merely for the asking. Pursuant to s 37M of the Act, the just determination of the appeal will have to be considered against the efficient use of the judicial resources of the Court and the Court’s overall case load. It is necessary to balance the consequences of refusing an order for expedition against the effect on other litigants waiting in the appeal list: Paul’s Retail Pty Ltd v Lonsdale Australia Limited [2012] FCA 724 at [38]; British American Tobacco Australia Limited v Secretary, Department of Health and Ageing [2012] FCA 718 at [7]. The applicants must demonstrate why their appeal should jump the queue.

19    The applicants submit that the appeal should be expedited for two reasons: that the orders lack clarity and are uncertain, and therefore expose the parties to the risk of sanction for disobedience of the orders; and the right of appeal, if leave is granted, will be rendered nugatory if the primary judge’s judgment in the principal proceedings is given before the appeal is heard and determined.

20    The respondents argue that the parties could be in no state of uncertainty as the orders require HWL to retain Gee and Joiner on the same terms as they were retained as at 10 September 2014, and those terms have essentially been in place since 2005. The respondents also argue that any lack of clarity can be remedied under the liberty to apply provision of the orders made by the primary judge. I accept that latter submission.

21    As to the applicants’ second argument, I do not accept that the appeal will necessarily lack utility in the event that the primary judge delivers his judgment before the appeal is heard and decided for the reasons I have given earlier. In addition, if the applicants wish to vindicate their position they are not prevented from continuing with their appeal.

22    I consider that the applicants have not demonstrated sufficiently cogent reasons why the appeal should be expedited.

Associate:

Dated:    26 September 2014