FEDERAL COURT OF AUSTRALIA

Coghill v Indochine Resources Pty Ltd [2015] FCA 377

THE COURT ORDERS THAT:

1.    The applicant’s interlocutory application filed on 8 December 2014 be dismissed.

2.    The applicant pay the respondent’s costs.

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

REASONS FOR JUDGMENT

1    Robert Coghill commenced proceedings in this Court on 25 February 2013 in which he sought various orders against Indochine Resources Pty Ltd, formerly Indochine Resources Limited (“IRL”). Mr Coghill worked for IRL as chairman, company secretary and chief financial officer. In the statement of claim which accompanied the originating application, he alleged that he had been employed by IRL since about 1 May 2008 until his employment was terminated by letter dated 21 June 2010. He contended that IRL had contravened various provisions of the Fair Work Act 2009 (Cth) by failing to pay annual leave due to him upon termination and failing to give him written notice or payment in lieu, in respect of which he seeks orders that he be paid a total of approximately $110,000. He also contended that IRL was in breach of his contract of employment in failing to pay him various other entitlements and that in breach of an oral agreement it failed to pay him in cash the balance and unpaid portion of his salary and superannuation due under the contract. He seeks damages for breach of contract of more than $3 million.

2    IRL filed a defence in which it admitted it was Mr Coghill’s employer but denied liability. Despite the admission, Mr Coghill now wishes to contend that another company, Indochine Mining Limited (“IML”), the holding company of IRL since January 2010 (following a restructure of the corporate group which includes IRL), was his employer at the time of termination, either jointly with IRL or alone. In support of his interlocutory application, Mr Coghill filed an interlocutory application seeking leave to add IML as a party. The interlocutory application was supported by an affidavit sworn by Mr Coghill on 8 December 2014. IRL, which opposes the application, relied on an affidavit sworn by its solicitor, Stephen Boatswain, on 29 January 2015. Mr Coghill filed an affidavit in reply on 2 March 2015. The affidavits were read at the hearing of the interlocutory application and Mr Coghill also tendered some documents.

3    Rule 9.05(1) of the Federal Court Rules 2011 (Cth) provides that:

A party may apply to the Court for an order that a person be joined as a party to the proceeding if the person:

(a)    ought to have been joined as a party to the proceeding; or

(b)    is a person:

(i)    whose cooperation might be required to enforce a judgment; or

(ii)    whose joinder is necessary to ensure that each issue in dispute in the proceeding is able to be heard and finally determined; or

(iii)    who should be joined as a party in order to enable determination of a related dispute and, as a result, avoid multiplicity of proceedings.

4    In his affidavit in chief Mr Coghill asserted that IML should be joined to ensure that each issue in dispute in the proceeding is able to be heard and finally determined and in order to avoid a multiplicity of proceedings. He did not, however, identify the issue or issues in dispute in the proceeding which make the joinder of IML necessary. Nor did he identify any related dispute which would make the joinder necessary or desirable in order to avoid a multiplicity of proceedings. At the hearing, through his counsel, Mr White, Mr Coghill relied on paragraphs (a) and (b)(i) and (ii) of r 9.05(1) but not (b)(iii).

5    Mr Coghill claimed that the application has become necessary for two reasons: first, because of certain evidence filed by IRL and secondly, due to “continued threats by representatives of [IRL] to the effect that [IRL] was devoid of any assets” and would be wound up if he succeeded in this action. The evidence in question filed by IRL was contained in statements made by David Evans, Gavan Farley and Ian Ross. Mr Evans was apparently the managing director of IRL from 2007 until 2011 and a director of IML for about a month when it was floated. Mr Farley has apparently been a director of IRL from 2008 and of IML from 2010. Mr Ross claims to have been the non-executive chairman of IRL from 18 February 2009 until 17 April 2014 and a non-executive chairman of IML.

6    The evidence which inspired the application was not identified in the supporting affidavit or the written submissions. The “threats” were not particularised and the representatives not named. Save to explain why the joinder application is being made at this stage, the “threats” seem to me to be irrelevant. It is common ground that, unless IML employed Mr Coghill at the relevant time, he could not look to it for damages.

7    A fundamental difficulty with the application was that the identity of Mr Coghill’s employer was never an issue in dispute in the proceeding. Issues in dispute are defined by the pleadings. An applicant sets out his or her factual contentions in the statement of claim and the respondent either admits or denies them. If the contentions of fact are admitted, then they are not issues in dispute. In this case Mr Coghill contended in his statement of claim that he was employed by IRL at all material times and IRL admitted that it was his employer at those times.

8    In the affidavit filed in support of the interlocutory application Mr Coghill confirmed that he entered into an employment contract with IRL in 2008 and that throughout his employment he was paid by IRL. Yet, in paragraph 41 he stated:

At all times I regarded myself as an employee and under the directions and control of IML.

9    This statement is completely at odds with all other documents filed on behalf of Mr Coghill in the proceeding.

10    Paragraph 8 of the statement of claim pleads:

The Applicant was employed by the Respondent at all material times between 1 May 2008 and 21 June 2010.

11    Paragraph 9 of the statement of claim is in the following terms:

By letter dated 21 June 2010 the Respondent terminated with immediate effect the Applicant’s employment.

12    Both these allegations are admitted in the defence.

13    In addition, it is not disputed on the pleadings that Mr Coghill’s employment was governed by a written contract of employment executed with IRL on or about 23 June 2008 and it is this contract which he alleged was breached. Indeed, it is common ground that IML was not formed until 27 January 2010, at which time it was also listed on the Australian Stock Exchange.

14    Furthermore, on 27 June 2014 Mr Coghill solicitors filed a Statement of Facts and Issues in which the identity of Mr Coghill’s employer is not said to be an issue. To the contrary, they recited as facts, consistent with what is alleged in the statement of claim and admitted in the defence, that Mr Coghill commenced employment with IRL on or about 1 May 2008 and that his employment was terminated by IRL by letter dated 21 June 2010.

15    On the present state of the pleadings, Mr Coghill would not be able to adduce any evidence to show that IML was his employer at any relevant time because there is no issue between the parties that the respondent was his employer.

16    That is not the only difficulty with Mr Coghill’s interlocutory application.

17    In Trade Practices Commission v Westco Motors (Distributors) Pty Ltd (1981) 58 FLR 384 the Court held that the predecessor of the current rule (O 6 r 8 of the Federal Court Rules 1979 (Cth)) did not give the Court jurisdiction to order the joinder of a person as a party where an action is properly constituted and there is no person apart from the named respondent who is concerned with the relief claimed. For relevant purposes O 6 r 8 is identical with r 9.05(1) of the current rules. The only person concerned with the relief claimed in the present proceeding is IRL. No draft amended statement of claim was annexed to the affidavit or handed to the Court and the submissions (which were not signed by Mr White) did not identify any relief that would be sought against IML, the nature of the cause of action Mr Coghill wanted to allege against IML or the material facts supporting the allegation.

18    At the hearing, when these deficiencies were drawn to his counsel’s attention, Mr Coghill was given an opportunity to submit a draft amended originating application and statement of claim. On 18 March 2015 he submitted documents answering this description.

19    The proposed amended originating application seeks the same relief against IML as against IRL in addition or in the alternative.

20    The proposed amended statement of claim alleges that IRL employed Mr Coghill until about 27 January 2010, instead of 21 June 2010 as originally pleaded. It alleges that on or about 27 January 2010 Mr Coghill was offered a variation of his existing written contract of employment (with IRL) “to the effect that his new employer would be [IML]” and that he accepted the proposed variation. The person who made the offer is said to have been Chris Jordinson, a consultant with CJS Corporate Consulting Pty Ltd. The offer is said to have been made orally on 27 January 2010. Despite a promise allegedly made by Mr Jordinson that he would be offered a new written contract with IML, he alleges he was never offered such a contract.

21    Mr Jordinson is alleged to have told Mr Coghill that as of 27 January 2010 all the executive directors of IRL were “employed by the IML group” and that until he received his new written contract his terms of employment remained as they were, except that he was now working “at the direction of IML”. Thereafter Mr Coghill wishes to contend that he undertook various tasks for IML as an employee of IML “pursuant to the oral variation of the [c]ontract” and in addition or in the alternative as an employee of both IRL and IML. The factual basis for the allegation of joint employment is said to be that:

(a)    he performed essential tasks for IML;

(b)    there was a close relationship between IML and IRL, its wholly owned subsidiary;

(c)    IML and IRL had directors in common from whom Mr Coghill took directions;

(d)    Mr Jordinson told him that he was working at the direction of IML;

(e)    Mr Coghill believed that from 27 January 2010 he was employed at the direction and control of IML.

22    It is well accepted that on an application for joinder under r 9.05(1) (and its predecessor O 6 r 8) the major question is whether the applicants have an arguable case against the proposed respondent: Sienkiewicz (as trustee for the Sienkiewicz Superannuation Fund) v Salisbury Group Pty Limited [2013] FCA 977; Bupa Australia Pty Ltd v iSelect (No 2) [2012] FCA 1277.

23    In the submissions in support of the interlocutory application Mr Coghill contends that a person may be regarded as an employee of “one group company” even though his written employment contract names another company in the group as the employer. In support of that contention he relied on the judgment of Edmonds J in Gothard, in a matter of AFG Pty Limited (Receivers and Manages appointed) (in liq) v Davey (2010) 80 ACSR 56; [2010] FCA 1163 (“Gothard”).

24    Gothard was concerned with an application by receivers and managers of companies in the Allco Finance Group, which had been placed in voluntary administration. The application sought directions under s 424 of the Corporations Act 2001 (Cth) as to the identity of the employer of current and former employees from within the Allco Finance Group who claimed that they should receive outstanding employment entitlements as priority creditors of one of the companies in the Group. In the course of his reasons Edmonds J stated at [52]:

Unsurprisingly, the outcome in cases which have been concerned with identifying an employer of a person or group of persons from two or more possibilities, whether from within the same group of companies or otherwise, has turned on their own facts and, in consequence, the case law in this area is of limited assistance. Nevertheless, it is possible to discern certain general principles that the courts have applied in the identification process. The courts have adopted the position that in undertaking this exercise, they are entitled to take a wide view of the putative relationship, beyond the terms of the contractual documentation, to examine how the parties conducted themselves in practice and whether, where there is contractual documentation, the reality of the situation accords with the terms of that documentation or whether it points to another entity being the employer.

25    His Honour then proceeded to analyse the relevant principles by reference to the case law. He began with In the matter of C&T Grinter Transport Services Pty Ltd (In Liquidation) & Grinter Transport Pty Ltd (In Liquidation) (Controller Appointed) [2004] FCA 1148 in which Finn J noted some of these principles, supported by the authorities which I have omitted from the following summary:

(1)    A contract of service cannot be transferred by one employer to another or novated as between them without the employee’s consent;

(2)    The totality of the circumstances surrounding the relationships of the various parties including conduct subsequent to the creation of an alleged employment relationship is relevant to the assessment to be made of who of two or more possible employers is the actual employer of an employee;

(3)    Documentation created by one or more of the parties describing or evidencing an apparent employment relationship will be relevant to, but not necessarily determinative of, the true character of that relationship, as the documentation may have been brought into existence for purposes which do not reflect the reality of the parties’ relationship, such as tax minimisation or the reduction of insurance premiums;

(4)    Conversations and conduct at the time of the alleged engagement of the employee are of considerable significance and the employee’s own belief as to the identity of his or her employer is to be given weight;

(5)    In cases of the engagement of new employees to work in a business in which a number of separate corporate entities participate otherwise than as partners, it is open to those controlling the business to select a company as the employer so long as the selection is consistent with the financial and administrative organisation of the business and not otherwise a sham.

26    Even where it is not suggested that the written contract is a sham, the Court may consider what the parties to a contract have done, in order to see whether the contract has been ignored or abandoned: Pitcher v Langford (1991) 23 NSWLR 142 at 161 (Handley JA).

27    Mr White could not point to a decision of any Australian court in which the concept of joint employment had been recognised. He relied, however, on a judgment of Collier J in Fair Work Ombudsman v Eastern Colour Pty Ltd (2011) 209 IR 263; [2011] FCA 803 (“Eastern Colour”) in which her Honour accepted that there was scope in Australia for a claim that multiple entities can jointly employ a person and declined to strike out various paragraphs in the applicant’s pleading in which the claim was made. Her Honour referred to several decisions of industrial tribunals where the concept had been “entertained”, though not considered or decided, and to one decision in particular in which the Full Bench of the Australian Industrial Relations Commission considered the question. In that case – Morgan v Kittochside Nominees Pty Ltd (2002) 117 IR 152 (“Morgan”) – the Full Bench said at [73]:

So far as we are aware, the notion of joint employment has thus far not been the subject of rulings or dicta by any Australian court. The compatibility of the notion with the common law concept of employment based on the master servant relationship is therefore moot.

28    But the Full Bench went on to point out at [74] that the doctrine of joint employment, or joint employers, was well established in US labour law. The Full Bench said it was apparently a response to the use of labour hire arrangements by employers in circumstances conducive to avoidance of labour regulation and employee protections. One American case which was cited by the Full Bench – National Labor Relations Board v Browning-Ferris Industries of Pennsylvania, Inc 691 F.2d 1117 (3d Cir 1982), – was also cited by Collier J in her judgment in Eastern Colour at [77], where her Honour stated :

[W]here two or more employers exert significant control over the same employees – where from the evidence it can be shown that they share or co-determine those matters governing essential terms and conditions of employment – they constitute ‘joint employers’ within the meaning of the NLRA [National Labor Relations Act 29 USC. §§ 151-169].

29    The Full Bench also referred to the Supreme Court decision in Boire v Greyhound Corp., 376 US 473 (1964).

30    On the face of the references to joint employers in the US authorities mentioned in Morgan, it is far from clear that the concept of joint employment has anything to do with the common law. But at this point in the proceeding and, having regard to what was said in Morgan, I am prepared to accept that the allegation of joint employment is open to be made and, provided that the material facts necessary to found the allegation are pleaded, would not be liable to be struck out, although whether it is available as a matter of law or on the evidence is an open question.

31    Regardless, there are two further problems with the interlocutory application. The first relates to the evidence on the interlocutory application, the second to the proposed amended pleadings.

32    Turning first to the evidence, I am not satisfied that it discloses a reasonably arguable case that IML was the employer of Mr Coghill at any time.

33    In Gothard at [60] Edmonds J pointed out that in determining the reality of the parties’ relationships it was relevant to consider which of the possible employers:

(a)    had practical and legal control and direction of the employees;

(b)    made decisions about hiring;

(c)    made decisions about disciplinary issues;

(d)    made decisions about the level of remuneration;

(e)    actually paid the remuneration;

(f)    communicated with employees about leave;

(g)    made decisions about termination of employment.

34    The evidence adduced at the hearing did not indicate that responsibility for any of these matters ever shifted from IRL. The evidence was that Mr Coghill took directions from the same people who issued him with directions before IML was formed but that when IML was incorporated they also became directors of IML. That circumstance alone does not mean that the directions were given at the behest of IML or that Mr Coghill’s obligation to comply with them arose from a contract with IML. The directors in question were directors of both IRL and IML.

35    Mr Coghill’s remuneration was never paid by IML and, apart from some occasions when he was paid by another related company (Indochine Resources (Cambodia) Limited), it seems he was always paid by IRL. I was not taken to any material to suggest that after 27 January 2010 that was done at the direction of IML.

36    The letter terminating Mr Coghill’s employment, which is annexed to one of his witness statements in the substantive proceeding (filed on 30 July 2014), is on IRL letterhead, is signed by Mr Ross as chairman of IRL, and makes no mention of IML.

37    In his affidavit of 8 December 2014 Mr Coghill stated that he was the company secretary of IML and took minutes at all meetings, including the minutes of the inaugural meeting on 17 March 2010. Furthermore, a report of an IRL board meeting on 13 January 2010 included in an exhibit to that affidavit records that Mr Coghill was the company secretary of IML. And the board minutes of IML for 17 March 2010 describe Mr Coghill as company secretary. But the prospectus for IML tendered in Mr Coghill’s case and which Mr White said had been written by Mr Coghill refers to Mr Coghill as the company secretary for IRL and not IML. In any case, there is no apparent reason why he could not be a company secretary for IML while being employed by IRL.

38    Mr Coghill also stated that he supplied services to IML and that the work he did from January 2010 “was for the benefit of IML”. Without more, however, that does not make him an employee of IML. There is nothing unusual about an employee of one company in a corporate group carrying out work for another company in the group: see, for example, Textile Footwear and Clothing Union of Australia v Bellechic Pty Ltd [1998] FCA 1465 to which Edmonds J referred in Gothard. The evidence about the work that Mr Coghill did for IML is neutral.

39    More importantly, a document entitled “Executive Management Proposal” attached to IML’s notice of meeting for 17 March 2010 and annexed to Mr Coghill’s affidavit of 8 December 2014 does not suggest that there was any change in Mr Coghill’s employment:

Messrs Evans, Hill and Coghill (“Executives”) have taken a 50% pay cut in good faith in respect of their respective employment agreements with Indochine Resources Ltd (IRL) for the past 18 months to support IRL so that cash is preserved and critical exploration progress can occur…

(Original emphasis.)

40    In his affidavit Mr Boatswain said that he was told by Mr Ross that Mr Coghill was offered a new contract of employment with IML but that his then solicitors rejected it.

41    Mr Coghill’s evidence in reply was to the effect that the offer of a new contract of employment, which he said had been made by Mr Jordinson, was not with IML but with IRL. He annexed to his affidavit of 18 February 2015 the “Final Draft” of the new contract the subject of the offer. It was on the letterhead of IRL to be signed by Mr Ross as the chairman of IRL. On 20 April 2010 his solicitors advised the Board of Directors of IRL in writing that (without alteration):

Mr. Coghill is not prepared to enter into a new service contract Mr Coghill’s employment contract is, as you have quiet properly confirmed, set out in the letter agreement dated 23 June 2008. Mr Coghill will abide by the terms of that contract.

(Emphasis added)

42    That contract, of course, was made with IRL.

43    With one exception, the additional documents tendered at the hearing did not take Mr Coghill’s case any further. The exception relates to material appearing in the IML prospectus concerning Mr Coghill’s employment. The statement was in the following terms:

[T]he Company is entitled to terminate the Coghill Agreement upon the happening of various events of default in respect of Mr Coghill as set out in the Coghill Agreement. The Coghill Agreement provides for the renewal for a further five years if the parties agree on such extension.

44    Mr White pointed out that “the Company” is defined in the prospectus as IML.

45    I cannot see, however, that this statement is entitled to any weight. The source of the so-called entitlement is not identified and I was not taken to it in the course of argument. Furthermore, read in context, it may be doubted whether “the Company” is used in this passage in its defined sense. To understand why, it is necessary to reproduce the entire portion of the prospectus which deals with Mr Coghill’s employment. It reads:

Indochine Resources Limited (IRL), a wholly owned Subsidiary of the Company, entered into an Employment Agreement with Robert Coghill dated 23 June 2008 for an initial term of 5 years commencing from 1 May 2008 (Coghill Agreement) under which Mr Coghill agreed to perform company secretarial and financial services for IRL.

Under the Coghill Agreement, Mr Coghill receives a base remuneration of $USD 240,000 per annum. This base salary is increased each year by one fifth (1/5) in USD plus CPI (for Australian All Groups).

Under the Coghill Agreement, Mr Coghill is also entitled to receive allowances for such items as Car, Family Health and Club Membership allowances to the amount of $USD 31,000 per annum.

Either party may terminate the Coghill Agreement upon eight (8) weeks of written notice to the other party. If IRL terminates this agreement without cause, IRL will be liable to pay Mr. Coghill an amount equal to 5 years remuneration.

Further, the Company is entitled to terminate the Coghill Agreement upon the happening of various events of default in respect of Mr Coghill as set out in the Coghill Agreement. The Coghill Agreement provides for the renewal for a further five years if the parties agree on such extension.

46    As IML was not formed at the time the Coghill Agreement was made and no evidence was produced regarding a novation of the agreement to make IML a party to it (a subject to which I will return shortly), the reference to “the Company” in the last paragraph is, at best, ambiguous. Having regard to the paragraphs that preceded it, it seems to me to be a slip.

47    Mr White tendered parts of the evidence of Messrs Evans and Ross filed by IRL in the principal proceeding. That material provided no support for the proposition that Mr Coghill was ever employed by IML. To the contrary, it tends to show that the work Mr Coghill was doing for IML was done for IRL and at its behest.

48    I was not taken to any contemporaneous evidence that Mr Coghill consented to a novation of his contract with IRL to IML at any time. I deal with this question below in more detail. The conversation Mr Coghill allegedly had with Mr Jordinson was not described in the affidavits filed in connection with the interlocutory application. All the contemporaneous evidence presented to the Court points to Mr Coghill remaining an employee of IRL.

49    On the face of the allegations in the draft amended statement of claim, however, it is clear that Mr Coghill now wishes to change his case. The difficulty, however, is that the proposed amended statement of claim omits several important allegations of fact, each of which is material to the question of whether IML was his employer at any relevant time and therefore to the question of whether IML should be joined as a party. There are also inconsistencies and ambiguities in the draft.

50    First, it is not alleged that Mr Jordinson was an agent of IRL acting within the scope of his authority at the time he made the offer to Mr Coghill. No material facts are pleaded to show by what authority he came to make the offer. That said, Mr Boatswain states in his affidavit that Mr Jordinson conducted negotiations in relation to the offer of a new employment contract with IML and that the board of IML delegated to Mr Jordinson, who was a consultant then engaged by IRL, responsibility for negotiating new employment contracts on behalf of IML. Consequently, this particular deficiency in the pleading could doubtless be overcome.

51    The other deficiencies are more problematic.

52    In substance, though not in form, Mr Coghill’s new case is that there has been a novation of the contract. A novation takes place where two contracting parties agree that a third, who also agrees, will stand “in the relation of either of them to the other” (Chitty on Contracts (31st ed, Sweet & Maxwell, 2012) Vol 1 (“Chitty”) at [19-086]) and “where a new contract takes the place of the old”: ALH Group Property Holdings Pty Ltd v Chief Commissioner of State Revenue of New South Wales (2012) 245 CLR 338 (“ALH Group Property”) at [12]. The new contract may be between the existing parties or between different parties (Scarf v Jardine (1882) 7 App Cas 345 at 351; [1881-5] All ER 651 at 655 (Lord Selborne)) but only with the consent of all the parties concerned in the arrangements: Robinson v Podosky [1905] St R (Qd) 118 at 122 (Chubb J); Rohrlach v Christianos (1980) 26 SASR 161 at 172 (White J); Seddon N, Bigwood R, Ellinghaus MP, Cheshire and Fifoot's Law of Contract (10th Aust ed, LexisNexis Butterworths, 2012) (“Cheshire & Fifoot”) at [8.46].

53    While rights may be assigned, neither at law nor in equity is a debtor able to relieve itself of its liability to a creditor by assigning the burden of the obligation to a third party; that can only occur with the consent of all three parties and involves the release of the original debtor: Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 KB 660 at 668 (Collins MR).

54    The proposed amended statement of claim includes a recitation of a conversation that Mr Coghill alleges he had with Mr Jordinson. It is plain from its terms that Mr Coghill alleges that he consented to a novation of the contract by which IRL’s rights and obligations under the June 2008 contract would be transferred to IML.

55    But the proposed amended statement of claim does not include the material facts necessary to support a conclusion that the purported novation occurred with the consent of IRL and IML. While this deficiency might also be curable, there is a more troubling one. That is that the conversation on 27 January 2010 relates to negotiations for a new contract. Contrary to a submission made by Mr White at the hearing, an essential feature of a novation is that the original contract is terminated and the obligations under it extinguished: ALH Group Property at [12]-[13]. The effect of a novation is not to assign or transfer a right or liability; it is to extinguish the original contract and replace it with new one: Chitty at [19-088]. Debts or obligations cannot be assigned: The Commissioner of Taxation of the Commonwealth of Australia v Orica Limited (1998) 194 CLR 500 at [19] (Brennan CJ). If that were possible (with or without the consent of all affected parties), that would be the end of novation as a legal principle. See Bailey J, “Novation” (1999) 14 JCL 189 at 220.

56    As the learned authors of Cheshire & Fifoot explain at [8.46]:

[W]hen two parties to a contract enter into an agreement with the third party under which, in consideration for the first party releasing the second party from the contract, the third party undertakes to assume responsibility for performance in place of the second party. A transaction of this nature, however, is not effective as a novation unless an intention is clearly shown that the second party’s obligations are to be extinguished. Otherwise the novation fails for want of consideration. The use of imprecise language can lead to trouble. It is common to talk of ‘novating a contract’ which would seem to imply that an existing contract is transferred and remains intact. An essential feature of the novation is that the original contract is terminated and its obligations are extinguished.

57    While in some circumstances, a novation may be able to be inferred from conduct, this possibility must be treated with caution because of the requirement that a novation must be by agreement of all three parties: Cheshire & Fifoot at [8.49].

58    The proposed amended statement of claim does not include an allegation that the contract with IRL was terminated. To the contrary, no amendments are sought to paragraphs 17 and 18 of the statement of claim which contain the allegations of breach of contract. As they presently stand, the allegation is that the contract with IRL remained on foot and that the liability, if any, of IML arose in part from the written contract with IRL made in June 2008. That allegation is simply untenable.

59    Thus, even if Mr Coghill were able to satisfy the terms of r 9.05(1), the proposed amendments would be liable to be struck out for failing to plead all the material facts (Bruce v Odhams Press Limited [1936] 1 All ER 287 at 294) which, as it happens, was what occurred in Eastern Colour in relation to the joint employment allegations made in that case, and, in some instances, because the allegations give rise to inconsistencies which render the proposed amendments embarrassing. The Court is bound to exercise all the powers conferred by the Rules in a way that would best promote their overarching purpose: to facilitate the just resolution of disputes, according to law and as quickly, inexpensively and efficiently as possible: Federal Court of Australia Act 1976 (Cth) s 37M. It would not promote the overarching purpose of the Rules to add a party to the proceeding only to strike out the foreshadowed amendments to the pleading which allegedly justify the joinder or to have to deal with an interlocutory application from the respondent seeking such a remedy. It would be productive of unacceptable delay and expense and it is the antithesis of efficient case management.

60    I do not entirely discount the possibility that Mr Coghill could bring forward a proposed amended statement of claim which is both coherent and pleads the necessary material facts to support the allegations he wishes to make. Nor do I discount altogether the possibility that additional evidence might come to light. I will deal with these questions if and when they arise. But on the material presented thus far, I have no alternative but to dismiss the interlocutory application.

61    That brings me to the question of costs. IRL foreshadowed that, if the interlocutory application were dismissed, it would seek its costs.

62    This proceeding relates in part to a matter arising under the Fair Work Act. To that extent, s 570(2) of the Act relevantly provides that a party may only be ordered to pay costs if the court is satisfied that:

(a)    the party has instituted the proceedings vexatiously or without reasonable cause; or

(b)    the party’s unreasonable act or omission caused the other party to incur the costs.

63    Mr White accepted that Mr Coghill should pay IRL regardless of the outcome of the proceeding. I take this to include an admission that Mr Coghill’s omission to name IML as a respondent in the first place caused IRL to incur the costs of defending the interlocutory application and that the omission was unreasonable. Having regard to the conclusion I have reached, it may be doubted whether the omission was unreasonable. Regardless, I am satisfied that Mr Coghill should pay IRL’s costs because it was certainly unreasonable to put IRL to the costs of an interlocutory hearing if Mr Coghill had always believed he was employed by IML. There was no suggestion that any of the evidence upon which he relied to support the interlocutory application was not in his possession or within his knowledge at the time he launched the proceeding.

64    It follows that the interlocutory application will be dismissed with costs.

Associate:

Dated:    23 April 2015