FEDERAL COURT OF AUSTRALIA

Olson v Keefe [2017] FCA 101

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to r 10.44(3) of the Federal Court Rules 2011 (Cth), service of the amended statement of claim filed 22 November 2016, the interlocutory application dated 25 November 2016, the affidavit of Malcolm John Davis sworn 25 November 2016 and orders previously made on 21 November 2016 be confirmed as against:

(a)    the first respondent;

(b)    the second respondent; and

(c)    the third respondent.

2.    Order 1 above be made nunc pro tunc to 14 February 2017.

THE COURT NOTES THAT:

1.    Service of an amended originating application filed 22 November 2016 was confirmed as against the first, second and third respondents pursuant to r 10.43(6) of the Federal Court Rules 2011 (Cth) by orders made 14 February 2017.

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

REASONS FOR JUDGMENT

BROMWICH J:

1    These are reasons for orders I made on 14 February 2017 and for supplementary orders I now make today to address an oversight in the interlocutory application by which they were sought and a consequential oversight in those prior orders.

2    This is a second interlocutory application for an order pursuant to r 10.43(6) of the Federal Court Rules 2011 (Cth) confirming the service of an amended originating application on two United States of America (USA) citizens and one USA company named as the first, second and third respondents. The fourth respondent is an Australian company. It does not appear to be in dispute that the first and second respondents are directors of the fourth respondent and senior executives of the third respondent. The third respondent owns all of the shares in another company, which in turn owns all of the shares in the fourth respondent.

3    A prior application for the same relief last year was abandoned without proceeding to judgment, due to defects that were pointed out by counsel for the fourth respondent at the initial hearing of that application. Those defects were sought to be remedied by amending the prior originating application and by amending and substantially adding to the prior statement of claim. In a practical sense, the question now to be resolved is whether those amendments and certain variations in the way in which the application was presented and argued provide a sufficient basis for the relief sought. For the reasons that follow, after careful consideration and some initial reservations and doubts, I am satisfied that the applicant has passed the necessary threshold and that service should be confirmed as against each of the first, second and third respondents.

4    As the first, second and third respondents had not been served in accordance with the Federal Court Rules they had no obligation to appear at this stage and did not do so. The fourth respondent provided very short written submissions identifying the matters required to be addressed by the Court, but expressly submitted that it could not consent to nor oppose the application. Counsel appearing for the fourth respondent maintained that position at the hearing of the application, to the point of not even making any submissions on a point of law once objection was taken to that course by senior counsel for the applicant. Accordingly, unlike the first application that was abandoned, in relation to which the fourth respondent took an active albeit quasi amicus curiae role, in this application the fourth respondent took an entirely passive role.

The applicant’s case as pleaded and supported by evidence on the application

5    The case is now brought by the applicant by way of an amended originating application, the material facts and circumstances of which are pleaded by way of an amended statement of claim. The following narrative is drawn mostly from the applicant’s pleadings, supplemented to a limited extent by the evidence relied upon by the applicant for the purposes of this application. The narrative necessarily does not have the benefit of any competing pleadings or evidence and may or may not reflect the facts ultimately found following a trial. Counsel for the fourth respondent has referred to particulars being sought and has foreshadowed the possibility of at least a partial strikeout application in relation to the case brought against it.

6    The third respondent is a company within a group of companies operating worldwide and described in the evidence somewhat elliptically as “specialising in asset valuation, asset monetisation and advisory solutions”. Part of this work is referred to in the amended statement of claim as “store closing projects”. It seems these projects involve giving effect to the closing of failed retail businesses, including inventory and other asset sales. The evidence relied upon by the applicant in addition to the case as pleaded refers to this work being done in relation to a number of different businesses worldwide. The fourth respondent is involved in such projects in Australia.

7    Between 2003 and 2006, the applicant was employed by a company related to both the third and fourth respondents, apparently in the USA although that is not expressly pleaded. From 2006 to 2009, the applicant worked as a contractor to the third respondent and in about 2009 became a permanent contractor and received weekly remuneration. For the period from 2006 to 2010, the applicant was responsible for business development, identifying and pursuing opportunities for the third respondent’s services and doing due diligence reviews of identified opportunities. Again, although not expressly pleaded, it seems that this work was done in the USA.

8    In about late November 2010, the applicant attended a training seminar conducted by a vice president of operations of the third respondent and another person. His case is that an offer was made to all attendees that any contractor was entitled to 10% of the net profit earned by the third respondent in relation to any job obtained by such a contractor. The applicant claimed to have accepted such an offer, apparently at large, calling it a Commission Agreement, and asserts that from then on it was a term of his contractor agreement that he was entitled to 10% of the net profits of any job obtained by him for the third respondent.

9    In December 2010, the third respondent invited the applicant and his family to move to Chicago where the third respondent is based, with a view to taking up full-time employment.

10    In about March 2011, the applicant identified the closure of the Borders bookshop chain in Australia as a business opportunity for the third respondent. Two representatives of the third respondent, the second respondent and the vice president of operations, travelled to Sydney to assist the applicant with securing for the third respondent the contract for the orderly disposition of Borders’ Australian assets. The applicant claims he then secured that contract for the third respondent.

11    On or about 1 April 2011, the third respondent sought and was allocated an Australian Company Number (ACN) by the Australian Securities and Investments Commission, for the purpose of conducting business in Australia. I note that registration of a foreign company is a legal requirement under s 601CD of the Corporations Act 2001 (Cth).

12    In or about April 2011, upon the applicant’s return to the USA he was offered and accepted full-time employment with the third respondent in Chicago.

13    In or about late June 2011, the applicant was asked by the third respondent to return to Australia to market further the third respondent’s services. On 3 July 2011, the third respondent asked the applicant to consider moving to Australia to be managing director of the new business unit of the third respondent in Australia. In July 2011, while in Chicago, the applicant was asked to provide a detailed budget and business plan for the Australian operations. Later in July 2011/August 2011, the applicant prepared and presented an annual budget for the new Australian business, including his necessary expenses for relocation, schooling, accounting expenses and so on. At that meeting, the applicant was offered by the first and second respondents a salary of US$350,000, part of which would be paid as a guaranteed bonus, and was informed that he would receive some equity in the Australian business.

14    From 1 September 2011, the applicant was employed by the fourth respondent or alternatively his place of employment with the third respondent was moved to Sydney, the terms being in writing by way of a document which is headed “EMPLOYMENT TERM SHEET: DRAFT” and may be conveniently referred to as the term sheet. The term sheet, to which I was taken during the course of the hearing of the application, was signed by the applicant and the first respondent who was described on the face of the document as the president and CEO of the third respondent. The applicant’s pleading describes the term sheet as having been signed by the first respondent on behalf of not just the third respondent, but also the fourth respondent. It was argued on behalf of the applicant that various references in the term sheet to “Company executives”, in circumstances where the applicant was the only executive employed by the fourth respondent, meant that it operated more widely than just between the applicant and the fourth respondent despite the fourth respondent being described as the employer. The term sheet included a number of express terms including as to bonus compensation and the vesting of what was described as “profits interest”. The restraint of trade clause described as “noncompete” also apparently operates in relation to other companies in the third respondent’s group of companies.

15    The applicant asserts that the contract of employment represented by the term sheet was also the subject of express verbal terms and implied terms as to benefits such as relocation expenses, return airfares to visit family, tax planning expenses, costs in forwarding personal mail to Australia and termination without cause by either the third respondent or the fourth respondent upon giving reasonable notice.

16    In the alternative, the applicant pleads that he commenced employment with the fourth respondent from 4 April 2012 either separately from or additional to his employment with the third respondent.

17    In the period from March 2011 to 2016, the third respondent entered into non-disclosure agreements with nine Australian companies in relation to store closing projects. It is pleaded that during that period, the third respondent (rather than the fourth respondent):

(1)    issued a number of requests to each of the Australian companies for information in relation to each project;

(2)    prepared a proposal for each project;

(3)    arranged the payment of money into an escrow account in Australia for the purpose of each project;

(4)    arranged the placement of a lead supervisor and a financial and accounting supervisor in Australia who would act as the CEO and CFO for each project;

(5)    arranged for the placement of experienced and qualified supervisors in Australia who would work under the lead supervisor to whom store managers would report for each project; and

(6)    arranged the purchase of media in Australia to advertise each project.

18    Also during that period from March 2011 to 2016:

(1)    invoices issued to the third respondent or the fourth respondent by Australian companies were paid through the direction of the third respondent’s chief financial officer in the USA for each project;

(2)    the third respondent by its agents, the chief operating officer and senior vice president, would manage and coordinate the inter-store transfers and reduction in number of stores as sales progressed in Australia for each store closing;

(3)    the third respondent allocated large amounts of expenses to the fourth respondent in the profit and loss statements of the fourth respondent for each project; and

(4)    the third respondent charged for services rendered to the fourth respondent for each project, as reflected in the profit and loss statements of the fourth respondent.

19    It is pleaded that in addition to the third respondent being the ultimate owner of the fourth respondent, the signatory to the term sheet and registered in Australia with an ACN, the various dealings and interactions in Australia outlined above establish that the third respondent was incorporated or carried on business in Australia as contemplated by the extraterritorial provision in section 5[(1)(g)] of the Competition and Consumer Act 2010 (Cth). Those allegations, taken at face value for the purposes of this application, provide considerable support for the arguments made on behalf of the applicant that the third respondent was directly carrying on business in Australia and not merely via its ultimate subsidiary, the fourth respondent. It is not necessary to decide whether registration of a foreign company in Australia and obtaining an ACN equates to incorporation in Australia, because it is sufficient that the “carrying on business” limb in s 5(1)(g) is established, although at face value that proposition seems doubtful.

20    The significance of these allegations, which on their face are detailed and apparently credible, or at least not inherently incredible, goes beyond the engagement of the terms of an Australian statute upon which a cause of action depends. They go to the jurisdiction of this Court by engaging federal jurisdiction encompassing but also going beyond the causes of action relied upon. Section 39B(1A)(c) of the Judiciary Act 1903 (Cth) bestows original jurisdiction on this Court in any matter “arising under any laws made by the Parliament”, subject to a criminal and related proceedings exception not relevant here. The case as pleaded may be seen to arise under at least two Commonwealth statutes: the Competition and Consumer Act and the Corporations Act.

21    The Corporations Act nexus is of particular importance because it does not depend upon the viability of the case the applicant seeks to bring under the Competition and Consumer Act, or more precisely the Australian Consumer Law (ACL) in Schedule 2 of the Competition and Consumer Act, as detailed below. Further, a justiciable controversy constituting a single matter for the purposes of the jurisdiction of this Court can, and often does, involve a mixture of federal and non-federal claims. This can also call for an evaluation as to whether the different aspects truly constitute a single matter or several different matters, noting the general desirability of finding a way in which all disputes, even disparate, can be addressed by a single court, which favours a wide concept of “matter”: see Fencott v Muller (1983) 152 CLR 570 at 608-9; Re Wakim; Ex parte McNally [1999] HCA 27; (1999) 198 CLR 511 at 585 [138]-[140], 587 [145].

22    The applicant’s case as pleaded is, as noted above, that he was either persuaded to leave employment with the third respondent in order to take up employment in Australia with the fourth respondent (ultimately owned by the third respondent through a subsidiary) or that he was employed by both companies for some or all of the time that he was an employee in Australia. In summary, he makes claims arising from the events that transpired of:

(1)    misleading or deceptive conduct contrary to ss 18 and/or 31 of the ACL in relation to asserted representations made by the third and fourth respondents via the first and second respondents in the USA in July 2011, to persuade him to take up employment with the fourth respondent in Australia, that he would obtain shares in the fourth respondent, as to his remuneration and as to his expenses – the allegation that the representations made were misleading or deceptive is asserted but not particularised;

(2)    short payment of commission by the third respondent in breach of the Commission Agreement said to be applicable to the applicant in his capacity as a consultant employed by the third respondent;

(3)    breach of fiduciary obligations by the first respondent and second respondent in relation to the financial arrangements between the third respondent and fourth respondent which affected the profitability of the fourth respondent and thereby the bonus to which the applicant was entitled – the relief sought is equitable compensation, which is clear enough for present purposes, or an account of profits against the first and second respondents, which is less clear unless this is intended to reflect a cause of action against the third respondent;

(4)    victimisation by the first, second and fourth respondents by way of termination of his employment for the proscribed reason of him making a protected disclosure contrary to ss 1317AC(2) and 1317AC(3) of the Corporations Act. It is alleged that the fourth respondent is the principal contravenor and the first and second respondents were involved in that contravention. I was taken to a copy of the letter by which the applicant apparently emailed the disclosure to the first and second respondents expressly under the umbrella of part 9.4AAA of the Corporations Act, referring to perhaps possible contraventions of that Act, unspecified taxation laws and various provisions of the Crimes Act 1900 (NSW), and also making specific reference to the obligation to report serious indictable New South Wales State offences imposed by the statutory version of the common law misprision of a felony offence in s 316 of the Crimes Act 1900; and

(5)    breaches of his contract of employment by the third respondent and/or fourth respondent in relation to the payment of a bonus, payment of other benefits, the payment of “profit interest”, severance payments, notice and base compensation.

The legal framework for the application

23    Service of an originating application on a person in a foreign country is effective for proceedings in this Court under r 10.43(1) only if:

    leave is first obtained; or

    the Court confirms service that has already taken place; or

    the person served waives any objection by filing a notice of address for service without also making an application to set aside the originating application or service of the originating application.

24    The affidavit evidence before the Court establishes that second option is applicable because the originating application (both as initially filed and as amended) has in fact been served on the first, second and third respondents ahead of seeking and obtaining leave to effect service. Delivery without formal leave first being obtained was permitted in advance by orders of this Court.

25    The application now made in terms seeks confirmation of service of an amended originating application, amended statement of claim, this application, an affidavit and orders previously made on 21 November 2016. However the present interlocutory application refers only to r 10.43, which, in r 10.43(6), only provides for confirmation of service of an originating application and not the other documents. The other documents are amenable to a like order pursuant to r 10.44(3) confirming service of them. I can see no reason why that evidently inadvertent omission should deprive the applicant of confirmation orders for the additional documents if the case is made out for confirmation of service of the amended originating application. The interlocutory application is therefore decided on that wider basis, as sought in terms but not by rule number. Except as otherwise indicated, reference to the requirements of r 10.43(7) in relation to r 10.43(6) is therefore to be taken as also encompassing a reference to the parallel requirements of r 10.44(4) in relation to r 10.44(3).

26    In order for the application for confirmation of service to be granted under r 10.43(6), r 10.43(7) requires the applicant to satisfy the Court that:

(1)    r 10.43(4)(a), (b) and (c) apply to the proceedings (pertaining to the Court having jurisdiction, the proceeding being of a kind mentioned in r 10.42 and the applicant having a prima facie case for all or any of the relief claimed) – this requirement applies to the amended originating application, but not to the other documents which would ordinarily flow from such an application meeting this test;

(2)    service is permitted by a convention other than the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters done at the Hague on 15 November 1965 (Hague Convention), or the Hague Convention, or the law of the foreign country; and

(3)    there is a sufficient explanation for the failure to apply for leave prior to service taking place.

27    Accordingly, as the first step, the applicant must ordinarily satisfy the Court that it has jurisdiction in the proceeding, that the proceeding is of a kind mentioned in r 10.42, and that the applicant has a prima facie case for all or any of the relief claimed in the proceeding: see r 10.43(4).

28    The three requirements contained in r 10.43(4) of jurisdiction, proceedings being of a kind mentioned in r 10.42 and a prima facie case for all or any of the relief claimed in the proceedings, are not as restrictive as they first appear, at least in circumstances in which there is an Australian respondent as well as a foreign respondent. There is compelling and indeed binding authority to the effect that a different test and different approach can apply when there is an Australian respondent who has been or can be served in the usual way and there are other respondents who are foreigners.

29    In Vautin v BY Winddown, Inc [2016] FCA 632, Rares J made ex parte orders for service of an application out of the jurisdiction in the USA. In those proceedings, there was an Australian respondent as well as the foreign respondent in relation to which leave to serve was granted. The foreign respondent unsuccessfully applied to set aside the service upon it in Vautin v BY Winddown, Inc (No 2) [2016] FCA 1235 (Vautin (No 2)). An appeal from Vautin (No 2) was dismissed, upholding Rares J’s reasoning and in particular upholding his Honour’s application of the prior authority of Costa Vraca Pty Ltd v Bell Regal Pty Ltd [2003] FCAFC 305: BY Winddown, Inc v Vautin [2016] FCAFC 168 at [33]-[52], especially [44]. Costa Vraca dealt with substantially the same earlier rules of this Court upon which Rares J relied in considering the correct interpretation of r 10.43(4).

30    The case for the applicant in Vautin (No 2) in defence of maintaining service was broader than that which had been advanced ex parte in obtaining leave in the first place. The foreign respondent argued in support of setting service aside that r 10.43(4)(c) should be construed as requiring the applicant to establish a prima facie case for all or any of the relief claimed in the proceeding against a person to be served outside the jurisdiction. This was said to arise as a consequence of the ordinary principle of private international law respecting the rights of foreigners who could be subjected to the jurisdiction of courts in places other than where they are located, especially by the use of what Rares J noted were referred to as “long arm statutes”. His Honour rejected that argument upon the basis that, in a case in which there is a respondent in Australia and a foreign respondent, the Court must be satisfied that a prima facie case exists against, at least, a party within the jurisdiction and that the foreigner is a necessary or proper party to the proceedings so as to justify the exercise of the Court’s long arm jurisdiction. His Honour noted at [34] that longstanding authority in Tyne Improvement Commissioners v Armement Anversois S/A (The Brabo) [1949] AC 326 at 339 dictated that the right to add a foreigner not otherwise subject to the jurisdiction should be exercised sparingly. That is, full satisfaction of the three requirements in r 10.43(4) may be met if there is a sufficient case effectively meeting those criteria as against the Australian respondent and it is a proper case to join the foreign respondent despite not otherwise being amenable to service, in particular having regard to the power in s 22 of the Federal Court of Australia Act 1976 (Cth) which is directed to avoiding multiplicity of proceedings.

31    In relation to the prima facie case threshold required to be met, the Full Court in Ho v Akai Pty Limited (in liquidation) [2006] FCAFC 159; (2006) 24 ACLC 1526 said at 1529:

10    As has been observed on many occasions, the prima facie case requirement has to be met at the outset, usually on an ex parte basis, and without the advantage of discovery and other procedural aids to the making out of a case:  see e.g. Merpro Montassa Ltd v Conoco Specialty Products Inc (1991) 28 FCR 387 at 390.  It “should not call for a substantial inquiry”: WSGAL Pty Ltd v Trade Practices Commission (1992) 39 FCR 472 at 476; see also Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd (1996) 68 FCR 539 at 549.  For present purposes it is sufficient to say that a prima facie case for relief is made out if, on the material before the court, inferences are open which, if translated into findings of fact, would support the relief claimed:  Western Australia v Vetter Trittler Pty Ltd (in liq) (1991) 30 FCR 102 at 110.  Or, to put the matter more prosaically as Lee J did in Century Insurance (in provisional liquidation) v New Zealand Guardian Trust [1996] FCA 376:

“What the Court must determine is whether the case made out on the material presented shows that a controversy exists between the parties that warrants the use of the Court’s processes to resolve it and whether causing a proposed respondent to be involved in litigation in the Court in Australia is justified.”

The case brought against the fourth respondent

32    It may readily be seen that the approach of Rares J in Vautin (No 2), confirmed on appeal, has the potential in many cases, and in this case in particular, to lower the bar to make a foreign party subject to the Court’s jurisdiction, subject to restraint by the proper exercise of discretion. As a practical matter, on the facts and circumstances of this case, as pleaded, if the applicant was unable to meet the threshold applied and approved in Vautin (No 2), along with the discretionary threshold of exercising the power sparingly, he probably was not going to be able to meet the usual more stringent test by the full application of the requirements in r 10.43(4) to the case sought to be brought against each of the three foreign respondents.

33    The practical effect of the Vautin (No 2) approach applied to this case is that, provided there is a prima facie case against the fourth respondent, all that is required for this application to succeed in having service confirmed is the Court being satisfied that it was proper for each or any of the three foreign respondents to be joined, albeit exercising the discretion sparingly, and that the requirements of r 10.43(7) (and of r 10.44(4)) have been met.

A prima facie case against the fourth respondent

34    In the application of the principles identified above, it is first only necessary to be satisfied that the applicant has a prima facie case against the fourth respondent in respect of some of the relief sought. For the reasons that follow, I am satisfied that there is a prima facie case against the fourth respondent in relation to at least some aspects of the claims detailed in the amended statement of claim. That said, even at a prima facie level some aspects of the applicant’s case, observed in the absence of direct evidence from him and any discovery, do appear to be somewhat ambitious and perhaps capable of being readily rebutted. It is therefore better not to stray beyond that which is necessary, particularly, as noted above, because counsel for the fourth respondent has foreshadowed the possibility of at least a partial strikeout application. Conveniently, that also accords with the perhaps necessarily limited argument advanced in support of this application.

35    The question that therefore presently arises for determination is whether, on the material presently before the Court, inferences are available which, if translated into findings of fact, would support the relief claimed. That is, whether the case sufficiently shows that a controversy exists between the parties that warrants the use of the Court’s processes to resolve it. If so, I must consider whether causing the three foreign respondents, or any of them, to be involved in litigation in this Court in Australia is justified, reflecting the restraint referred to above.

36    As outlined at [22] above, the causes of action pleaded against the fourth respondent are breach of the contract of employment, misleading or deceptive conduct and proscribed victimisation. I am satisfied that there is a prima facie case brought against the fourth respondent in relation at least to the breach of the contract of employment cause of action. That action depends on allegations of payments not being made as agreed, based on the allegations made in the amended statement of claim and the limited hearsay affidavit evidence before me. Those allegations, translated into findings of fact, constitute a sufficiently clear prima facie case against the fourth respondent.

37    The misleading or deceptive conduct cause of action has some greater difficulty, at least by reason of the absence of particulars, but also the related issue of such representations as were made being shown to be misleading or deceptive at the time they were made. It is undesirable to pre-empt any arguments that might be advanced in relation to that claim, especially as it seems that the need for particulars will be difficult to avoid. Consideration of that claim now is therefore likely to be based on an incompletely pleaded case and to that extent is premature. On the current pleading, without particulars as to how the representations made were misleading or deceptive at the time of their communication, I am not prepared to find that there is a prima facie case against the fourth applicant for the purposes of this application only. That does not mean that no such case exists, but only that I am not prepared to find that it does prima facie exist at present because of the limits on what can be translated into hypothetical findings of fact.

38    The proscribed victimisation case against the fourth respondent is prima facie established in the conventional sense of taking the case alleged at its highest and drawing such inferences as are necessary in favour of the applicant and none in favour of the fourth respondent. It is essentially a finding that a protected disclosure followed by a termination of employment may be inferred in favour of the applicant prima facie to have the necessary causal relationship. A prima facie test necessarily entails disregarding the stated reasons for the termination in the letter sent to the applicant by the first respondent on behalf of the fourth respondent, dated 17 March 2016. However that prima facie conclusion necessarily says nothing of the ultimate prospects of success of this claim.

39    Accordingly, having been satisfied of there being a prima facie case against the fourth respondent for part of the relief sought, as relating to the breach of the contract of employment action, being more than a bare prima facie case on its face, and the proscribed victimisation claim, being no more than a bare prima facie case on its face, I need not form a concluded view on the prima facie case against the fourth respondent in relation to the misleading or deceptive conduct claim.

The case against the foreign respondents

40    I now turn to the question of whether it is proper to join the foreign respondents, a prima facie case against the fourth respondent in Australia having been established. Although the test of whether it is proper to join a respondent does not in terms require a prima facie case to be established, no other basis is suggested on behalf of the applicant. In the circumstances, I am prepared to assess whether it is proper to join the first, second and third respondents by considering whether there is a prima facie case against each of them. In other cases, a different means of determining whether it is proper to join a respondent may be necessary or appropriate.

The case against the third respondent

41    As outlined at [22] above, in relation to the third respondent the applicant alleges short payment of commission, misleading or deceptive conduct and breach of the contract of employment.

42    I am of the view that the claim against the third respondent for the asserted outstanding amount of US$245,000 commission by reason of having brought in the business of the project concerning Borders in Australia is a proper case to bring, at least sufficient to justify confirming service. That is because there is both pleading and some limited hearsay evidence establishing the commission payable and an allegation that it has not been paid in full. In keeping with the breach of the contract of employment claim brought against the fourth respondent, this is sufficient to establish a prima facie case against the third respondent.

43    Strictly speaking there is no requirement to go further than this in relation to the third respondent. However, I reach a similar conclusion in relation to the breach of the contract of employment cause of action in so far as it is brought and able to be maintained against the third respondent. In further support of that position, I note that there is some lack of clarity as to whether the applicant was employed by the third respondent, or by the fourth respondent, or perhaps by some combination of the two whether consecutive or wholly or partially concurrent. It would be undesirable for that question to be litigated to conclusion only against the fourth respondent, only for the Court to reach a conclusion that the evidence established the applicant’s case also or instead against the third respondent, having regard to s 22 of the Federal Court of Australia Act.

44    For the same reason as declining to find a prima facie case of misleading or deceptive conduct against the fourth respondent, I decline to find that this claim is a proper basis for confirming service on the third respondent, but once service is confirmed, that is part of the matter before this Court, including as against the third respondent.

The case against the first and second respondents

45    As outlined at [22] above, the causes of action pleaded against the first and second respondents are breach of fiduciary obligations and proscribed victimisation in relation to the alleged protected disclosure.

46    In relation to the first respondent, with some hesitation I conclude that it is proper for him to be joined and therefore for service to be confirmed in respect of the proscribed victimisation by reason of a protected disclosure claim. That is because he is the signatory to the letter of termination dated 17 March 2016 sent to the applicant on behalf of the fourth respondent. As pleaded, the case against the first and fourth respondents is substantially the same, being for both a bare prima facie case.

47    The reason for my hesitation as foreshadowed earlier is that the applicant’s case of victimisation ultimately depends upon establishing that the applicant’s employment was terminated because of the applicant’s alleged protected disclosure, rather than for the reasons set out in the termination letter. On the face of that letter, which is reasonably detailed, the grounds for termination appear to be substantial (which does not entail any adjudication as to lawfulness, justification or even whether those reasons are bona fide). The protected disclosure upon which the applicant relies was made the same day.

48    While it is not impossible that the termination was triggered by the disclosure to the complete or substantial exclusion of the reasons stated in the termination letter, it may not take much to establish that there was no such proscribed nexus. However this is a difficult and underdeveloped area of the law. There are strong public policy reasons for not erecting barriers to bringing such proceedings. Those reasons include the fact that the victimisation laws are evidently designed to support those who discover and reveal illegal conduct by or on behalf of companies. If a genuine claim of victimisation is brought, it may in some cases be shrouded in self-serving justification, designed to conceal the real reason for what has happened. In making that observation, I am not suggesting, one way or the other, that anything of this nature has, or has not, in fact occurred. Upon evidence and adjudication, such a claim may be revealed to be devoid of merit, or a serious and pre-planned contravention, or warrant some other characterisation or conclusion. An inference is therefore available of the alleged contravention, albeit presently weak and perhaps easily rebutted, but also perhaps able to be bolstered by contextual evidence from the applicant that the disclosure gave rise to the termination despite other ostensibly legitimate grounds being advanced in the termination letter. At least a bare prima facie case and to that extent proper joinder of the first respondent has been established.

49    The victimisation claim against the second respondent is weaker than that alleged against the first respondent. It travels no higher than the second respondent being a person against whom allegations were made, and on the morning of 17 March 2016 communicated to him. Although it may accord with common sense that the second respondent would likely have been involved in the decision to terminate the employment of the applicant, that is a weak inference without any evidence of involvement in the composing or sending of the termination letter. While the second respondent is an addressee of the asserted protected disclosure, there is no evidence beyond a wafer thin inference that he was involved in the decision to terminate the applicant’s employment, let alone motivated to do so by the protected disclosure. I therefore consider that the victimisation case brought against the second respondent is presently too thin for that to be a proper basis on its own for joining him.

50    If I had reached the conclusion as to the proper joining of the first respondent upon the basis of only the alleged victimisation by reason of a protected disclosure, that would have left me with a sense of unease. It would not have been enough for the second respondent. However I reach a similar conclusion in relation to the allegations of breach of fiduciary duty brought against both the first respondent and the second respondent in relation to the dual capacities in which they acted as senior executives of the third respondent and directors of the fourth respondent and the allegation that costs were said to be shifted from the third respondent to the fourth respondent in order to, or at least which had the effect of, artificially lowering its profitability, thereby reducing the applicant’s entitlement to a “profit interest” payment. This conclusion is again reached with some degree of hesitation due to the difficulties associated with the ambit of fiduciary claims. Moreover, there may have been many other reasons for those arrangements which could well have had nothing to do with such considerations, but at this stage that is only speculation unsupported by any evidence. This conclusion leads to the conclusion that it is proper to join both the first respondent and the second respondent upon the basis that such a prima facie case is sufficient to constitute a proper basis for joinder. Once service against each of them is confirmed, all causes of action pleaded against them are available to the applicant, subject to the course of the litigation and any further application any of the respondents may make.

Whether service of the kind carried out is permitted: r 10.43(7)(b)

51    The applicant relies upon affidavit evidence as to two means of service having been effected, being:

(1)    under the Hague Convention, which allows for postal service; and

(2)    under the USA Federal Rules of Civil Procedure as varied in the State of Illinois and known as the Illinois Rules for Civil Procedure (Illinois being where, on the evidence, each of the three foreign respondents is located and was served), which allow for personal service.

52    The fact of service having being effected by both means in Illinois is established to my satisfaction by the affidavit evidence. The question then is whether either was a permitted means of service.

53    In relation to the Hague Convention, reliance is placed on the reasoning of Collier J in Bell v Steele [2011] FCA 1390; (2011) 198 FCR 291 at 293-4 [8]-[16], wherein her Honour recognised the distinction between service being permitted in the sense of not being objected to by a signatory State such as the USA, and service “in accordance with” the Hague Convention. Her Honour was prepared to accept that postal service, which is permitted in the USA, is in accordance with the Hague Convention. There is no reason on the material before me to come to any different conclusion. I therefore find that the postal service that has been effected is permitted by the Hague Convention.

54    In relation to the law of the foreign country, in this case the Illinois Rules for Civil Procedure, I am satisfied that personal service on a person either directly, or alternatively on a person at the address for service apparently over the age of 13, is permitted (provided prepaid postal service also takes place in the latter situation), and that it has been effected by process servers retained in the USA for that purpose. Also pursuant to those Rules, I am satisfied that service on a corporation may be effected by leaving a copy of the process with the corporation’s agent. I have read the affidavits of service in respect of each of the three foreign respondents, with service being effected on the first respondent’s wife and a copy being posted to the first respondent, on the second respondent in person and at the offices of the third respondent on a person authorised to accept service.

Explanation for failure to apply for leave: r 10.43(7)(c) and r 10.44(4)(b)

55    The reasons given by affidavit evidence for effecting service ahead of obtaining leave were to facilitate the resolution of the issues as quickly, inexpensively and efficiently as possible and to effect service in accordance with both the Hague Convention and local Illinois law. To that should be added that I made orders permitting delivery to take place ahead of leave being obtained. In all the circumstances where there was a live case against a respondent in Australia, rather than only foreign respondents, in my view that was a reasonable and appropriate course to adopt, given that it took place under the Court’s effective supervision. Such a course may not be so readily accepted for solely foreign respondents, or in different circumstances. A sufficient explanation for the failure to seek leave first has been established in the circumstances of this case.

Conclusion

56    By reason of the forgoing, the service of the amended originating application, amended statement of claim, this interlocutory application, an affidavit and orders upon the first respondent, second respondent and third respondent must be confirmed. The costs of this application should be reserved rather than being costs in the cause or there being no order as to costs. That is because the three foreign respondents were probably aware of this application and could have elected to waive service. That does not necessarily mean that they should pay the costs of this application, but, depending on the outcome of the litigation and any other considerations that may be advanced, it may be that the costs of the application should be the applicant’s costs in the cause.

Associate:

Dated:    23 February 2017