FEDERAL COURT OF AUSTRALIA

Olson v Keefe (No 2) [2017] FCA 1168

ORDERS

THE COURT ORDERS THAT:

1.    Within 14 days, or such other period as may later be ordered, the parties furnish:

(a)    agreed or competing draft orders to give effect to these reasons; and

(b)    agreed or competing draft procedural orders for the future conduct of the substantive proceedings, including:

(i)    a timetable and process for a draft further amended statement of claim to be provided by the applicant; and

(ii)    provision for the respondents to indicate either consent or particular points of opposition to the draft further amended statement of claim.

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

REASONS FOR JUDGMENT

BROMWICH J:

1    This is an application by the respondents for summary dismissal or striking out of significant parts of the applicant’s amended statement of claim (ASOC) and corresponding parts of the applicant’s amended origination application (amended OA). The respondents also seek a stay as to parts of the ASOC as against the third respondent, a company in the United States, on the basis that this Court is a clearly inappropriate forum. It is not contended, however, that a certain aspect of the applicant’s case, advancing claims in contract, should not proceed in a more limited form than presently pleaded, albeit that it will be defended.

2    In general terms, the issues in this case arise out of the employment of the applicant, Kevin Olson, by the third respondent, Hilco Merchant Resources LLC (Hilco USA), and subsequently by the fourth respondent, Hilco Merchant Australia Pty Ltd (Hilco Australia), its wholly-owned subsidiary. It is sufficient for present purposes to describe:

(1)    the first respondent, Michael Keefe, as:

(a)    the Chief Executive Officer of Hilco USA; and

(b)    a director and officer of Hilco Australia; and

(2)    the second respondent, Cory Lipoff, as:

(a)    the executive vice president of Hilco USA; and

(b)    also a director and officer of Hilco Australia.

3    It is convenient to repeat parts of a prior judgment, Olson v Keefe [2017] FCA 101, for the purposes of briefly outlining the nature of the proceedings and the matters in dispute. In that decision, the following summary was drawn from the pleadings and uncontested evidence adduced for the limited purpose of an application to confirm service outside the jurisdiction on the first to third respondents – that is, what follows is not the product of an adjudication, but rather of taking the pleadings, with some limited supplementation in the nature of particulars, at face value:

6.    [Hilco USA] 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 [ASOC] 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. [Hilco Australia] is involved in such projects in Australia.

7.    Between 2003 and 2006, the applicant was employed by a company related to both [Hilco USA and Hilco Australia], apparently in the USA although that is not expressly pleaded. From 2006 to 2009, the applicant worked as a contractor to [Hilco USA] 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 [Hilco USA]’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 [Hilco USA] 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 [Hilco USA] 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 [Hilco USA].

9.    In December 2010, [Hilco USA] invited the applicant and his family to move to Chicago where [Hilco USA] 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 [Hilco USA]. Two representatives of [Hilco USA], [Mr Keefe] and the vice president of operations, travelled to Sydney to assist the applicant with securing for [Hilco USA] the contract for the orderly disposition of Borders’ Australian assets. The applicant claims he then secured that contract for [Hilco USA].

11.    On or about 1 April 2011, [Hilco USA] 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 [Hilco USA] in Chicago.

13.    In or about late June 2011, the applicant was asked by [Hilco USA] to return to Australia to market further [Hilco USA]’s services. On 3 July 2011, [Hilco USA] asked the applicant to consider moving to Australia to be managing director of the new business unit of [Hilco USA] 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 [Mr Keefe and Mr Lipoff] 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 [Hilco Australia] or alternatively his place of employment with [Hilco USA] 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 [Mr Keefe] who was described on the face of the document as the president and CEO of [Hilco USA]. The applicant’s pleading describes the term sheet as having been signed by [Mr Keefe] on behalf of not just [Hilco USA], but also [Hilco Australia]. 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 [Hilco Australia], meant that it operated more widely than just between the applicant and [Hilco Australia] despite [Hilco Australia] 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 [Hilco USA]’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 [Hilco USA] or [Hilco Australia] upon giving reasonable notice.

16.    In the alternative, the applicant pleads that he commenced employment with [Hilco Australia] from 4 April 2012 either separately from or additional to his employment with [Hilco USA].

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

(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 [Hilco USA] or [Hilco Australia] by Australian companies were paid through the direction of [Hilco USA]’s chief financial officer in the USA for each project;

(2)    [Hilco USA] 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)    [Hilco USA] allocated large amounts of expenses to [Hilco Australia] in the profit and loss statements of [Hilco Australia] for each project; and

(4)    [Hilco USA] charged for services rendered to [Hilco Australia] for each project, as reflected in the profit and loss statements of [Hilco Australia].

…

22.    The applicant’s case as pleaded is, as noted above, that he was either persuaded to leave employment with [Hilco USA] in order to take up employment in Australia with [Hilco Australia] (ultimately owned by [Hilco USA] 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 [Hilco USA and Hilco Australia] via [Mr Keefe and Mr Lipoff] in the USA in July 2011, to persuade him to take up employment with [Hilco Australia] in Australia, that he would obtain shares in [Hilco Australia], as to his remuneration and as to his expenses – the allegation that the representations made were misleading or deceptive is asserted but not particularised; [certain particulars have since been provided]

(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 [Hilco USA];

(3)    breach of fiduciary obligations by [Mr Keefe and Mr Lipoff] in relation to the financial arrangements between the third respondent and fourth respondent which affected the profitability of [Hilco Australia] 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 [Mr Keefe and Mr Lipoff], which is less clear unless this is intended to reflect a cause of action against [Hilco USA];

(4)    victimisation by [Mr Keefe, Mr Lipoff and Hilco Australia] 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 [Hilco Australia] is the principal contravenor and [Mr Keefe and Mr Lipoff] 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 [Hilco USA] and/or [Hilco Australia] in relation to the payment of a bonus, payment of other benefits, the payment of “profit interest”, severance payments, notice and base compensation.

4    The respondents did not take issue with the last of the claims listed above being litigated (and defended) in this Court, insofar as what is alleged is a breach of the applicant’s employment contract in Australia by Hilco Australia, based on the term sheet referred to above. That concession did not extend to the aspect of the contractual claim concerning “profit interest”, nor to the claim in the alternative that the applicant was employed by Hilco USA. Nor does the interlocutory application concern the victimisation claim insofar as it is brought against Hilco Australia and Mr Keefe, summary dismissal of that claim being sought only to the extent that it is brought against Mr Lipoff.

5    The interlocutory application was concerned only with:

(1)    the misleading or deceptive conduct claim (topic 1);

(2)    the “profit interest” claim (topic 2);

(3)    the alleged breach of fiduciary duty (topic 3);

(4)    the claim of proscribed victimisation, to the extent it is brought against Mr Lipoff (topic 4);

(5)    the employment claim brought in the alternative against Hilco USA (topic 5); and

(6)    the claim based on what is described as a “Commission Agreement” (which is said to have arisen based on an agreement to an offer made in the USA at a November 2010 training seminar in the United States prior to the applicant’s employment in Australia: see [3(8)] above), for which this Court is said to be a clearly inappropriate forum (topic 6).

It is convenient to consider the above six topics raised by the interlocutory application under those headings after briefly outlining the applicable legal principles.

Applicable legal principles

6    There was no dispute as to the applicable principles. For summary judgment under s 31A of the Federal Court of Australia Act 1976 (Cth), the text of the provision cannot be improved upon: summary judgment may be given where the Court is satisfied that the relevant party has “no reasonable prospect of successfully prosecuting the proceedings” or part thereof. The statutory test, being a radical departure from earlier tests, is not to be paraphrased or further defined: Spencer v Commonwealth of Australia [2010] HCA 28; 241 CLR 118 at [53], [58]. What is required is a critical examination of the material advanced in support of the application to determine whether there is a real question of fact or law to be determined at trial, the onus being on the moving party: see Australian Securities and Investments Commission v Cassimatis [2013] FCA 641; 220 FCR 256 at [46]-[50].

7    The strike out provisions in r 16.21 of the Federal Court Rules 2011 (Cth) are similarly clear and blunt:

16.21    Application to strike out pleadings

(1)    A party may apply to the Court for an order that all or part of a pleading be struck out on the ground that the pleading:

(a)    contains scandalous material; or

(b)    contains frivolous or vexatious material; or

(c)    is evasive or ambiguous; or

(d)    is likely to cause prejudice, embarrassment or delay in the proceeding; or

(e)    fails to disclose a reasonable cause of action or defence or other case appropriate to the nature of the pleading; or

(f)    is otherwise an abuse of the process of the Court.

(2)    A party may apply for an order that the pleading be removed from the Court file if the pleading contains material of a kind mentioned in paragraph (1)(a), (b) or (c) or is otherwise an abuse of the process of the Court.

The meaning of the above terms used were not in dispute and do not require elaboration.

Summary dismissal or strike out and re-pleading?

8    As a preliminary matter, after hearing oral submissions for the respondents, senior counsel for the applicant sought an opportunity to re-plead the ASOC (and implicitly, the amended OA) to meet all of the objections raised by the respondents, rather than have this Court determine the respondents’ interlocutory application at all. It was accepted that this course would necessarily entail an order that the applicant pay the costs thrown away. Counsel for the respondents was amenable to that approach, or at least quite properly conceded it could not be resisted, but only as to parts of the applicant’s pleadings, seeking an adjudication as to the balance of the interlocutory application. The reasons below address this issue for each topic.

Topic 1: the claim of misleading or deceptive conduct ([44]-[53] of the ASOC; [7]-[8] of the amended OA)

9    As noted above, the respondents do not object, subject to some modification in pleading, to the aspects of the applicant’s case that concern a disputed claim for entitlements under his contract of employment. The respondents do, however, object to the claim of misleading and deceptive conduct that is pleaded as a complete alternative to the contractual claim. Under the alternative claim, set out in [44] to [53] of the ASOC, the applicant seeks compensation for loss or damage suffered in reliance on misleading or deceptive representations as to future entitlements he would receive in his employment. In that way, the relief sought under this claim is to similar effect as the contractual claim, albeit by way of a different cause of action, with its own evidentiary and legal hurdles.

10    The gravamen of the respondents’ complaint as to the claim of misleading or deceptive conduct is that the lack of clarity in the ASOC as pleaded means that they are unable to understand the case being made against them. In this regard, it was submitted that the misleading or deceptive character of the three representations relied on is asserted by way of circular or conclusory pleadings that do not explain how it is said that any those representations as to future events were in fact misleading or deceptive at the time they were made. This point was illustrated by reference to what is pleaded as the “Share Representation” at [45] of the ASOC, which concerns an alleged representation made to the applicant that he would be entitled to a future right to share in a business yet to be set up. That paragraph states:

45.    In the alternative, on 3 July 2011 Lipoff, on behalf of HMR LLC and Hilco Aust engaged in a telephone discussion with Olson [the Telephone Discussion]:

(a)    During which Olson was invited to agree to travel to Australia with his wife and his children (Olson Family) to establish HMR LLC’s Australian business for the purpose of undertaking marketing, transactional development and transactional due diligence activities in Australia and New Zealand (Hilco’s Australian Business); and

(b)    Offering Olson a share in Hilco’s Australian Business if he agreed to do so (Share Representation) [emphasis added].

Particulars

Lipoff made the representation for and on behalf of HMR LLC and Hilco Aust in the course of a telephone conversation with Olson on 3 July 2011.

11    The misleading or deceptive character of the “Share Representation” identified in the above paragraph, and of the other two representations relied upon, is asserted at [50] as follows:

50.    Each of the Share Representation, the Budget Representation and the Term Sheet Representations were misleading or deceptive or likely to mislead or deceive.

12    The deficiencies disclosed by this pleading were rhetorically and effectively expressed by counsel for the respondents as follows:

… what is the proper characterisation of misrepresentation? Is it a representation of fact as at the time that the representation was made? Is it a representation about a future event to occur? Is it a statement of opinion? Is it a statement of aspiration? And when one reads it, we say in proper context, all one can discern from the pleading is that it is a statement of future event.

13    Similarly forceful submissions were made as to the pleading of the other two representations relied on, described in the ASOC as the “Term Sheet Representation” and the “Budget Representation”. The former concerns a representation that the applicant would be entitled to the remuneration and benefits to be set out in the term sheet. The latter concerns a representation that the applicant should submit a budget for establishing an office in Australia, including his personal expenses of relocation. Both representations are pleaded in a similar manner to the “Share Representation”, with their misleading and deceptive character identified, without further particularisation, by way of the general assertion at [50], reproduced above. Reference was also made to particulars provided by way of correspondence that was in evidence as to the three asserted representations.

14    Counsel for the respondents appropriately did not strongly contend for summary judgment in respect of the misleading and deceptive claim, given the deficient pleading nature of the complaint. Similarly, it was appropriately conceded by the respondents at the hearing that if only their secondary application for a strike out were to succeed, they could not properly resist leave being granted to re-plead this aspect of the ASOC. Correspondingly, senior counsel for the applicant, after hearing the oral submissions for the respondents, sought leave to re-plead the relevant paragraphs of the ASOC, accepting that this would inevitably result in an order for costs thrown away. The prior written submissions for the applicant defending the pleadings in their current form were, wisely, not actively pursued.

15    As a starting point, it should be observed that it is notoriously difficult to show that a representation as to the future was false at the time it was made. Where such allegations are brought, particular clarity in the pleadings is required so that the responding party can understand the basis on which the representation is said to be misleading or deceptive. This necessarily entails disclosure of the character or nature of the alleged misrepresentation, as was adverted to by counsel for the respondents in the quote reproduced above at [12].

16    I am of the view that the points taken by the respondents do not rise higher than identifying defects in the pleadings, and do not presently justify an order for summary judgment. That said, the relevant defects are substantial. Critically, the claim of misleading or deceptive conduct in the ASOC does not provide sufficient clarity or particulars to enable the respondents to understand the case that is brought against them. In particular, the pleading is plainly deficient by reason of the applicant’s failure to particularise the precise terms of the alleged representations relied on, or to identify the character or nature of those misrepresentations, and the bases on which each representation is said to be misleading or deceptive. In this regard, the relevant parts of the ASOC also do not meet the specific requirement in r 16.42 of the Federal Court Rules that a pleading as to misrepresentation state particulars of the facts on which the party relies.

17    It follows that the submissions for the respondents are largely accepted as to each of the defects relied on. Pursuant to r 16.21, the relevant paragraphs of the ASOC are to be struck out on the basis that they are ambiguous, or likely to cause prejudice, embarrassment or delay in the proceeding, or fail to disclose a reasonable cause of action. The applicant did not seriously contend that any finding to the contrary should be reached. Necessarily, this conclusion cannot and does not entail any assessment of the strength of the case sought to be advanced on behalf of the applicant. The re-pleading process, however, may be cause and opportunity for the applicant’s legal representatives to reflect upon the viability of this set of claims.

18    Given the parties’ effective agreement on the outcome that should be reached on this aspect of the interlocutory application if summary judgment were considered inapplicable, no more detail is required by way of reasons. The appropriate course is to strike out the offending parts of the ASOC, and to grant the applicant leave to re-plead those paragraphs. The precise paragraphs affected will need to be identified in final orders reflecting the substance of these reasons. It does not appear that the corresponding paragraphs of the amended OA at [7]-[8], seeking declarations and damages for the alleged conduct, require amendment. The re-pleading to be embarked upon by the applicant will need to address comprehensively the legitimate concerns advanced on behalf of the respondents.

Topic 2: the “profit interest” claim ([83(c)] of the ASOC)

19    After some debate and an opportunity to obtain instructions, senior counsel for the applicant advised the Court that the applicant’s “profit interest” claim, which is pleaded at [83(c)] of the ASOC, would not be pressed and summary judgment in that respect would be consented to. Accordingly, the applicant’s “profit interest” claim will be summarily dismissed.

Topic 3: the alleged breach of fiduciary duty ([57]-[70] of the ASOC; [11]-[13] of the amended OA)

20    The respondents pressed for summary dismissal of the claim at [57]-[70] of the ASOC that the first and second respondents have breached a fiduciary relationship owed to the applicant. Summary dismissal was sought on the basis that, even accepting every fact pleaded as having been proven, no fiduciary relationship is capable of being established, such that this claim cannot succeed.

21    In response, senior counsel for the applicant contended that the problems identified by the respondents could be rectified by amendment of the pleadings, and that, in the interests of justice, he should be permitted to do so. In resisting that course, the respondents effectively contended that this would amount to sidestepping the pleading point properly advanced, which requires adjudication. Given that no draft amendment was advanced addressing how the problem identified by the respondents could be avoided, the application for summary dismissal or striking out must be determined on what is before the Court. There is no injustice in proceeding in that way. Indeed, it is difficult to see how the point of principle taken by the respondents, if correct, can be avoided by re-pleading.

22    The key issue requiring adjudication is not whether there has been a breach of the pleaded fiduciary relationship, but whether that relationship is capable of existing at all when taking the applicant’s factual case at its highest. The pleadings as to that asserted relationship are better reproduced than summarised. They are as follows (with a grammatical correction to [62] as raised at the hearing of the interlocutory application):

Fiduciary relationship

57.    In or about March 2011, Olson and Keefe and Lipoff agree to form for the first time a new HMR LLC business unit in Australia by setting up the company Hilco Aust.

58.    On or about 1 April 2011, HMR LLC sought and was allocated an Australian Company Number (ACN) by the Australian Securities and Investments Commission, for the purpose of conducting business in Australia (ACN 605 678 144) and Hilco Aust was established with Keefe, Lipoff and Mr Bradley Ross as the directors.

59.    In or about July or August 2011, Olson agreed with Keefe and Lipoff to:

(a)    be the managing director of Hilco Aust; and

(b)    be sole representative of Hilco Aust in Australia;

(c)    be employed by Hilco Aust or in the alternative continue to be employed by HMR LLC in Sydney: and

(d)    move to Sydney with his family to devote his full labour to the success of Hilco Aust.

60.    In return, Keefe and Lipoff agreed with Olson to provide the support necessary to ensure the success of Hilco Aust and Olson would be entitled to amongst other remuneration, a share of the net profits of Hilco Aust and a share of the value of Hilco Aust upon a sale event after 5 years vesting.

61.     By agreeing to make his financial reward for the contract of service Olson was entering largely dependant upon the calculation of Hilco Aust’s profit, Olson was placing his utmost confidence in Keefe and Lipoff to properly calculate Hilco Aust’s profit.

62.     Keefe and Lipoff [both] as directors of […] Hilco Aus and [as] senior executives of HMR LLC occupied a position of advantage in relation to Olson because each:

(a)    knew what costs were being attributed to Hilco Aust by HMR LLC; and

(b)     were able to control those costs and thereby Olson’s remuneration.

63.    In the period from March 2012, Keefe and Lipoff had a special opportunity to exercise the power or discretion in relation to calculation of Hilco Aust’s profit to the detriment of Olson.

64.     By reason of the matters pleaded in paragraphs 2, 3 and 57 to 63 above, Keefe and Lipoff as directors of Hilco Aust each owed a fiduciary duty to Olson.

Particulars of duty

The scope of the fiduciary duty was that Keefe and Lipoff owed a fiduciary duty to Olson to ensure that the accounts of Hilco Aust reflected a true and fair view of the profitability of Hilco Aust and that only services properly and directly attributable to the Australian operations were charged by HMR LLC to Hilco Aust.

23    The above pleadings and, in particular, the references to Hilco Australia’s profits and to the applicant’s remuneration, are to be understood in the context of the asserted contract of employment, constituted by the term sheet and further oral and implied terms, by which is it said (and may be accepted for the present argument) that the applicant was entitled to:

(1)    an annual bonus of 10% equal to the net earnings of Hilco Australia; and

(2)    a 10% interest in Hilco Australia’s valuation, payable upon a future sale event.

It is clear that each of those entitlements depends on Hilco Australia’s profitability. That profitability, in turn, would likely be affected by the quantum of payments made by Hilco Australia to Hilco USA and how they are recorded in the books and records of Hilco Australia.

24    During the course of legal argument, senior counsel for the applicant further stated the factual basis for the assertion of a fiduciary relationship, which is largely consistent with the pleadings reproduced above. He said:

Your Honour, it’s as simple as this: Mr Olson agrees with Mr Lipoff and Mr Keefe that he is going to head up – he’s going to move to Australia and head up the Australian business on the basis that he will get 10 per cent of that business. Now, it’s 10 per cent by way of profit and it’s 10 per cent also in the event of a sale. It goes up to 20 per cent. But he has got a vested interest in the running of that business. Now, he does that in a circumstance where he has no control over the costs that are going to be imposed on the company. He has to rely on Lipoff and Keefe to ensure that he is getting that benefit. They’re in a special position to control the benefit that he has agreed to for the detriment that he has agreed to undertake.

25    The relevant pleadings, supplemented if need be by the above statement, can be seen to mount a case for a fiduciary relationship based on:

(1)    the applicant agreeing with Mr Keefe and Mr Lipoff to be the managing director and sole representative for Hilco Australia, to be employed by Hilco Australia (or, alternatively, to continue to be employed by Hilco USA), and to move with his family to Sydney, devoting his work to the success of Hilco Australia;

(2)    Mr Keefe and Mr Lipoff agreeing with the applicant to provide the support necessary to make Hilco Australia a success;

(3)    the confidence the applicant reposed in Mr Keefe and Mr Lipoff to calculate properly the profit of Hilco Australia; and

(4)    the position of advantage and special opportunity Mr Keefe and Mr Lipoff had in being able to cause the costs charged by Hilco USA to Hilco Australia to be increased or decreased, thereby affecting Hilco Australia’s profit result.

26    It should be noted that it is not suggested, nor could it be, that either Mr Keefe or Mr Lipoff had been dealing with the applicant in any personal capacity. Each could only have been acting in their executive roles with Hilco USA, or in their capacity as directors of Hilco Australia, or in both roles. Importantly, it was not asserted, nor is there any apparent basis to suggest, that there was any direct legal relationship between the applicant and either Mr Keefe or Mr Lipoff, whether in contract or otherwise, apart from the asserted fiduciary relationship.

27    As pleaded, the scope of the fiduciary duty owed by Mr Keefe and Mr Lipoff to the applicant was said to be to ensure that the accounts of Hilco Australia reflected a true and fair view of its profitability. The point of principle raised by the respondents is whether the pleaded facts and circumstances, if taken to be proven, are capable of giving rise to the asserted fiduciary duty.

28    The respondents’ case comes down to the following two central propositions:

(1)    the material facts pleaded do not establish a fiduciary relationship recognised at law; and

(2)    the ASOC does not plead with precision the particular duty claimed to have been breached.

29    The second of these points is a question of the adequacy of the pleading, which, in theory, may be rectified by amendment. As addressed below, the applicant sought the opportunity to re-plead the ASOC with particulars of the relevant fiduciary duty, presumably in terms similar to the further details provided by senior counsel at the hearing reproduced above. The focus of the application for summary dismissal must be whether there are reasonable prospects of success, taking the applicant’s case at the highest, including by reference to senior counsel’s supplementary statement reproduced at [24] above and the representations made in correspondence.

30    The respondents’ arguments in support of the conclusion that no fiduciary relationship could be found to have existed on any view of the pleaded facts were advanced in written and oral submissions as follows:

(1)    The relationship between the applicant and Mr Keefe and Mr Lipoff did not fall within any previously identified category of fiduciary relationship, such as trustee-beneficiary, agent-principal, solicitor-client, employer-employee, director-company and partners with one another: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 96.

(2)    The relevant relationship was not even an employment relationship; at most, it was a relationship between the directors of an employer company and a senior employee of that company. Research by the respondents had only revealed authority denying a fiduciary relationship in that situation: Morris v Hanley [2004] NSWCA 41 at [55], [57]-[58].

(3)    The essential characteristics of a fiduciary relationship were not present, relying on Mason J’s observation in Hospital Products at 96-7 that the usual critical feature of a fiduciary relationship is that the fiduciary undertakes or agrees to act for or on behalf of another person in the exercise of a power or discretion which affects that other person’s interests. (In relation to that submission, it should be noted that, in some very limited situations, the fiduciary duty may exist or otherwise be imposed without knowledge, let alone agreement – for example, a beneficiary may never meet a constructive trustee and such a trustee may not express any view on the topic – but this is not such a situation.) Relevantly, no such undertaking of agreement was asserted in the pleadings. No contractual obligation was pleaded, and no allegation was made that the contracting parties to the term sheet (being the applicant and either Hilco Australia or Hilco USA, or perhaps both companies) owed any fiduciary obligations to the applicant.

(4)    As the basis for the asserted fiduciary relationship, it is said by the applicant that Mr Keefe and Mr Lipoff, as directors of Hilco Australia and as senior executives of Hilco USA, occupied a position of advantage and had the special opportunity to exercise power or discretion to the detriment of the applicant. This was said in correspondence to be a unique relationship giving rise to the fiduciary obligation. According to the respondent, however, that position is an ordinary and essential feature of most employment relationships.

(5)    The mere fact of reliance and vulnerability does not convert a commercial relationship into a fiduciary relationship, as the High Court made clear in John Alexander’s Clubs Pty Limited v White City Tennis Club Limited [2010] HCA 19; 241 CLR 1 at [82]. Vulnerability to a breach of contract similarly does not, without more, create a fiduciary relationship: John Alexander’s Clubs at [83]. The substance of this submission was that the applicant was not entitled to a better bargain than he had contracted for and could not invoke fiduciary obligations to supplement a contract that was deficient. To allow such an outcome, without some additional feature to warrant it, would be to subvert the very nature of commercial contractual relations. Here, the basis asserted for the fiduciary obligation could not be divorced from its contractual origins to the effect that liability might shift from Hilco Australia (or perhaps Hilco USA) to Mr Keefe and Mr Lipoff.

(6)    The evidence relied on by the applicant as to the existence of a shareholder relationship between each of Mr Keefe and Mr Lipoff with Hilco USA was misconceived because the case was not, and arguably could not, be brought against either man as a shareholder, and it was not to the point that they may have had influence over that company by reason of their shareholding (a fact that was not conceded, except perhaps for the purposes of the argument).

(7)    The applicant’s reliance on Crawley v Short [2009] NSWCA 410; 262 ALR 654, and the line of cases to which it refers, was misconceived. Those cases are authority for no more than the proposition that a director of a company might owe a second fiduciary duty to a shareholder where there is an express or implied promise to act in that particular shareholder’s interests. However, this was not a case in which the applicant was a shareholder. Rather, the relevant relationship between the applicant and Hilco Australia (and perhaps Hilco USA) was contractual. The reference to the applicant being a potential shareholder did not bridge the gap and was, in any event, textually erroneous because the entitlement the applicant relied upon was not for a shareholding, but rather for a dollar amount calculated by reference to share value.

31    Although advanced in support of the pleading argument, the respondents also pointed out that the existence of an asserted fiduciary duty as to the accounts of Hilco Australia is not supported by any known authority, falling outside the commonly used prohibitions on fiduciaries:

(1)    avoiding even the significant possibility of a conflict between duty and personal interest; and

(2)    avoiding making a gain or benefit by reason or use of that position, including by information obtained,

citing Chan v Zacharia (1984) 154 CLR 178 at 198-199.

32    The written submissions for the applicant focused in part on the rationale for fiduciary obligations, and the content of those obligations. Broad principles were also cited to the effect that the existence and scope of fiduciary obligations depends upon the circumstances of the parties and how they conduct themselves, and it was emphasised that a person may be a fiduciary without being aware of it. Counsel for the applicant also cited cases, such as Brunninghausen v Glavanics [1999] NSWCA 199; 46 NSWLR 538, in which directors have been found, under special circumstances, to owe a second fiduciary duty to shareholders.

33    The written submissions for the applicant, however, did not grapple with the fundamental need, at least in a case such as this, to identify an express or implied basis for finding that Mr Keefe or Mr Lipoff had in some way undertaken or agreed to act for or on behalf of the applicant in the oversight of the books and records of Hilco Australia and in its financial relationship with Hilco USA. That is not surprising. First, no asserted fact presently pleaded suggests any such undertaking or agreement. Secondly, any such undertaking or agreement is not only inherently unlikely, but conceptually highly problematic. Such an undertaking or agreement to act solely in the applicant’s interests would itself create the risk of a conflict with the undoubted fiduciary obligations that Mr Keefe and Mr Lipoff each owed to Hilco Australia as a director, and the probable fiduciary obligations that they owed to Hilco USA. No authority was cited to support such an unlikely outcome. Nor is any such authority likely to exist, given that the very essence of a fiduciary duty is to prefer the interests of another over and above one’s own interests, or indeed the interests of anyone else. The circumstances in which there will be a second fiduciary relationship are limited, such as where small companies or companies effectively run as partnerships. In such situations, a director’s fiduciary duty to the company may also accommodate a second fiduciary duty to a shareholder, arising from the special nature of that particular company, but in a way in which the duty does not conflict with the duty to the company, and with the risk of such conflict being addressed by confining the operation of the second duty.

34    The oral submissions for the applicant did not improve upon the position advanced in writing. It is convenient to address a few preliminary matters raised first.

35    Senior counsel for the applicant submitted that the intention of the pleading was to base the existence of the fiduciary duty not just on the position of Mr Keefe and Mr Lipoff as directors of Hilco Australia, but also on their position as senior executives of Hilco USA. The key point relied upon was that Mr Keefe and Mr Lipoff were in a position to influence accounts of Hilco Australia by reason of their role in the ultimate parent company, Hilco USA. For present purposes, it may be assumed, contrary to the express words used in the present pleading, and instead, or as well, relying upon the oral statement reproduced above at [24], that this broader position occupied by Mr Keefe and Mr Lipoff is the foundation for the asserted fiduciary relationship. That appeared to be the most significant pleading defect sought to be remedied by an amendment.

36    It was then submitted by senior counsel for the applicant that the question of the existence of the fiduciary relationship should be left to trial, rather than dealt with in a summary judgment application, relying upon a decision of Hely J in Fernandez v Glev Pty Ltd [2000] FCA 1859, where his Honour said at [6], in dealing with a dispute as to the pleadings, that there was no utility in determining the correctness or otherwise of whether a franchisee/franchisor relationship provided the foundation for a fiduciary relationship. It should be observed that his Honour’s view was expressed in the context of a strike out application only, and falls well short of a universal proposition that such an issue cannot be determined upon an interlocutory basis, especially where objections for the purposes of summary judgment are made as to the reasonable prospects of the fiduciary claim, and not just as to the adequacy of the pleadings. In any event, it is not a sufficient basis to withhold adjudication on this issue in the very different circumstances of this case.

37    Similarly, the absence of a complete evidentiary picture was not a sufficient basis to await trial for the determination of this issue. As counsel for the respondents pointed out, all of the pleaded facts are taken to be established for the purposes of determining this application. It is difficult to see how any further pleaded facts could do more than provide additional detail as to the asserted fiduciary relationship, rather than provide a new or different basis for the existence of that relationship. It would remain the case that the pleaded relationship would not fall within any of the categories in which fiduciary obligations have previously been recognised. The relationship would still be that of an employee of one company or the other and the directors or senior executives of whichever company was found to be the employer. The key underlying legal relationship would remain one of contract between the applicant and one or the other of the companies. Senior counsel did not identify any further indispensable facts or circumstances that would be relied upon beyond his explanation of the basis for asserting a fiduciary relationship reproduced above at [24].

38    Turning to the substantive oral submissions made on behalf of the applicant, reliance was placed upon John Alexander’s Clubs for the proposition that the existence of a contractual relationship did not preclude the existence of a fiduciary relationship. That much is not in doubt. However, this did not address the limitations on that coexistence expressed by the High Court both in Hospital Products and in John Alexander’s Clubs, as further considered below.

39    Senior counsel for the applicant also relied upon Brunninghausen at [40] and [98]-[99]. However, those passages did not assist the applicant. They describe circumstances in which a director may have a second fiduciary duty to a shareholder, as addressed above in the context of the discussion of Crawley v Short. For the reasons identified by the respondents, that is not the present situation, nor even a close approximation of the present situation.

40    Reliance was then placed upon a number of passages from the judgment of Mason J in Hospital Products. However, that argument also foundered upon the lack of any legal relationship at all between the applicant and either Mr Keefe or Mr Lipoff upon which to ground a fiduciary relationship, such as the distributor relationship in Hospital Products.

41    The oral submissions for the applicant reflected only bootstrap reasoning, by which the basis for asserting a fiduciary relationship depended upon the relationship existing in the first place. This is not to be confused with observing the well-established principle that a person is not subject to fiduciary obligations because he or she is a fiduciary; rather, he or she is a fiduciary by reason of being subject to such obligations: see Finn P, Fiduciary Obligations 40th Anniversary Republication with Additional Essays (Federation Press, 2016) at p 2 [3].

42    On 13 September 2017, an email was sent to my associate by the solicitor for the applicant, with the consent of the respondents’ solicitors, referring to, and attaching a copy of the 1 September 2017 decision of the Full Court in Oliver Hume South East Queensland Pty Ltd v Investa Residential Group Pty Ltd [2017] FCAFC 141. While no particular passage of that lengthy judgment was specifically referred to, it is apparent that it was drawn to my attention because of the treatment given to the creation of fiduciary obligations by Dowsett J at [33]-[55] and by Greenwood J at [236]-[279]. The Full Court, in part unanimously and in part by majority, came to a different conclusion to the primary judge as to whether certain of the relationships which were shown to exist imposed obligations of a fiduciary nature.

43    Oliver Hume does not, upon careful consideration, advance the position of the applicant. Rather, it consolidates the position of the respondents by confirming the principles discussed in these reasons. It does not raise any relevant principle that has not been addressed either above or below.

44    In Oliver Hume, fiduciary relationships were found to exist on the part of employees in the context of contracts of employment and contracts of agency, duties arising out of the performance of those contracts, the relationship with an associated company, and also director’s fiduciary duties. The facts of that case resulted in fiduciary obligations being found to exist in the context of such relationships, including fiduciary obligations being owed by an employee. It did not address fiduciary obligations being owed to an employee by a director or senior executive (or both in combination). Oliver Hume does not assist the applicant, not just because the facts are quite dissimilar, but also because the principles applied in that case are not new or relevantly different from those discussed in these reasons.

45    A number of fundamental principles emerge from the authorities. First and foremost, as Mason J observed in Hospital Products at 97, and has been much cited ever since:

That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.

46    In Pilmer v Duke Group Ltd (In Liq) [2001] HCA 31; 207 CLR 165, the plurality considered and quoted from a passage at 96-97 from Mason J’s judgment in Hospital Products preceding the quote above, concerning the ordinarily critical factors for a fiduciary relationship of undertaking or agreeing to act for, or on behalf of, or in the interests of another person, and the resulting special opportunity and vulnerability that may arise. At [71], their Honours then relied upon authority of the Supreme Court of Canada to sound a cautionary note and restriction as follows (citations omitted):

It is important also to recognise the distinct character of the fiduciary obligation, which sets it apart from contract and tort. In Norberg v Wynrib McLachlin J said:

“The foundation and ambit of the fiduciary obligation are conceptually distinct from the foundation and ambit of contract and tort. Sometimes the doctrines may overlap in their application, but that does not destroy their conceptual and functional uniqueness. In negligence and contract the parties are taken to be independent and equal actors, concerned primarily with their own self-interest. Consequently, the law seeks a balance between enforcing obligations by awarding compensation when those obligations are breached, and preserving optimum freedom for those involved in the relationship in question. The essence of a fiduciary relationship, by contrast, is that one party exercises power on behalf of another and pledges himself or herself to act in the best interests of the other.”

In the same case, Sopinka J observed:

“Fiduciary duties should not be superimposed on these common law duties simply to improve the nature or extent of the remedy.”

47    The same reasoning applies to fiduciary relationships which are said to arise in the context of a contract. That is, fiduciary duties should not be superimposed on contractual duties simply to improve the nature or extent of the remedies available.

48    The passage reproduced above at [45] from Hospital Products at 97 was considered by the New South Wales Court of Appeal in Streetscape Projects (Australia) Pty Ltd v City of Sydney [2013] NSWCA 2; 85 NSWLR 196 to support the foundational proposition that a fiduciary relationship may exist in, but be subject to, a contractual setting. Barrett JA (with whom Meagher and Ward JJA agreed) then said at [100]:

The contractual terms are paramount. A fiduciary duty cannot detract from or contradict them. The two types of obligation — contractual and fiduciary — will, in general, co-exist only if and to the extent that the sanctions available for breach of contract (including any implied terms) are insufficient to deal with some possibility of unconscionable conduct to which one party is exposed.

49    Applied to the present situation, it is not apparent why the applicant should be able to have the benefit of a fiduciary duty to improve upon whatever contractual rights he may have. While the above quote from Streetscape Projects was directed to the content of a fiduciary duty, in this case it also informs the question of whether such a fiduciary relationship is likely to exist in the first place. The following passages from Barrett JA’s judgment in Streetscape Projects demonstrate why that is so:

104    In Re E Dibbens & Sons Ltd (In liq) [1990] BCLC 577 at 582, Harman J took the view that the relationship between a warehouse company and customers for whom it stored furniture for reward was exclusively contractual and “no fiduciary obligation could usefully be added to the contractual obligations which arise between the parties”.

105    A similar approach was taken in In re Goldcorp Exchange Ltd (In receivership) [1995] 1 AC 74. A bullion company had sold unsegregated gold forming part of a bulk on terms that it would be stored for buyers pending their requests for delivery. Those buyers had clear contractual rights. The Privy Council rejected the proposition that they were also the beneficiaries of fiduciary duties. Their Lordships accepted (at 98) that “the fact that one person is placed in a particular position vis-à-vis another through the medium of a contract does not necessarily mean that he does not also owe fiduciary duties to that other by virtue of being in that position.” One argument put by the claimants was that the seller by whom their gold was stored in mingled form owed them fiduciary duties because of the trust they reposed in it to satisfy their entitlements. Their Lordships dealt with that argument thus (also at 98):

“But the essence of a fiduciary relationship is that it creates obligations of a different character from those deriving from the contract itself. Their Lordships have not heard in argument any submission which went beyond suggesting that by virtue of being a fiduciary the company was obliged honestly and conscientiously to do what it had by contract promised to do.”

106    The following important point was then made:

“Many commercial relationships involve just such a reliance by one party on the other, and to introduce the whole new dimension into such relationships which would flow from giving them a fiduciary character would (as it seems to their Lordships) have adverse consequences far exceeding those foreseen by Atkin LJ in In re Wait [1927] 1 Ch 606. It is possible without misuse of language to say that the customers put faith in the company, and that their trust has not been repaid. But the vocabulary is misleading; high expectations do not necessarily lead to equitable remedies.”

107    The adequacy of remedies for breach of contract is therefore, in general, the determinant of whether there is scope for equity to play a supplementing role by way of the imposition of a fiduciary duty upon a contracting party; and the mere fact that one party puts faith and trust in the other is not of itself sufficient to bring equity to centre stage in that way.

50    The final observation in the above passages from Barrett JA’s judgment in Streetscape Projects, when read with the quotes by his Honour from Goldcorp Exchange Ltd, makes it clear that faith and trust are not, without more, sufficient to create fiduciary relationships. Nor is vulnerability of a contracting party to breach by another, or reliance on that other party, sufficient, as John Alexander’s Clubs also makes clear at [82]-[83]. The applicant’s argument is no better because the asserted faith, trust or reliance, and the resulting vulnerability and opportunity, are said to arise from Mr Keefe and Mr Lipoff’s positions as the effective controlling minds of whichever corporation is found to be the relevant employer of the applicant. Yet that set of circumstances was the effective sole foundation upon which the applicant’s assertion of a fiduciary relationship was based, as a means of supplementing or improving upon his contractual remedies.

51    It is not apparent how any amended pleading could remedy this defect, save perhaps by way of a bare assertion of an undertaking or agreement to place the applicant’s interests ahead of any conflicting fiduciary obligations that Mr Keefe and Mr Lipoff undoubtedly owed to Hilco Australia and probably owed to Hilco USA. Having regard to the principles of fiduciary law considered above, it is doubtful that they could have, let alone would have, been able to give such an undertaking or enter into such an agreement.

52    The pleaded facts and circumstances, taken at their highest, did not, and could not, give rise to any fiduciary obligation owed by Mr Keefe or Mr Lipoff to the applicant. There are no reasonable prospects of this claim succeeding. Accordingly, [57]-[70] of the ASOC and [11]-[13] of the amended OA will be summarily dismissed.

Topic 4: the victimisation claim against Mr Lipoff ([93] and [95] of the ASOC; [4] and part of [6] of the amended OA referring to Mr Lipoff)

53    Mr Lipoff is alleged to have been involved in the contravention by Hilco Australia of the victimisation prohibition contained in s 1317AC of the Corporations Act 2001 (Cth) and thereby liable to pay compensation to the applicant. The case for summary dismissal of this claim advanced on behalf of the respondents can best be addressed by assuming, for present purposes, that the contravention by Hilco Australia has taken place, and then examining whether the pleading, again taking the facts pleaded as proven, is sufficient to disclose a proper basis for accessorial liability on the part of Mr Lipoff.

54    The basis for the case against Hilco Australia is victimisation by way of termination of the applicant’s employment for the proscribed reason of him making a protected disclosure contrary to s 1317AC(2) of the Corporations Act. Accessorial liability is pleaded under s 1317AC(3). It is not in dispute that the applicant’s employment was terminated on the same day as he sent a disclosure letter by email to Mr Keefe and Mr Lipoff, expressly referring to Part 9.4AAA of the Corporations Act, and referring to 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. Mr Keefe sent the applicant a letter by email the same day advising the applicant that his employment had been terminated.

55    While the respondents deny any nexus at all between the applicant’s disclosure and his termination, they accept that there is a prima facie case – that is, taking the asserted case at its highest – against Hilco Australia and against Mr Keefe as the author of the termination letter. However, the respondents rely upon there being no such prima facie case against Mr Lippoff. It is, in substance, a no case submission to the effect that, even accepting everything factual alleged against Mr Lippoff, he has no case to answer.

56    The submissions for the respondents assert that the ASOC does not disclose any element or basis for accessorial liability on the part of Mr Lipoff beyond him being a director of Hilco Australia, citing the well-known authorities in this area of Yorke v Lucas (1985) 158 CLR 661 at 670 and Giorgianni v The Queen (1985) 156 CLR 473.

57    It is not in doubt that, for accessorial liability, there must be knowledge of the essential facts constituting a contravention. In a civil context, those facts must be pleaded. This has not happened. But more importantly, there is nothing to suggest that such facts exist. Were it only the former, then the problem might be remedied by re-pleading. However, re-pleading is not appropriate in the absence of anything to indicate that the necessary facts exist, let alone that the applicant is in any position to prove them.

58    Senior counsel for the applicant accepted that the case pleaded against Mr Lipoff was “thin at the moment”. However, he was unable to explain how it was going to improve, suggesting that the necessary evidence could be obtained once the respondents’ defence had been filed. The problem the applicant faces is that the disclosure and the termination took place on the same day. If there was not already a factual basis to plead the necessary accessorial knowledge on the part of Mr Lipoff, there was no foundation for supposing that would improve. Being an addressee of the disclosure letter and being a director of the employer company was not enough to prove even knowledge of the disclosure (in the sense of it having been read in that limited window), let alone knowledge of the necessary causal connection with the termination letter that followed soon after, and some degree of involvement in that letter being sent. What is required to be pleaded, and ultimately proved, against Mr Lipoff is involvement with knowledge, not just either in isolation.

59    No proper basis for alleging accessorial liability on the part of Mr Lipoff has been pleaded and no alternative factual foundation has been suggested for that claim. In those circumstances, it follows that the applicant has no reasonable prospects of success, and the only proper remedy is summary dismissal of this claim against Mr Lipoff.

Topic 5: the employment claim in the alternative against Hilco USA (parts of [44]-[53] of the ASOC; part of [9] of the amended OA referring to Hilco USA)

60    The ASOC advances contract of employment-based claims upon the primary basis that the applicant was employed in Australia by Hilco Australia, the terms of which were primarily said to be constituted by the term sheet. However, largely, but not solely, due to the arguably ambiguous terms of the term sheet, and also by reference to the applicant having previously been employed by Hilco USA, the alternative claim is that the applicant continued to be employed by Hilco USA upon moving to Australia. That alternative claim is attacked by the respondents upon the basis that there is an absence of material facts pleaded to support any conclusion, even in the alternative, that Hilco USA was the applicant’s employer, however described. In particular, reliance is placed by the respondents on the absence of pleading any of the ordinary indicia of an employment relationship between the applicant and Hilco USA. As such, it was principally (but ultimately somewhat faintly) argued that the present form of pleading does not disclose any reasonable cause of action against Hilco USA.

61    This, again, was a claim which counsel for the respondents properly conceded was capable of being re-pleaded if the alternative relief of a strike out were to be granted. Formally, the case for the primary relief of summary dismissal was maintained. The effective concession that a strike out was a course open to the Court was largely due to the arguably ambiguous terms of the term sheet already referred to.

62    It cannot safely be concluded that there is no reasonable basis for asserting the existence of a contract between the applicant and Hilco USA, particularly where the respondents’ application was largely based on deficiencies in the pleadings. While the ASOC does not disclose the strongest of claims, and accepting the deficiencies identified by the respondents, there is at least an arguable basis for a claim that such an employment relationship existed. This may be seen having regard to the ambiguity in the term sheet and the applicant’s historical employment with Hilco USA. In those circumstances, the test for summary judgment has not been met for this claim. Critically, it cannot be said that there was no reasonable prospect of successfully prosecuting this claim. That is not to say that the threads for finding such a contract existed with Hilco USA as well as, or instead of, Hilco Australia, may, following a final factual and legal adjudication on the merits, prove to be absent. The applicant would be well-advised to consider carefully the viability of this claim, especially given the effective concession by the respondents as to the existence of a contract between the applicant and Hilco Australia, albeit that the meaning of the written terms and the nature and extent of the obligations thereby arising, are plainly in dispute. If this alternative claim is pursued and does not succeed, counsel for the respondents have foreshadowed seeking appropriate costs orders on the basis that they have maintained it cannot succeed on the merits. If that prediction proves correct, the applicant cannot say he was not warned.

63    Once the view is formed that the test for summary judgment cannot be met, but that the pleadings are deficient for the reasons identified by the respondents, the proper relief is to strike out the key operative parts of the ASOC that advance this alternative claim. The amended OA does not appear to require strike out or amendment if this claim is maintained against Hilco USA. Accordingly, the pleading against Hilco USA in [44]-[53] of the ASOC will be ordered to be struck out with costs, with leave to re-plead as to those paragraphs and with leave to amend any collateral paragraphs. There is no need to amend [9] of the amended OA referring to Hilco USA if that claim is maintained.

Topic 6: the “Commission Agreement” claim against Hilco USA

64    It was properly accepted by counsel for the respondents that if leave were given to re-plead the employment claim insofar as it is brought in the alternative against Hilco USA, the argument as to forum non conveniens and the basis for a stay of this claim would be substantially weakened. With that outcome having been reached, it cannot presently be said that this Court is a clearly inappropriate forum. First, there will, at this stage at least, be a case brought against Hilco USA in this Court that is separate to the “Commission Agreement” claim arising in the United States, but also arising out of the same course of dealings between the applicant and Hilco USA. Secondly, in relation to the “Commission Agreement” claim itself that is sought to be stayed, there are competing arguments as to whether the applicable law is determined by where the offer of the commission is said to have taken place, that being in the United States, or where the conduct said to have given rise to the entitlement to the commission took place, that being in Sydney. This Court is no less appropriate a forum in which to resolve that issue than a United States court.

65    It follows from the above that this aspect of the respondents’ interlocutory application therefore cannot succeed. However, it was a sufficiently small part of the respondents’ overall application, involving little additional oral or written argument, so as not to warrant any impact on the appropriate costs order.

Conclusion

66    The interlocutory application succeeds in the greater part. Orders will be made to that effect, including that the applicant pay the respondents’ costs.

67    The parties are directed, within 14 days, or such other period as may later be ordered, to furnish agreed or competing draft orders to give effect to these reasons, together with agreed or competing draft procedural orders for the future conduct of the substantive proceedings, including a timetable and process for the draft further ASOC to be provided and provision for the respondents to indicate either consent or particular points of opposition. The aim should be to avoid, or at least limit, the need for any further adjudication on the pleadings.

Associate:

Dated:    29 September 2017