Patrick Stevedores Operations No 2 Pty Ltd and ORS v Maritime Union of Australia and ORS M29/1998 [1998] HCATrans 127 (27 April 1998)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No M29 of 1998

B e t w e e n -

PATRICK STEVEDORES OPERATIONS NO 2 PTY LTD

First Applicant

LANG CORPORATION LTD

Second Applicant

STRANG PATRICK HOLDINGS PTY LTD

Third Applicant

NATIONAL STEVEDORING HOLDINGS PTY LTD

Fourth Applicant

PLZEN PTY LTD

Fifth Applicant

INTRAVEST PTY LTD

Sixth Applicant

CUMBERLANE HOLDINGS PTY LTD

Seventh Applicant

EQUITIUS PTY LTD

Eighth Applicant

JAMISON EQUITY LTD

Ninth Applicant

SERENADE PTY LTD

Tenth Applicant

SCARABUS PTY LTD

Eleventh Applicant

PATRICK STEVEDORES HOLDINGS PTY LTD

Twelfth Applicant

PATRICK STEVEDORES OPERATIONS PTY LTD

Thirteenth Applicant

and

MARITIME UNION OF AUSTRALIA

First Respondent

PETER BREUKERS, JAKE HAUB and KIERAN COYLE

Second Respondent

PATRICK STEVEDORES NO 1 PTY LTD (Under Administration)

Third Respondent

PATRICK STEVEDORES NO 2 PTY LTD (Under Administration)

Fourth Respondent

PATRICK STEVEDORES NO 3 PTY LTD (Under Administration)

Fifth Respondent

NATIONAL STEVEDORING TASMANIA PTY LTD (Under Administration)

Sixth Respondent

CHRISTOPHER D'ARCY CORRIGAN

Seventh Respondent

WILLIAM CLAYTON

Eighth Respondent

ROBERT DUNN

Ninth Respondent

NATIONAL FARMERS FEDERATION

Tenth Respondent

PCS OPERATIONS PTY LTD

Eleventh Respondents

PCS RESOURCES PTY LTD

Twelfth Respondent

P & C STEVEDORES PTY LTD

Thirteenth Respondent

DONALD GORDON McGAUCHIE

Fourteenth Respondent

PAUL XAVIER HOULIHAN

Fifteenth Respondent

JAMES WILLIAM FERGUSON

Sixteenth Respondent

COMMONWEALTH OF AUSTRALIA

Seventeenth Respondent

PETER KEASTON REITH

Eighteenth Respondent

Application for special leave to appeal

BRENNAN CJ

GAUDRON J

McHUGH J

GUMMOW J

KIRBY J

HAYNE J

CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON MONDAY, 27 APRIL 1998, AT 10.19 AM

Copyright in the High Court of Australia

MR R.V. GYLES, QC: If your Honours please, I appear with MR J.E. MIDDLETON, QC and MR M.P. McDONALD for the applicants. (instructed by Freehill Hollingdale & Page)

MR J.W.K. BURNSIDE, QC: If your Honours please, I appear with my learned friends, MR H. BORENSTEIN, MR M. BROMBERG and MR M.G.R. GRONOW, for the first and second respondents. (instructed by Maurice Blackburn & Co)

MR P.B. MURDOCH, QC: May it please the Court, I appear with my learned friend, MR J.D. ELLIOTT, for the third, fourth, fifth and sixth respondents, which are the companies under administration. (instructed by Phillips Fox)

MR G.P. HARRIS: May it please the Court, I appear on behalf of the seventh and ninth respondents. (instructed by Blake Dawson Waldron)

MR J.D. MERRALLS, QC: May it please the Court, with my learned friends, MR J.I. FAJGENBAUM, QC and MS P.M. TATE, I appear for the eleventh, twelfth, thirteenth, fourteenth, fifteenth and sixteenth respondents. (instructed by Minter Ellison)

I wish to say something about the description of the eleventh and twelfth respondents. There is an error in as much as one of the companies for whom we appear has been named twice under different names. That is apparent from the Australian companies' numbers of the second company referred to as the eleventh respondent and the company referred to as the twelfth respondent. What has happened is that the same company has been sued under two names. It changed its name, so we suggest that the former name, PCS Training Services Pty Ltd, be struck out and the present name, PCS Resources Pty Ltd, be substituted for it as the twelfth respondent, there remaining only one eleventh respondent.

BRENNAN CJ: There is no objection to that, I take it?

MR MERRALLS: No, your Honour.

BRENNAN CJ: Thank you. Mr Merralls, you are not appearing for the tenth respondent, the National Farmers Federation?

MR MERRALLS: No, your Honour, that is an unincorporated association. There is some doubt about its status as a party. We do not appear for it. It is no secret that the companies for whom we appear are associated in some respects with it and the individuals for whom we appear are or were office bearers of it, but we do not in fact appear for the tenth respondent.

BRENNAN CJ: Thank you.

MR G.T. PAGONE, QC: May it please the Court, I appear with MS W.A. HARRIS for the seventeenth and eighteenth respondents. (instructed by Dunhill Madden Butler)

BRENNAN CJ: The Senior Registrar certifies that she holds a letter from Messrs Arthur Robinson Hedderwicks, solicitors for Mr Clayton, the eighth respondent, advising that the eighth respondent has been provided with a copy of the draft application in this matter. The eighth respondent has not been formally served with the application and seeks to be excused from attending the Court. The eighth respondent will abide by any orders made by the Court.

Yes, Mr Gyles. I should indicate, Mr Gyles, that although this is an application for special leave, the Court would expect that counsel would deliver themselves of a full argument so that if at the end of the day the Court should be minded to grant special leave, it would be able to proceed to a disposition of the matter without any delay. That, of course, will involve you in speaking, no doubt, for longer than the usual 20 minutes, but at the same time the Court is conscious of the limitation on its time and we would be grateful if counsel would confine themselves as closely as possible in the course of their oral arguments. I should indicate that the Court has read the written arguments of the parties and that may assist in the framing of counsel's oral submissions.

MR GYLES: In that event, your Honours, may I leave aside, for the moment at least, the questions dealing with the interlocutory nature of the appeal, go to the questions of substance and then perhaps come back and address the interlocutory nature of the appeal.

There are, your Honours, as your Honours will have gathered from the written material, three broad areas which we say warrant the grant of special leave and, if granted, would warrant a discharge of the orders below.

The first group, your Honours, can be seen to be - or described as a question of power; that is, in principle, whether or not the relevant part of the Workplace Relations Act 1996 constitutes, in effect, a special regime to the exclusion of the general powers of the Federal Court. The second broad heading, your Honours, is the failure of the trial judge below to follow principle in framing the orders that he did, and that picks up a number of points which I will outline later, but one of them, your Honours, flows into the third major aspect, and that is the Corporations Law ramifications of what was done.

That was an aspect of the case which, in our submission, should have been taken into account and was not, at least properly, and there are at least two separate issues which turn upon it; the order 3 which was added by the Full Court itself, or the third order in the Full Court, which deals with the administration provisions, and the direction giving leave to proceed, which was granted by his Honour below.

May I return, your Honours, to the question of power. Could I commence by taking your Honours to the Workplace Relations Act . The relevant parts, your Honours, is section 298 Part XA, which is entitled "Freedom of Association". Your Honours should know, however, that Part VIA of the Act deals with termination of employment, or includes a division relating to the termination of employment. That commences with section 170CA. I will not take your Honours right through those provisions for termination of employment but it is necessary, in my submission, to have regard to them when one comes to section 298A and following. In particular - - -

KIRBY J: Is this a part of the Act that is designed to give effect to any international obligations of Australia under section 3(k)?

MR GYLES: Does your Honour speak of 298A or of the earlier provisions?

KIRBY J: The whole of Part XA, on Freedom of Association, and 298A and the provisions of 298 sequence which are in question here.

MR GYLES: Your Honour, I am not sure that there is any recital to that effect.

KIRBY J: There is a mention in section 3(k) about one of the sources of the power that is evoked by the federal Parliament being to assist to give effect to Australia's international obligations in relation to labour standards.

MR GYLES: There is, your Honour, but I see no reference in this particular part to indicate that that is the case here.

KIRBY J: Yes.

MR GYLES: I would be subject to correction, but it is not something I recall seeing. Your Honours, returning to Division 3 of Part VIA, starting at 170CA, without taking your Honours through those provisions in detail I would take your Honours to section 170CR, which deals with orders available to the courts.

Now, in 170CR(1) the court is enabled to make various orders if it "is satisfied that an employer has contravened" the substantive sections and 170CR(6) declares that:

A court.....must not grant an injunction in respect of a proposed contravention of section 170CK.

Your Honour, that provision of 170CR makes explicit what a long line of decisions had held, that there was no power to make interim orders of reinstatement and so on in cases falling under the predecessors of this section. I will take your Honours later to one - perhaps the last of that line of authority to draw your Honours' attention to it. Whilst, your Honours, we have that part at hand, might I also ask your Honours to go back to 170CP because 170CP(1) shows that the legislature well understood the difference between a contravention and an alleged contravention. Your Honours will see that the terms of CP, which talk about alleged contravention. To the same effect, your Honours, is 170CFA(2)(b), (3)(b) and so on.

One can conclude that there is a well-known and sensible distinction between something which is in contravention, something which threatens contravention, or proposes contravention, and something which is an alleged contravention. So there are really three concepts which one gets from these sections. With that in mind, your Honours, going to section 298, Division 3, section 298K, is the section which prohibits conduct and, for present purposes, the examination of the power question, we assume his Honour found an arguable case of breach of 298K. Let me accept that for a moment. Note, however, your Honours, that in 298K(1) the prohibition is upon:

must not, for a prohibited reason, or for reasons that include a prohibited reason, do or threaten to do any of the following.

So that a threat is a contravention. Then your Honours will come to Division 6 which deals with remedy - - -

McHUGH J: Before you leave section 298K, paragraph (c):

alter the position of the employee to the employee's prejudice;

must go beyond, must it not, altering the legal rights of the person and include altering the position of the employee to that person's economic prejudice.

MR GYLES: Let me assume that for the purposes of the current argument, your Honour. It may be that that is the case, but we would not - I mean, I accept that for the purposes of the current argument, your Honour. Section 298T(1):

Subject to subsection (4), an application may be made to the Court for orders under section 298U in respect of conduct in contravention of this Part.

Your Honour, our respectful submission is that you cannot read "conduct in contravention" down to mean conduct alleged to be in contravention.

GAUDRON J: Why not, because every application would start with conduct alleged to be in contravention and it would only be when a finding was made that you could say there was a contravention?

MR GYLES: Well, my submission is that if it was intended to use those words, the legislature would have done so.

GAUDRON J: Your construction would assume, would it not, that somewhere else you have to prove that a contravention occurred; that there would be no jurisdiction to entertain proceedings unless the contravention had in fact occurred.

MR GYLES: No, your Honour, with respect, an application can be made to the court for orders under U, in respect of. You can apply, as you do in all cases; final relief depends upon the finding of a cause of action or a statutory power or whatever the case may be. And section 298T(1) certainly authorises the bringing of an application for orders in the final event. What are they? Orders under U:

In respect of conduct in contravention of this Part, the Court may, if the Court considers it appropriate in all the circumstances of the case, make one or more of the following orders:

Again, your Honours, this is, with respect, a final relief provision; you cannot read this down to say it means, in respect of conduct which is alleged to be in contravention of this Part the court may make these orders. It is primarily, your Honours, a penalty provision. That would be, with respect, a non-sensical construction of it. The only feature of the provision to which attention was directed below is (e):

injunctions, (including interim injunctions), and any other orders, that the Court thinks necessary to stop the conduct or remedy its effects:

Now, if I could ask your Honours to note a couple of things about that provision. First of all, the grant of an interim injunction power after contravention approved, bearing in mind contravention includes threat, is a perfectly sensible and beneficial power to have. There may be many situations in which an urgent finding of threat is made and the court wishes to take further evidence about the final order.

McHUGH J: Is "interim injunction" used in paragraph (e) in its technical sense in contradistinction to "interlocutory injunction"?

MR GYLES: I would submit so, your Honour. I would submit so and when we come by a comparison to look at section 80 of the Trade Practices Act 1988 , which I have chosen as something which might be useful to examine, you see that form of words used in that case or a form of words which is - - -

McHUGH J: Interim injunctions are usually issued restraining or ordering something to be done until a specified date.

MR GYLES: Correct.

McHUGH J: Interlocutory injunctions until a final hearing.

MR GYLES: Until a final hearing, yes. Your Honour, we submit that it is a perfectly beneficial grant of power, bearing in mind that our primary argument here, your Honours, is that this is a special regime, it is a statutory power, and, therefore, it is useful to have the court in a position where, having found contravention, it does not have to immediately go to make up its mind about final orders. It can make an interim injunction to hold the position whilst those final orders are contemplated, bearing in mind, as I have said, this is primarily, at least, a penalty provision.

GAUDRON J: Does that mean that on your argument that you could have an injunction if there were a threat but not if there was the actual carrying out of the conduct?

MR GYLES: No, your Honour. No, I mean, you must find the threat and you must find the actual contravening conduct. Once either is found, then that 398U jurisdiction exists or is enlivened. Now, your Honour, the other things about (e) - - -

BRENNAN CJ: That is a rather difficult argument to raise in relation to paragraph (e), is it not, because there may be no effects of a threat? The effects may be of that which is to be done pursuant to the threat.

MR GYLES: Your Honour, I would have thought, with respect, that is in my favour. I mean, if you have a threat and you have found the threat, the best thing to do may be to grant an interim injunction before deciding what ultimately should be done about it and bear in mind, your Honours, of course, these provisions apply not just to threats, but to contraventions and it would be very sensible, as I have said, to have an interim injunction provision there.

BRENNAN CJ: Take, for example, the clearest instance of a breach, say, of 298K(1)(a) to dismiss an employee. An employer says to the employee, "I am going to dismiss you this afternoon for a prohibited reason." How does 298U(e) cover that situation, if the employee rushes off immediately to the Federal Court?

MR GYLES: The Federal Court would then have the earliest hearing as to whether there was a contravention and, if there was a contravention, then there would be a range of possibilities - - -

BRENNAN CJ: Let us assume it was able to find immediately exactly what had happened. How would (e) cover it?

MR GYLES: Your Honour, it covers it precisely because the contravention has been proven.

BRENNAN CJ: Then what order is it that it makes?

MR GYLES: It can order reinstatement under (b).

BRENNAN CJ: But it would not be reinstatement. This is before the actual sacking.

MR GYLES: It would make a final injunction presumably.

BRENNAN CJ: How?

GUMMOW J: It would make an order under (d), would it not?

MR GYLES: I mean, it could penalise under (a) or all of the foregoing presumably.

BRENNAN CJ: It could not so far as (e) is concerned, looking at (e), it would not be stopping the conduct because the conduct in question would be the threat - it is over and done. The threat itself does not produce the dismissal, therefore, there is no effects. So (e) would be useless, is that right?

MR GYLES: No, your Honour. I do not, with respect, follow. If you have got a threat to dismiss and you find the threat before the dismissal takes places, is that not par excellence a case for an order under (e) that you shall not dismiss?

McHUGH J: But what about (d):

an order requiring the person or industrial association not to carry out a threat - - -

MR GYLES: Quite, your Honour.

BRENNAN CJ: That I understand, because it seems to me that (d) is the one that covers it. (e) does not, is that right?

MR GYLES: No, I do not accept that, your Honour, with respect.

BRENNAN CJ: Because the threat is the relevant conduct, not the dismissal and, if the threat is the relevant conduct, it has been complete, so you cannot stop it. It has had no effect in itself; it will be the dismissal that has the effect so, therefore, there is nothing to justify an order in relation to remedying effect. So, (e), therefore, does not apply; (d) is the only one.

MR GYLES: Your Honour, can I just, before going on - your Honour, it may be that, under the circumstances, a quia timet order, in effect - that that breach having been proven - as with section 80 of the Trade Practices Act, what is done - what can be done, on occasion, is to order, under section 80, that contravention (a) having taken place, there be an injunction to restrain further breaches. Now, that would be work for (e) to do. But, your Honour, if (e) does not apply in a threat situation, (d) does, and so does (a), and so does (f). So the fact that, even if your Honour is, with respect, correct in that, contrary to our submission, then we say rhetorically that does not assist very much because here we have not - the fact that there are appropriate paragraphs does not mean you read down or draw any conclusions to that in relation to (e).

McHUGH: It may be under (e) you can only stop the threat, as opposed to the dismissal.

MR GYLES: That is the point his Honour the Chief Justice is putting to me, and I accept that that may well be so. But that does not mean you may not make, perhaps, a quia timet injunction to stop a repetition of the threat.

GAUDRON J: Under what paragraph?

MR GYLES: (e) or (f).

CALLINAN J: The threat to dismiss somebody might be productive of other harm or damage.

MR GYLES: Yes.

CALLINAN J: It may be designed, really, to induce men to work longer hours, or to reduce their remuneration, and that is an effect that could be remedied under the general power.

MR GYLES: Indeed, your Honour. Could I just draw your Honours' attention to one other matter about (e), and the wording of (e)? Does it not assume, or I submit it assumes, that the conduct must have been found to contravene.

GAUDRON J: But if you say a quia timet, that is not necessarily consistent.

MR GYLES: Well, it is, your Honour, because what I am saying is that if you have found a threat - this is the case that has been put to me: if you found a threat, that may provide an appropriate basis for an order that there be an injunction to stop further threats of that character to that employee and, in that sense only, is it quia timet. The other thing about subsection (e) that I would again put to your Honours is this; you cannot read "conduct" in (e) as anything other than contravening conduct. It cannot mean alleged conduct. We also submit that the words "remedy its effects" assume that the conduct has occurred and that there are effects which have been occasioned by it.

GUMMOW J: And it has to be conduct of the employer.

MR GYLES: Of the employer. Your Honour, so far as that is concerned, that was found in our favour by the court below, the Full Court, and there is no notice of application for cross-appeal on that issue. So that we submit that the result - we submit two things. The first is that Division 6 is, evidently on its face, the method of remedying breaches of this part of the Act, and that the words of this Court in Thomson's Case are absolutely applicable, of which I will remind your Honours in a moment. So we say it is a special provision which would oust the general jurisdiction of the Court.

GAUDRON J: Mr Gyles, can I take you back a step. Although it may be that paragraph (e) does refer to the conduct of the employer, "remedy its effects", the power to "remedy its effects" would seem to extend much wider than the employer. I mean, subject, of course, to observance of the judicial process.

MR GYLES: Not in our submission, your Honour.

GAUDRON J: I mean, what do you have for reading down or "remedy its effects"?

MR GYLES: Because, your Honour, the whole part relates only to employer/employee relations and, indeed - - -

GAUDRON J: Once you say it relates to employer/employee relations, you do not necessarily confine it to employer and employee, as the facts of this case show.

MR GYLES: In our submission, one would, absent some special statutory power. Your Honours, may I make it clear that the submission, or that point, is not one which is to the contrary of my basic submission. Even if that was so, it would not alter what I am now putting, namely, that this is a special provision which allows no room for the operation of section 23 of the Federal Court Act. Secondly - and I will have to come to that, your Honours, to make the submission good, but that is where we are going with, in our submission. Secondly, your Honours, that the lacuna argument really has no place where one is dealing with an express statutory provision. Here, the legislature has decided that these shall be the remedies which will be afforded in this particular instance. Not at all surprising that they do not include any quia timet relief from the ordinary interlocutory sense because of the nature of the subject matter and, by a parody of reasoning, with the long principles which govern dismissals.

KIRBY J: Is there anything in the history of this legislation that lends strength to your argument, or is there any change in this part of the Act that is relevant?

MR GYLES: This part of the Act, your Honour, is newly constructed. Features of it come from previous Acts but there is no equivalent of Part XA with its particular objects which is freedom of association, ironically enough. May I also make it clear that whilst the argument has focused on threat in relation to (e), your Honours will appreciate that my submission says that (e) operates and would operate immediately upon a finding of contravention by actual contravening conduct. The power to make an interim injunction would arise prior to the formulation of final relief. It almost certainly would be a two-stage process. It is a penalty provision, apart from anything else, and a provision which involves reinstatement as a possibility, so there may be very good reasons for not immediately making a decision but wishing to hold the position in the meantime.

KIRBY J: You say it is natural, but it does seem curious if it can be established that, first of all, the Parliament has enacted this very important principle that you cannot sack people because of union membership, and then it is provided that the court may make orders in the nature of injunction. It does not seem natural that if you have a threatened action that you cannot intervene; you have to wait until it comes to fruit.

MR GYLES: Your Honour, this is, with respect, a penalty provision and other remedial provisions as well.

KIRBY J: I take the point of your statutory construction. I am merely responding to your suggestion that it is natural. It does not seem natural to me that you have to wait until awful things happen before courts can give relief. It may be that that is what the Act requires.

MR GYLES: I am just putting, your Honour, that this is not a ridiculous position. After all, you are providing prohibited offences and you are saying this is how it will be remedied. The court is given a considerable armoury of powers to deal with a contravention which has been found but, your Honour, with something which is quasi-criminal, it is hardly surprising that there be the need to find contravention before you act.

GUMMOW J: Yes, but (a) has extra factors in it, does it not, that are not in (b), (c) or (d). (a) operates where there is conduct which "contravened or is contravening". Those factors are not in the other subparagraphs.

MR GYLES: Reinstatement would assume dismissal.

GUMMOW J: But (a) cannot apply in a pure quia timet situation on its terms.

MR GYLES: No, it cannot; it is impossible.

KIRBY J: But does that not then force to the suggestion that where Parliament meant it to be something that is, as it were, fully established and complete, that it has used the past participle "contravened", whereas that is not used in (e).

MR GYLES: Your Honour, 298T and 298U are premised by the description "conduct in contravention of this Part."

GAUDRON J: How does 298V fit in? That may operate, on one reading at least, to presume a contravention once an application and allegation are made.

MR GYLES: On the contrary, your Honour, we submit that it assumes that there has been a dismissal of the employee or a dismissal of the - - -

GAUDRON J: A threat or some action to their prejudice?

MR GYLES: B, your Honour?

GAUDRON J: V. 298V is a presumption in proceedings under that division.

MR GYLES: Yes, your Honour.

GAUDRON J: It seems the presumption arises when an application is made and an allegation is made. If the allegation is made, there would then be a presumed contravention, on one reading at least, which - - -

MR GYLES: 298V, your Honour, only operates at the point of hearing.

GAUDRON J: Well, I do not see why. In terms it does not and it may be that it is that that presumes a contravention and thus, even if you are correct in your construction of 298U, there is a presumption in operation and the orders may be made.

MR GYLES: Well, your Honours, 298V we use in another way. Section 298V may make it very easy to have a quick hearing. It is a very unusual provision, which works very much against the employer or not necessarily - the party alleged to be guilty of the offending conduct.

KIRBY J: A quick hearing was not really possible in this case if you read the judgment of Justice North who said that, from your side, it would take months and months. December was the Commonwealth's prediction.

MR GYLES: The Commonwealth said that your Honour. But this is a very special case, your Honour. I mean, we are assuming for the purposes of argument that this is a 298 case. Now, if it is, it is a very unusually 298 case.

McHUGH J: But sooner or later you have to come to grips with the conspiracy issue, have you not?

MR GYLES: Yes, quite, your Honour, I do and I will, but may I first submit, as I have, that Division 6 is to be construed as I would construe it. Now, your Honours, may I remind your Honours of some authorities. The first to which I refer your Honours is the latest decision which looks at the question of interim relief. It is CFMEU v Gordonstone Coal Management Pty Ltd 149 ALR 296, your Honours.

BRENNAN CJ: That is in tab 3, is it?

MR GYLES: Yes, your Honour.

BRENNAN CJ: I think it is empty.

MR GYLES: I think the instruction we received was that any Commonwealth Law Reports or Australian Law Reports would be provided.

BRENNAN CJ: Yes, all right.

MR GYLES: Your Honours, the point which arose in that case was that:

The applicant sought an interlocutory order restraining the respondent employer from contravening a clause of an enterprise agreement which was certified under the Industrial Relations Act.

The respondent contended that the court did not have jurisdiction to grant the remedy sought even if a contravention of the certified agreement was established.

Now, your Honours, his Honour at 297 line 30 said:

But a preliminary point has been argued - whether, even if a contravention of the certified agreement has been established, the court has jurisdiction to grant the remedy sought. The respondent, in submitting that the court does not have such jurisdiction, relies on a line of authorities in which no breach appears. I take, as the starting point, the decision of Pincus J in Australasian Meat Industry Employees' Union v Frugalis Pty Ltd (1987). There, his Honour held, with some regret, that the legislative history of the Conciliation and Arbitration Act 1904 required him to conclude, despite the literal terms of a grant of injunctive power by s 109(1)(b), read in combination with s 122, that the court lacked jurisdiction to restrain a breach of an order of the Conciliation and Arbitration Commission. This decision was followed by Gray J in The Queen in Right of the State of Victoria v Australian Teachers Union, where his Honour made clear his view that "the reintroduction of the use of injunctions to restrain breaches of awards" would circumvent "a specific code designed to deal with such breaches". He considered that the repetition in the Industrial Relations Act, when it was enacted in 1988, of provisions similar to those of the earlier Act construed by Pincus J, "demonstrate[d] the intention of parliament that the remedy of injunction should continue to be unavailable in respect of breaches of awards". An argument that s 23.....supplied the power otherwise lacking was rejected. This argument is also refuted by several other authorities: Dunham v Randwick Imaging -

which was a case of wrongful dismissal, although the question is complicated by the terms of 170EH of the Industrial Relations Act 1987 and a number of other authorities are there set out including, your Honours will see Thomson in this Court and Jackson in this Court.

As Wilson and Dawson JJ said in the lastmentioned case "the power given by s 23 is expressly limited to the making of orders in relation to matters in which the court has jurisdiction and it does not extend the jurisdiction of the Federal Court".

The line of authority to which I have referred ends in Wattyl Ltd v Australian Liquor, Hospitality and Miscellaneous Workers Union (1995). In that case, Madgwick J, sitting in the Industrial Relations Court of Australia, dismissed an application for interlocutory injunctions to compel compliance with certified agreements. The Industrial Relations Act then conferred jurisdiction on the court by s 412(1)(a) in terms which remain unchanged in the same section of the Workplace Relations Act:

The Court has jurisdiction with respect to matters arising under this Act in relation to which:

(a) applications may be made to it under this Act ...

Section 23 of the Federal Court of Australia Act was also in force.

His Honour went on to reject the notion that section 23 could be called in aid.

His Honour then looks at 178 of the Workplace Relations Act itself, and says, at page 299 line 28:

These provisions substantially mirror (with a few amendments) the terms of s 178 of the Industrial Relations Act.

and his Honour draws attention to the differences:

In my opinion, s 178 does not assist the applicant. On the contrary, it is an example of a special statutory mode of enforcement, not only of awards and orders made under the Act, but also of the special statutory species of agreement, created by the legislation and conferring new rights, known as a certified agreement. Long ago, in Josephson v Walker [1914] HCA 68; (1914) 18 CLR 691 at 701, Isaacs J said:

Prima face, where the same statute creates a new right and specifies the remedy, that remedy is exclusive. The natural presumption to begin with is that parliament in creating the novel right attaches to it - - -

McHUGH J: Mr Gyles, the case is a long way removed from 298U, is it not? It may give you some assistance in relation to section 23 but it is just - - -

MR GYLES: Well, that is an integral part of my case, your Honour. There are two limbs to it, your Honour; the Wattle Case - Wattle and Dunham and others deal with reinstatement provisions, your Honour. They say no interim reinstatement, no interim orders in relation to wrongful dismissal. They are directly, we submit, in point as a matter of policy, if you like. It is not surprising the result should follow. The case is important in showing there is a consistent line of authority which says section 23 does not come into play in filling what people may see as gaps in the statutory regime under these Acts. Indeed, this was a case upon this very Act - or the section of this very Act.

BRENNAN CJ: But all you are saying is that 23 does not flesh out or extend the statutory remedies that are provided by 298U.

MR GYLES: Yes, your Honour.

BRENNAN CJ: The real point that you have to address, which you have addressed, of course, is the question of the scope of the remedies provided by 298U.

MR GYLES: That is so, your Honour.

GAUDRON J: Well, I would have thought there was another question, Mr Gyles, I am sorry, and that is whether section 23(e), as I would have thought it did, and I would have thought was implicit in Jackson v Sterling Industries, gives the Federal Court power to make orders of a kind that it considers necessary, or that might reasonably be thought necessary to enable it to completely exercise its jurisdiction and powers. So that, for example, you have Mareva injunctions, albeit that, perhaps in relation to specific cases in which there is provision for specific statutory remedies, and also Anton Pillar orders, where the point of the order is to ensure that the jurisdiction, and, perhaps also the statutory powers, are defeated.

MR GYLES: Well, your Honour, that, if I may say so, with respect, puts the issue, that last statement. Section 23 would - - -

GAUDRON J: And I mention in relation, if I could just say, to Anton Pillar orders, of course, such orders go, as I understand it, to persons who are not even parties to the proceedings.

MR GYLES: Well, Anton Pillar orders are a special case, because they are class of discovery before action, as I recollect it, your Honour.

GAUDRON J: Yes, but they would come under section 23, would they not?

MR GYLES: Well, they might, your Honour, but could I deal with the point in this way: the lines of cases to which I have just referred, and some I will refer, establish the proposition, we would submit, that where you have a statutory special regime, you do not flesh out the statutory remedies, or do anything to give extra or ancillary effect to them. You can only have the remedies which you are given, and you cannot supplement them. You cannot, putting it bluntly, do what the legislature did not do.

KIRBY J: Now, that point was considered very recently by the Court in SCI Operations (1998) HCA 20, handed down a month ago, and it may give some support to your proposition. That was relating to whether the Federal Court could award interest over and above a statutory regime under the Customs Act, and the Court unanimously said no.

MR GYLES: If your Honour pleases. Certainly we have not got that case on the list, your Honours. What we do have on our list is the relatively recent case of Downey v Transwaste 172 CLR 169. That I might hasten to say is not a case under section 23, but it makes the point, your Honours, that we are - it is support for our basic proposition. It was a case under the Industrial Relations Act of Victoria and there was what might be called a wrongful dismissal series of provisions and there were also the more general dispute resolving provisions.

The applicant before the relevant board was too late under the wrongful dismissal provisions. So what happened was that the general dispute resolving provisions were utilised and the dispute arising out of his dismissal was dealt with and resolved. What this Court said was that that cannot be done, that there was a special series of provisions dealing with wrongful dismissal and, in those circumstances, if you have not complied with those provisions, then you cannot resort to the general powers and, if your Honours go the joint judgment at 171 point 5 to 172 point 4 your Honours will, with respect, find a compelling analysis of that point and Justice Dawson, your Honours, to the same effect at 180 point 10 to 183 point 5. May I remind your Honours of Thomson Case itself 148 CLR 150.

GUMMOW J: That concerns final relief, of course.

MR GYLES: Yes, your Honour, it does, but for the present point that does not matter, I would submit. Page 162, your Honours, point 6:

A final answer to the Commission's argument on this point is that s.80 proceeds upon the footing that it constitutes the Federal Court's exclusive charter to grant injunctions restraining, or relating to, contraventions of the Trade Practices Act. In various sub-sections of s.80 references are made to injunctions granted "under" the section or a particular sub-section and to applications for injunctions "granted" under the section or a sub-section -

and they are then set out:

Section 80 makes special provision in several respects for the grant of injunctions under the section - see sub-ss. (4), (5) and (6). It is scarcely to be supposed that the Parliament intended to draw a distinction in these respects between two classes of injunctions, one class of injunctions granted under s. 80 and another class granted under ss. 22 or 23 of the Federal Court of Australia Act. The inference is irresistible that Parliament looked upon s. 80 as a complete and comprehensive statement of the circumstances in which injunctions might be granted in respect of relief sought under the Trade Practices Act.

GUMMOW J: You rely on page 161 as well, do you not, where there is a treatment of section 23?

MR GYLES: Yes, sorry, your Honour. There is a reference to section - the discussion really starts with 161, the argument being that 22 and 23 would apply. Your Honours, the reference to section 80 is, in my submission, illuminating. May I had to your Honours - I am sorry they were not provided earlier - with a copy of that section. Your Honours will see that section - the section has changed over the years, of course, but section 80(1) is the primary provision. Let me take, relatively, what it says:

where, on the application of the Commission or any other person, the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute:

(a) a contravention of a provision -

which is rather similar in concept to the present one, which is conduct contravening or threatening to contravene -

a contravention of a provision.....the Court may grant an injunction in such terms as the Court determines to be appropriate.

Your Honours, if at the end of (1) the words were "may grant an injunction (including an interim injunction)" then one would have a precise analogy with the present section. In my submission, it would be plain that that injunction power including interim injunctions, would be premised upon a finding of contravention or proposal to contravene.

GAUDRON J: It does not, however, have a deeming provision or a presumption provision.

MR GYLES: Your Honour, what it does have is subsection (2).

GUMMOW J: And subsection (4).

MR GYLES: And subsection (4). And, your Honour, (2) is particularly significant in that analysis, that:

Where in the opinion of the Court it is desirable to do so, the Court may grant an interim injunction pending determination of an application under subsection (1).

When I answered Justice McHugh earlier, I said this Act has words which cannot be mistaken; they relate to an injunction holding the position whilst the application itself is heard. If it were not for subsection (2), your Honours, it would be plain, in my submission, that you could not do that and that section 23 could not be utilised to supplement. Indeed, your Honours, in our written outline we refer to, in paragraph 5, Mr Justice Woodward in Visy Board [1983] FCA 360; (1984) ATPR 40-435 at 45008. This is back in 1984 - said:

In the event the TPC sought only discontinuance, no doubt because section 80(1) of the TP Act did not permit a consent judgment unless the court could be satisfied that the facts -

that should be, your Honours -

justifying it had been established - and this was not possible without an extensive hearing.

Your Honours, it is because of that question that section 80(1AA) was inserted, which enables a consent injunction to be made or granted whether or not the Court is satisfied about the contravention, because absent 80(1AA) there was no power to do that. In other words, before you get a consent injunction the judge would have to be satisfied of the jurisdictional fact. A number of your Honours will recall that in - and it may be the same interstate - in Testators Family Maintenance Act applications, you could not get a consent order from the court; you had to satisfy the judge that the testator had left the applicant without means of support. Once that was established then, in effect, the judge would listen to an argument that the appropriate order should be X or Y.

MR GYLES: In other words, it is a perfectly ordinary situation where a statutory power is given conditioned upon facts existing, found to exist. Your Honours, section 76 of the Act is not before your Honours, but it has the same requirement and in the Allied Mills Case, to which I refer in paragraph 6 of our written outline, that is, TPC v Allied Mills [1981] FCA 142; (1981) ATPR 40,241 at 43,181, and this was a penalty matter, his Honour said:

I must therefore be satisfied that the fourth respondent is in breach of the Act -

before imposing a penalty. Now, your Honours, also in paragraph 8 of our written outline, we refer to cases in which justices of the Federal Court have held that precisely the same thing applies under section 87(1)(A) of the Act, where it is the same scheme. In section 87 the cause of action does not arise until the breach is found. So that what we are putting, your Honours, is, with respect, in no sense unconventional or nor does it cause any concern. The tendency of some judges is to say, if there is something happening I do not like, and it is ultimately to be stopped, then I think I should be able to stop it now, and if I cannot find the power in the statute I will find it elsewhere. Well, in our respectful submission, your Honour, that cannot be done, that is, to substitute the individual view of the judge for that of Parliament.

KIRBY J: Well, it is true that ultimately you have got to look for the source of power and work out the scheme of the Act and what it requires, but you withdraw the word "natural", but it is not unnatural if you have a high policy, adopted by the Parliament, about not dismissing people for their union membership and the judge comes to a conclusion of that by a process as is what has happened here, that the judge should have some remedies and that Parliament should have intended that there be remedies. I mean, you took the word "natural" out, but I think it is not an unnatural conclusion to reach.

MR GYLES: Natural or unnatural, your Honour, it must yield to statutory intention and we submit that this is one of those cases.

KIRBY J: But perhaps it is a reason for examining the statutory intention or the meaning of the statute very carefully against the proposition that it does not provide a remedy in such case, because ordinarily one would expect that the Parliament would provide a remedy.

MR GYLES: I submit your Honour would not start with that proposition at all. I have endeavoured to show your Honour, through a long series of decisions, that interlocutory relief is not granted in this type of case.

KIRBY J: What is the policy of the scheme of the legislation you say is behind that differentiation?

MR GYLES: Well, because, your Honour, it is a provision which remedies and punishes, and it just provides a code and - it may be, your Honour, very common for judges dealing with equitable principles to step in and become involved in prejudgment. In the area of industrial relations, your Honour, that is, it is fraught with danger and, we submit, the policy of the various Acts has not been to encourage that. Notwithstanding, your Honours, that at various stages there have been injunctive powers in the Act, the courts have been very clear that you should not let those interfere, even when the court itself has given them, with the special provisions which deal with- - -

McHUGH J: The opening words of 298U give some support - maybe a lot of support - to your argument because they commence:

In respect of conduct in contravention of this Part, the Court may.....make one or more of the following orders -

So it rather assumes that you cannot make orders until it is established that there is "conduct in contravention of this Part".

MR GYLES: Yes, your Honour, and T is the governing section. It has precisely the same words. We say, with respect, the Full Court below said not a word about that. Our argument starts at that point; that is our key argument. The court below said not a word about how you construe "in respect of conduct in contravention of this Part", which is the critical question of statutory construction.

GAUDRON J: Would you not construe it by reference to the presumption in 298V, at least by reference to the presumption?

MR GYLES: I submit, your Honour, that the presumption assists at the hearing in coming to the conclusion and may, as I have said, facilitate quick - and it can only be when you come to decide - perhaps I will put it this way more carefully, your Honour. If V is looked at, the presumption can only be a presumption which would lead to a finding of contravention. If it is not that, it is nothing.

GAUDRON J: Well, I do not know; it could well - so you can make a finding of contravention, I would have thought, which stands unless and until it is proved otherwise.

MR GYLES: I would submit not, your Honour. I would submit that a provision of that sort cannot operate in an interlocutory way in that sense. You cannot have chopping and changing.

HAYNE J: V goes only to presume one of the elements of the contravention, does it not?

MR GYLES: Yes, quite.

HAYNE J: It does not presume that the conduct bears the character described in 298K(c), the alteration to prejudice.

GAUDRON J: Well, that is not in - - -

MR GYLES: And your Honours can readily see why that would be so because that is a subjective matter.

GAUDRON J: But is there any issue about that in this case?

MR GYLES: About what, your Honour?

GAUDRON J: That the position of the employees has been altered to their prejudice?

MR GYLES: Yes, your Honour, but I mean for purposes of argument - - -

GAUDRON J: Forget the purpose. Is there any dispute as to that?

MR GYLES: Indeed, your Honour, but we are accepting for this argument arguable case.

GAUDRON J: Sorry, for the purposes - - -

MR GYLES: For the purposes of this argument we are accepting arguable case. There will be a very significant issue at the trial about that but the whole question of indirect effect is, to say the least, very, very arguable. But V, your Honours, is rather like section 51A of the Trade Practices Act which has a statutory presumption, and this is the same. Nobody has ever suggested that you could have an interim finding based on 51A. We submit here the purpose that 298V fills, it deals with a subjective element which the wronged party, or the party who alleges he or she has been wronged, may not be able to know. The legislature said in relation to that particular component you have this presumption, but it does not presume contravening conduct.

Your Honours, we respectfully submit that your Honours will bear in mind in relation to this argument also the decision of this Court in Jackson v Sterling Industries. I do not stop to read passages to your Honours but I respectfully submit that that case supports the proposition that section 23 is not a roving charter to fill any gap which the Court thinks should be filled. So that the end result of this argument is that it is not sufficient to make orders under 298U(e) that there is an arguable case of contravention. Contravention must be found. There is no question but that this was an important aspect of the reasoning of the judge below, that he, the judge below, relied upon this as a principal foundation for his finding. I have just lost my flag on that but I will give your Honours the reference to it in a moment. With respect, the way the Full Court dealt with the matter did not come to grips with the question.

Your Honours, the next significance of the argument is in relation to the conspiracy point. Now, we argue that you cannot have a conspiracy charging 298 as the unlawful means and we have referred to some authorities, particularly Pancontinental Mining v Posgold Investments. The Full Court dealt with that argument by saying these were cases where the crime itself was a combination and you cannot plead conspiracy and undoubtedly, your Honours, there is a strand to that effect and whilst, in my submission, Pancontinental Mining cannot be explained on that basis, I accept on an interlocutory footing that there is a question about this.

Pancontinental [1994] FCA 983; 121 ALR 405 was not such a case because the conspiracy, your Honours, as pleaded is at 407 and it is said that, if your Honours look at paragraphs numbered (7), (8) and (9), it will be seen that there is said there was an agreement which was unlawful by virtue of provisions, particularly 615, which said "a person shall not acquire shares in a company" et cetera. Now, your Honours, 615 is a provision which makes unlawful what a person does individually. It is not a combination crime or a combination offence. What his Honour did in relation to that - and perhaps the headnote will suffice for this purpose:

Where a statute made unlawful what was lawful before and appointed a specific remedy, that remedy and no other must be pursued.

And his Honour struck out those pleadings. Now, I, your Honours, for present purposes concede there is a question as to whether or not that is correct. We submit it is, but I can see, with respect, there is some force in the argument on the other side, but what we do gain from this analysis, your Honours, is this: if one is left with a conspiracy to do what is unlawful under 298K and that is the sole foundation of interlocutory relief, then one would need a very different consideration of it than was afforded by his Honour or the court below because undoubtedly the principal focus was on 298E and section 23, not on the conspiracy, although I concede, of course, that there was that finding.

Now, your Honours, the importance of - the trial judge at page 10 of his judgment completed his examination of serious question to be tried or the 298K section by point 9 of the page:

The court has power to make orders to remedy the effects of conduct in breach of 298K(1) which is (e) serious question to be tried -

et cetera, and your Honours will see that his Honour actually used not the interim injunction power, but the remedy effects power which, we submit, is plainly not on any view something that was open to him and it is right to say that the Full Court in their consideration of the matter saw the statute as being at the heart of the case. The argument flows through to conspiracy in this way, your Honours: if our basic point is right and there is no interlocutory relief available in relation to Division 6 of 298, it would be anomalous in the extreme if you could get interlocutory relief for a common law conspiracy, one element of which was breach of 298.

McHUGH J: Why should that be so? It is a conspiracy to injure. That is the common law cause of action, and breach of the section is the means by which it is employed, and the type of injury involved may go well beyond what is involved in 298K. For example, supposing two people, an employer and somebody else, agreed to dismiss somebody in breach of 298K so that that would cut off the employee's earnings, which would prevent the employee engaging in some business transaction. In that situation, why could you not use the power conferred by section 23 to make interlocutory orders of a kind that you could not make if you were simply relying on 298K?

MR GYLES: Well, your Honour, what I put was, it would be anomalous if you could do, by a charge in conspiracy which it cannot do directly under the special statutory regime. That does not mean it is not - - -

McHUGH J: I do not see that at all. It is different damage. It is different damage, Mr Gyles.

BRENNAN CJ: And different parties. It is the combination, it is said, which makes conspiracy significant.

MR GYLES: Your Honour, all I am putting, as a starting point - not the end point - I understand what your Honours are putting to me. My starting point is if what is charged is effectively the same as the breach of 298, which is this case, I would submit, it would be anomalous to have interlocutory relief in relation to that conspiracy because interlocutory relief is not available for the principal offence. I am not suggesting it would be impossible, your Honours; it would be a very strange result. Now, your Honours, also, if I may put it this way, in this setting, where it is extraordinary to get interlocutory relief in relation to a common law conspiracy. I do not know that your Honours would have ever known of such a case, because damages are an adequate remedy. It is not an equitable - - -

McHUGH J: What about cases in England? What about Stratford and Lindley, I suppose they are breach of inducing contract - - -

MR GYLES: Yes, your Honour, that is a different point. Again, your Honour, one would hesitate to say you could not have an injunction in some circumstances where there is a totally different object in view - and I follow what your Honour is putting to me, if you had - well, your Honour has put an example. That may be a case where one could say, well, you have got a totally different sort of situation. 298K is just a minor means of achieving a - now, your Honour, we respectfully submit that this is not such a case; that it would be very unusual to grant an injunction against a conspiracy where, to say the least, there was no examination of the strength of the prima facie case, or arguable case, where damages of prima facie are a complete answer, your Honour.

GAUDRON J: Surely damages are prima facie and not an adequate remedy in a case where there is a question as to the financial stability of anyone of the primary employer.

MR GYLES: There is no question, your Honour - there has been no issue raised as to the financial ability of the defendants to the conspiracy case to meet whatever damages are awarded.

GAUDRON J: Yes.

BRENNAN CJ: Well, that is an interesting proposition because, if the damages consist of the lost earnings of the entire work force for the rest of their working lives, one must wonder about the sufficiency of the defendants' assets.

MR GYLES: Well, your Honour, we have met a rolling series of points. That is not one of them that we have met so far, your Honour.

McHUGH J: But it is a matter that must be taken into consideration.

BRENNAN CJ: But it is a matter which has to be taken into consideration.

MR GYLES: But we want some factual basis, your Honour.

McHUGH J: Well, that may be but, arguably, here the damages in this case could be enormous.

BRENNAN CJ: Enormous.

McHUGH J: And they could include punitive damages, and that is something that has got to be kept in mind.

MR GYLES: Your Honour, again we are met with another - I mean, I will deal with every point that your Honours wish to put up but I - - -

BRENNAN CJ: No, it is not a question of putting up new points, Mr Gyles.

MR GYLES: Well, your Honour, that is, with respect.

BRENNAN CJ: It is not a question of putting up new points. This is the proposition: the question is conspiracy, and what remedy may be appropriate, on an interlocutory basis, when the case of conspiracy is mounted against a number of the defendants. Now, if the conspiracy be established and a breach by one of the conspirators of 298K is established, the damages must sound, in terms of that which follows from the fulfilment of the conspiracy.

MR GYLES: Subject to the normal principles of damages, your Honour, including mitigation and so on.

BRENNAN CJ: Of course it does. No question about that.

MR GYLES: And would have regard, of course, to the entitlements under the Act. Lifetime damages, your Honour, is not a proposition that has ever been put to me before. I can think of - - -

BRENNAN CJ: It would have regard to all the mitigating circumstances in relation to lost earnings.

McHUGH J: Prospects of re-employment.

BRENNAN CJ: Prospects of re-employment. Everything that would be relevant to the damage suffered by the series of individuals would obviously have to be taken into account. The only proposition that I think you have to deal with is that if those causes of action succeed at the end of the day, the damages must be enormous.

MR GYLES: Well, your Honour, I respectfully submit it mistakes the principles.

McHUGH J: It does not because it is relevant to the Mareva injunction. The orders restraining order (6).

MR GYLES: Well, that is not a basis that was ever advanced, your Honour. Can I deal with one point at a time? So far as the massive damages are concerned, leaving aside punitive damages for a moment, and your Honours will pardon me, I have not thought of that before this moment, but - - -

BRENNAN CJ: Something which is very obvious on the face of the instrument.

McHUGH J: On the face of the statement of claim, if those allegations are made good, there would be a real chance, one would have to say, that there was a case for punitive damages. Take breach of clause 43 of the award, to start, failure to consult.

MR GYLES: Well, your Honour, that is not - I do not - - -

McHUGH J: You may be on strong ground when you get to some of the orders that have been made in this case, but on conspiracy I think you are on your weakest asset.

MR GYLES: All right, your Honour, can I just deal briefly with the point that was put to me? I respectfully submit that, even if established, and leaving aside, for this purpose, exemplary damages, what your Honours put to me assumes that the employees have a right to employment for life. Now, their employment is governed by an award or a certified agreement and one could not possibly go beyond that, we would respectfully submit, and the Commonwealth is a party, your Honour, the Commonwealth is a party.

CALLINAN J: Mr Gyles, the other matter relevant to damages is the assumption that the employer companies could and should have stayed in business and would have been able to stay in business. There is no obligation upon anybody to stay in business to make losses.

MR GYLES: Indeed.

McHUGH J: It is very interesting that 298K, together with the law of conspiracy, seems to place very considerable impediments in the way of any employer doing just about anything, if it does it for a prohibited reason. Indeed, it may be that an employer who said, "I want to get out of this business because I cannot deal with the unions", cannot do it. That may be the effect of a literal construction of the section. It would be one of life's ironies if, against the tort of conspiracy which was used to hinder, if not seriously damage the trade union movement in the 19th century, is now, in combination with 298K, to be used against employers in the last decade of the 20th century.

MR GYLES: Well, your Honour, that points up the issue which will arise at trial as to how extraordinary it would be that a Part devoted to freedom of association would have that result. Now, it may have the result in particular cases, of course, your Honour, it may, because the section prohibits conduct, but we will be saying, not this conduct. Anyway, the question of ultimate damages, your Honour, is not something which is explored below in either court, and we would submit that to contemplate punitive damages at an interlocutory stage, without the judge really being able to express a view as to chances of success at all, is not something which the courts would do. Why is it that there are not any interlocutory orders in this sort of case? It is because they are - common law works by way of damages and - - -

BRENNAN CJ: There is no doubt the general rule is that injunctions do not go simply to prevent the exacerbation of damages once the tortious act is complete; that is the general rule, it is not the universal rule.

MR GYLES: No, well- - -

BRENNAN CJ: But your concern at this stage of your argument is in relation to the orders that were made in reliance on section 298U(e), is that right?

MR GYLES: Yes, your Honour, but I flowed into conspiracy- - -

BRENNAN CJ: You did indeed.

MR GYLES: - - - because that is something I have been invited to deal with, your Honour, and I will do my best.

BRENNAN CJ: Do you want to float out of it again?

MR GYLES: Well, may I then go straight to the orders which have been made in the case. Can I briefly, your Honours, go through the scheme of them so that there is no doubt as to what their effect is. The orders are found in pages 2 and 3 of the judgment at first instance and at the front of the Full Court's judgment.

McHUGH J: Which one do you want to take us to, because there is a difference, is there not?

MR GYLES: Yes, there is, your Honours. If your Honours could just have both at hand, because the Full Court judgment makes some differences, but it makes none, your Honours, to orders (1) and (2). Now the effect of order (1) is that parties other than the employer "are restrained from acting upon or giving effect to" the termination of the various labour supply agreements. Order (2) matches that in relation- - -

GAUDRON J: When you say "other than the employers", other than the former employers or the current employers of non-MUA labour?

MR GYLES: No, I am speaking, your Honour, here of order (1)- - -

GAUDRON J: Yes, you said the effect of orders that parties other than employers; I just wish to know which employers?

MR GYLES: Yes, well these parties were never employers, order (1); they are the stevedoring companies.

GAUDRON J: Thank you.

MR GYLES: Order (2) is directed to the parties who are in administration, the employers, and the seventeenth respondent, and it says, not only shall they continue to treat them on foot and binding, but they shall give effect to them.

GUMMOW J: Now there is some shift between orders (1) and (2); are "the labour hire agreements" the same as the "labour supply agreements"?

MR GYLES: Yes, your Honour, on the evidence that is so, your Honour. Yes, the answer is yes. So it, first of all, restrains them "from acting upon or given effect to" a termination and goes further and says, they shall be treated as binding and be given effect to. I should tell your Honours that the actual order that was made differs in this respect that his Honour, when handing down the judgment, orally added before (2), "Subject to order (4)", and we have copies of that, your Honours, in due course, but if your Honours make that assumption for a moment that order (2) is prefaced by the words "Subject to order (4)".

GUMMOW J: Well, have the orders been taken out yet?

MR GYLES: I have to obtain instructions to that, your Honour.

GUMMOW J: It would be a good idea.

MR GYLES: I must confess I was told of this this morning and I, well the transcript is clear enough, but that is not an answer to his Honour's question, which is whether the order has been taken out.

BRENNAN CJ: Mr Burnside might know the answer.

MR GYLES: There has not been very much time to take anything out, your Honour, apart from our toothbrush, but- - -

GAUDRON J: If the orders have not been taken out, what are we doing here?

MR GYLES: Because, your Honour, all parties were in court and heard the orders. They are enforceable.

KIRBY J: Are we to treat "subject to order (4)" as in or not in?

MR GYLES: I think your Honours should assume that it is in. My learned friend, Mr Merralls, has copies of the relevant page of the transcript, your Honour.

MR MERRALLS: Because this amendment affected us, we have, if your Honours please, had copies of the transcript of the proceedings at the delivery of judgment photocopied.

KIRBY J: But it is not unusual, when you give an oral judgment, to pronounce orders and then when you come to revise your reasons to make small changes.

MR MERRALLS: Yes. I think what happened is that his Honour came in with the order, the minute of order, attached to the typescript of his judgment - it was typed and read - and he then said, on page 5 of the transcript of proceedings on the afternoon of 21 April, when he delivered judgment:

I insert words which you will not find in the printed form of orders to be handed down in a moment. The words are "subject to paragraph 4 of these orders":

and then (a) and (b). If the Court desires it, I can hand up copies of that page. So that it seems clear that it did form part of the order actually pronounced in the court.

BRENNAN CJ: I understand that my brother Hayne gave directions that the orders be included in the papers for this Court. It would seem that the orders have not yet been taken out. It would obviously be desirable that that should be done immediately.

MR GYLES: Yes, your Honour.

BRENNAN CJ: Surely somebody can be made available in Melbourne for that purpose.

MR GYLES: Yes, your Honour. Your Honours, thus (1) and (2) combined order positively that the parties give effect to the terms of agreements. The third order restrains the employing companies from terminating the labour hire agreements:

for any reason without giving the union notice of that intention and the reason for that proposed termination.

It is certainly not part of any status quo.

McHUGH J: What about clause 43 of the award?

MR GYLES: Your Honour, the award governs some of the employees, a certified agreement govern others, and whatever provisions they have obviously bind the parties.

GAUDRON J: Does not the award cover all of them and then the agreement applies to some only in Melbourne?

MR GYLES: The agreement applies, I think, to the Melbourne employees but not to others.

GAUDRON J: But the award governs all?

MR GYLES: Yes, yes. I think, your Honour, it may be right to say that employees in other States may also desire the entitlements under the agreement, but that is perhaps another matter.

GUMMOW J: But (3) is talking about the labour hire agreement, which is sequential to (2). It is not talking about contract of employment.

MR GYLES: No, that is an error which we would submit the Full Court fell into. These are the agreements between the company employing and the company who is the stevedore.

BRENNAN CJ: What I do not understand about order (3) is that the seventeenth respondent does not seem to be picked up by it.

MR GYLES: No. Your Honour, I am now told by both sides that the seventeenth was included.

BRENNAN CJ: Was included?

MR GYLES: Was included in (3), so that is another aspect of the order which will have to be tidied up, your Honour.

BRENNAN CJ: I mean, it is the seventeenth that was the last party to the labour supply agreements.

MR GYLES: Yes, that is correct, your Honour. Then the fourth order restrains the stevedores, if I can put it that way, from acquiring the stevedoring services which until 7 April they had acquired from the first, second, third and fourth from any person other than the first, second, third or fourth respondents. Your Honours, the ambiguity in that, if one were confronted with a contempt application, seems to be made clear by the judgments both by his Honour and the Full Bench. They are saying you cannot employ any other stevedoring labour, and that is plain from the judgments, although there is some ambiguity, one would have to say, in the precise form of order (4). Your Honours will not be surprised to know that that particular order is one which we respectfully submit represents no status quo at all.

McHUGH J: Well, it creates new rights and it is difficult to see that it is an order that could be obtained on a final hearing, but what is put against you, as I understand it, although the courts below do not seem to have considered this point, is that the applicants in the original proceedings want to unscramble the egg altogether, set aside the whole deal. Unless order (4) is made, as I understand the argument against you, the employer companies may be out of business.

MR GYLES: Your Honour, that is a short summary perhaps of - - -

McHUGH J: Why could not the Court make an order in terms of paragraph (4) on that hypothesis? I appreciate it does not seem to me at the moment, subject to hearing the other side, it is an argument that could be made on a final hearing. It creates rights which did not exist before. But was it open to the judge to think that it was the only way that the employment companies could conceivably be still in business at the time of the final hearing?

MR GYLES: No, it would not be a conceivable result, your Honour. We take our stand a little before that and we say that, no matter what interlocutory power is being used, on the assumption that there is one, it cannot be used in these circumstances to do something which was never part of any status quo. That would be opposed to all principle and authority. May I quickly explain.

GAUDRON J: Well, Mareva injunctions go beyond that, do they not, sometimes?

MR GYLES: Mareva injunctions have been described as sui generis and your Honour raised the issues which this Court in Sterling looked at, but this order (4) is not a Mareva injunction.

GAUDRON J: I am not too sure.

MR GYLES: In my submission, it is not and our first point, your Honours, is that it does not either restore or maintain any conceivable status quo.

McHUGH J: But is it not also part of the jurisdiction to grant interlocutory injunctions that the courts are able to maintain the position that will most easily enable justice to be done at the final hearing?

MR GYLES: Your Honour, with a very substantial qualification. I mean, that may be the objective, but the means of doing it do not enable the court, in my respectful submission, according to well-established principle, to create new rights which have never formed part of a status quo. May I explain very briefly, your Honours. The courts below acknowledge that this order will entrench a union monopoly of labour until this hearing is finished.

McHUGH J: I appreciate that and it seems, subject to hearing the other side, that the only possible basis that this particular order can be supported on is the basis that it is necessary in some way to ensure that the employers will be viable at the time of the final hearing, and to do that you, in effect, are going to compel somebody to supply services or to hire their services or go out of business pending the hearing.

MR GYLES: Yes. Well, your Honour, may I make this point. A monopoly of union labour has never been part of the status quo. Let us ignore for the purposes of argument the September 1997 transactions altogether. The law did not permit a union closed shop and Patricks were perfectly entitled to hire whatever non-union labour they liked and to engage any services they liked.

McHUGH J: But supposing the judge said, "On the final hearing I am going to unscramble this whole transaction, tear it up root and branch. I'm going to order 318 million to be paid back. I'm going to deal with questions of priorities, questions of creditors, questions of share buy-backs, and so on. I'm going back to June 1997 or even earlier, if necessary". Now, if a judge was to take that view of the case, could order (4) be justified on that basis?

MR GYLES: No, your Honour, it could not. First of all, in principle, no matter what interlocutory power is being used, you cannot do that because it creates rights. It does not maintain or restore a status quo and I submit that is the principle to be applied. Going beyond that, however, your Honour, what it also does is to require - it is not just the entrenchment of a union monopoly. Taken with the other earlier clauses, it obliges parties to agreements which are complex commercial arrangements and complex industrial arrangements, to operate those arrangements for months in circumstances where all principle and all authority would suggest courts will not do that. It has recently been examined by the House of Lords in the Argyll Case and, your Honours, there is a - - -

McHUGH J: I know, but have you read criticism by Professor Tettenborn in the Conveyancer on the reasoning of the House of Lords in Argyle?

MR GYLES: No, your Honour, I have not, your Honour, but I have read - - -

McHUGH J: It is fairly persuasive.

MR GYLES: - - - Argyle, your Honour, and I have also read the decisions of this Court which govern that very point. When I say "that very point", the question of forcing people to do business together and, also, forcing them to carry on business which a court cannot supervise. I mean, one would have to, in my respectful submission, refuse to follow a number of decisions of this Court, and Argyle, before one could say this is right. It is no answer to say Argyle relates to final relief, so did Pakenham.

KIRBY J: Argyle was final, though, of course, was it not?

MR GYLES: Yes, I appreciate that, your Honour. Argyle was final, Pakenham was final, and Lukey, I think, was final. But there are other decisions which are not, and the principle must be the same. As Lord Hoffmann said, you cannot have chopping and changing.

McHUGH J: Yes, but these orders are framed negatively.

MR GYLES: No, they are not, your Honour.

McHUGH J: They restrain them from acquiring for stevedoring purposes. Now, there is no obligation on the stevedoring operations companies to obtain any services from anybody and, if they do that, they will no doubt suffer very considerable financial harm, but so will the employees. But it is a question of choice, then, as to which two alternatives the stevedoring operations want to do; whether they will continue to use the employing companies for their labour, or they will just sit it out until the final hearing of the action.

MR GYLES: Destroying their business.

McHUGH J: Well, that is one side of it. But, as against that, it is put against you that the hypothesis is that there has been a conspiracy here to injure the employees, and that the only way that that can be overcome is to make an order such as in paragraph (4).

MR GYLES: Now, let me, your Honour, unpick some of the strands in that. Order (4) could not possibly be supported as an interlocutory order in relation to a common law conspiracy claim for damages, in my respectful submission, and there would be no possibility of this order being made finally, or anything like it being made finally, in relation to conspiracy. In relation to 298U, your Honour, there is nothing in 298, or any part of it, or any previous, or any relevant provision of this Act which authorises, let alone mandates, a union monopoly of labour, which is what the Full Court said should take place.

Whatever methods might be found to deal with the situation, I cannot include something which is contrary to the spirit of the Act, not authorised by the Act, and forms no part of any status quo, whether it was 1997 or 1998 and - - -

BRENNAN CJ: Mr Gyles, you are speaking in terms of union monopoly of labour. No doubt, in the industrial context that is the language which has been used, but the problem for this Court is in relation to the form of orders which deal, in this context, with the relationship between corporations.

MR GYLES: Your Honour, with respect, the Full Court said it, not me. The Full Court said it at 15.

BRENNAN CJ: Well, be it so, so far as order (4) is concerned, we are concerned with the relationship between corporations on an hypothesis of what might be established at the trial of the action.

MR GYLES: I understand that, your Honour, but I submit that the Full Court said this would mean a monopoly of union labour. I am not putting that as a - - -

BRENNAN CJ: But so what? Where does that take you, in legal terms? That is the problem.

MR GYLES: Well, it takes you, your Honour, into a situation which the Act does not countenance or authorise; it takes you into a situation which is contrary to the Trade Practices Act; it takes you into a situation, your Honour, where the Court - let it be no doubt about it - has compelled a union monopoly. The Full Court said they were doing it.

BRENNAN CJ: Mr Gyles, we are here concerned with legal argument with respect to the possible finding of a conspiracy consisting of a breach of section 298K(1).

MR GYLES: Which would sound in damages at final hearing or - - -

BRENNAN CJ: Which would sound in damages, and the question is whether or not, order (4), which relates to the relationship of corporations, is an order which is appropriate in those circumstances.

MR GYLES: I appreciate that, your Honour, but - - -

BRENNAN CJ: Now, the fact that it will or will not have some effect, so far as union coverage is concerned, is not really to the point.

MR GYLES: Well, your Honour puts that, with respect, it is not our submission. Our submission is that the Full Court said this was the effect and it is the effect. It is an interlocutory order and one must take account of the wider ramifications. This case, your Honour, extends far beyond the immediate parties to it and it would be, in my respectful submission, not realistic, and not proper, to fail to have regard to the effect of order (4) as stated by the Full Court, which has been read by everybody who is interested - - -

KIRBY J: But did not the administrators seek the opportunity to have relief from that part of the order in the event that they wanted to and needed to, to discharge their duties and employ non-union labour and that was reserved to them, I think.

MR GYLES: I do not believe so, your Honour.

BRENNAN CJ: I will just add this, Mr Gyles, whatever the wider effect may be, whatever the significance may be in public, so far as this Court is concerned, it is concerned with nothing but the legal concepts which govern the appropriate decision in the case, and it will only be those concepts which will be of assistance to the Court in reaching their decision.

MR GYLES: But, your Honour, it is, I would submit, necessary that the Court should examine the impact on the parties. That is the essence to the interlocutory - - -

BRENNAN CJ: Of course. That is exactly what I am trying to draw your attention to, the parties in order (4) being those corporations.

MR GYLES: Quite, your Honour. In legal terms, your Honour, what this means is that the parties for whom I appear are restrained in their choice of the people who can provide the stevedoring services to them. That is something which is new, it is no part of any status quo. Furthermore, your Honours, it cannot be justified on any practical basis in terms of stultifying relief. It has nothing to do with relief by way of damages. That is the first point. So far as 298U is concerned, the armoury of remedies under 298U, your Honours, exist and one of them only is reinstatement. There are other orders which might be made.

In so far as it is desirable to maintain the legal existence of the company, the employer company, that can be done, or at least the Corporations Law provides mechanisms for doing it. Because the net result of what is done, perhaps I should put this to your Honours: (4), of course, forms part of a scheme, which the applicant devised and his Honour put into place, the objective of which is made clear in his Honour's judgment. That is an attempt to deal with the problem occasioned by the fact that the employer who employs the workers may have no work.

It does not mean the company disappears; nor, I might add, does it mean that there is anything improper in what has taken place from a financial point of view. This seems to have been overlooked, your Honours, in some of the discussion in the courts below. There is no suggestion that any disposition of assets has been at an undervalue, none whatever. And if there were, the administrator is there to look into it. There can be no suggestion that the financial position of the employing companies has been altered by virtue of the transactions themselves. What might affect them is the lack of work coming to those companies, and that is what his Honour sought to deal with.

BRENNAN CJ: As that may be relevant to order (6), would you like to take us through what the effects were?

MR GYLES: Yes, thank you, your Honour. I have stopped on the way through, and I should not have. Order (5), relates to the employing companies and I will not stay with that at the moment. Order (6), your Honour, is an unrestrained Mareva injunction which, in our respectful submission, was not properly based upon any evidence before the court and that virtually stops any commercial arrangements at all without the active intervention of the Court and the Union.

McHUGH J: It is otherwise than in the ordinary course of business.

MR GYLES: Your Honour, yes, but there a number of corporations and it is a very Draconian order to make, I would submit. Your Honours will then take into account (7) - - -

BRENNAN CJ: Do you want to take us through any details of what the situation is in relation to the employer companies and the transactions and their financial effect?

MR GYLES: Your Honour, in my submission, there is simply no evidence that there was any adverse financial effect from that transaction.

BRENNAN CJ: Let me ask you these questions, because they have been puzzling me. The employer companies were carrying on four profitable businesses, is that correct?

MR GYLES: Yes.

BRENNAN CJ: They sold those - - -

MR GYLES: Four - yes, let me accept that, your Honour.

BRENNAN CJ: They sold those businesses to Operations No 2?

MR GYLES: Yes.

BRENNAN CJ: For how much?

MR GYLES: I do not have - 318 million.

McHUGH J: 318 million.

BRENNAN CJ: They then received the 318 million?

MR GYLES: Your Honour, effectively, yes. I mean - - -

BRENNAN CJ: The question is, have they got 318 million for their businesses?

MR GYLES: Your Honour, they received the money but it was then utilised. The statementof facts, your Honour, at - - -

BRENNAN CJ: It was then utilised, as I understand it, to pay some debts - - -

MR GYLES: Yes.

BRENNAN CJ: - - - and then there was a buy-back - share - - -

MR GYLES: A buy-back, yes.

BRENNAN CJ: Share buy-back.

MR GYLES: Yes, 60 million.

BRENNAN CJ: Now I take it that the share buy-back resulted in some proportion of the 318 million being paid back to the company from which it had been received, or to some other company in the Patrick Group?

MR GYLES: Yes, that could be assumed, your Honour.

BRENNAN CJ: How much, then, went in that round robin?

MR GYLES: Will your Honour - the facts, your Honour, say 60 million.

BRENNAN CJ: 60 million in the buy-back?

MR GYLES: Yes.

BRENNAN CJ: So that leaves the companies on that footing with 258 million?

MR GYLES: 254, I think, your Honour, but - - -

BRENNAN CJ: 254 million. There was some debt that was owing by Operations - and I think Operations No 2 - to these companies on 7 April.

MR GYLES: Yes.

BRENNAN CJ: And on that day the security trustee of the group placed a fixed charge upon that viability.

MR GYLES: Correct.

BRENNAN CJ: How much, then, was thus extracted from the availability of the employer companies?

MR GYLES: Well the charge, your Honour, operated upon the surplus assets.

BRENNAN CJ: That was not what is in the statement, as I understand it; there were debts owing or contingent from companies in the group to the employer companies.

MR GYLES: Well, your Honour, of course, because of the transaction.

BRENNAN CJ: You told me that they have received that $318 million; did they or did they not?

MR GYLES: Your Honour, can I just go back to paragraphs 4 and 5 of the statement of facts in our - - -

BRENNAN CJ: Yes.

MR GYLES: The affidavit of William Hara, your Honour, is in Volume 2 tab 7, 11, 11A; if your Honours go to tab 11.

BRENNAN CJ: You see, the impression that I got from your statement of facts is that these companies which had substantial businesses, which were then sold within the group for a price, did not in fact receive, or have not been able to retain, the price for which they sold them.

MR GYLES: They do not retain- - -

BRENNAN CJ: And that they may well be in a situation which is close to insolvency, which I take it was the foundation for the placing of these companies under administration?

MR GYLES: Yes, your Honour.

BRENNAN CJ: Well now, how was it that $318 million, being paid to companies which have been trading profitably, results in them being reduced to insolvency between September 1997 and 7 April 1998?

MR GYLES: Your Honour, if your Honour wants to know the answer to that it can only lie in the evidence- - -

BRENNAN CJ: Exactly.

MR GYLES:- - -and those matters which were investigated and that is, your Honour - - -

BRENNAN CJ: That is the impression I have got from what you have put in your statement of argument and I want to know whether I am right or wrong about it?

MR GYLES: Let me give your Honour the short answer and then go to the evidence to make sure it is right. The position, your Honour, is that the transaction was for value. That value cannot be given away. We know there was a buy back for $60 million, but save for that, that value simply cannot disappear; it must be reflected, either in the existence of assets or it must be reflected in its acquittal of other debt. Now, your Honour, in broad terms, the position is that the lenders to the group are entitled to, and did, crystallise their debt, including any surplus assets of these companies. That is point 1. Point 2, your Honour, the companies have very considerable accrued entitlements to the workers, the employees, and indeed, as we understand it, the employees are the major creditors of the company and are represented on the committee of management and so on.

Your Honour, furthermore, the view taken by the director of the company was that the companies could not trade profitably; they are slowly, or not so slowly, quickly losing money.

GUMMOW J: There was but one director, was there not?

MR GYLES: Yes, and therefore the administration provisions of the Act were enlivened, and, your Honour, this is one of the great difficulties of this case, the Corporations Law- - -

BRENNAN CJ: He was of the opinion, I take it, consistently with the Act that the companies were on 7 April insolvent.

MR GYLES: Insolvent or might be insolvent I think, your Honour, is the test, yes, and he gave evidence about that.

McHUGH J: Would you correct me if I am wrong about this? I thought the scheme was that there was a sale of assets, this 318 million, so that was a receivable from the point of view of PS1, 2, 3, 4.

MR GYLES: Yes.

McHUGH J: That then gave them very large of sums of capital which they had no immediate objective for, so there was a share buy back. The result was to reduce their capital to - does the evidence disclose to what sum it was - - -

MR GYLES: If your Honour goes to paragraph 4 of our statement of facts - I am sorry, the affidavit of Mr Hara behind tab 11, volume 2, 11A.

HAYNE J: It is not 11A. It is 11. 11A is a correcting affidavit.

MR GYLES: Right, thank you, your Honour. We were right in the first place:

Overall, the total consideration for the sale of the business assets of PS1, PS2 and PS3 totalled $314.9 million dollars.

McHUGH J: Which paragraph is this?

MR GYLES: Paragraph 4, your Honour, page 3. It is 11. The key thing, your Honour, is in paragraph 4. Prior to the transfer the operating companies owed $297 million up the line, if I could put it that way, to PSH and Jamison Finance and the consideration for the transfer of business assets was used to retire that debt. In other words, the sale price was utilised to pay off the debt to the other companies leaving $17 million owing.

CALLINAN J: Was Jamison Finance the company that looked after the banking arrangements or the borrowing arrangements?

MR GYLES: I am not sure that the evidence shows that, your Honour.

CALLINAN J: It does not matter.

MR GYLES: But that is probably right, but - - -

KIRBY J: Do you suggest that this was just a transaction with the companies for the purpose of overcoming problems of insolvency and not in order to restructure their work force and to get rid of union labour? Is that what you say?

MR GYLES: No, your Honour, I am really just trying to get the facts straight, which is what I have been asked to do. The sale consideration was, in the main, applied towards repaying into company debt and, your Honour, the secured lenders to the group have crystallised the total debt and they are entitled to a charge over all of the assets of this company. In addition, your Honour, there were significant accrued liabilities to the employees - I do not have a figure in my head at the moment but it is some millions of dollars, your Honour - long service leave, et cetera, which needed to be dealt with, and with the company losing money week by week it was, we submit, an appropriate case for an administrator to be appointed and the Corporations Law would operate upon it.

Now, your Honour, that administrator, when appointed, has the ability to, and the duty to, investigate the assets of the companies, and to report upon those, and I will take your Honours to the Corporations Law provisions later, but he has - when it is an entirely appropriate thing to happen in circumstances where a company is or may be insolvent, or might be insolvent, for an administrator to be appointed and - - -

McHUGH J: What were the terms of those loans?

MR GYLES: The evidence does not disclose them. One can imagine - - -

McHUGH J: Does not disclose it. On one basis, it may be that the employing companies were always insolvent.

MR GYLES: It may be, your Honour.

McHUGH J: And drastically so.

MR GYLES: It may be.

McHUGH J: Because they appear to have very little capital, had borrowed large sums of money which were tied up in the various assets of the business.

MR GYLES: Except that in the end the sale price was more than the accumulated indebtedness.

McHUGH J: I appreciate that, but in terms of being able to pay its debts as they were due, that depends on the terms of the loan.

MR GYLES: It depends on the creditors' attitude and, presumably, your Honour - - -

McHUGH J: If the $297 million was on call, for example, well, they just could not possibly have paid it.

MR GYLES: No, quite, but if they are - for insolvency - as your Honours appreciate, the questions of insolvency, you can take account of the ability to borrow and - - -

HAYNE J: And the likelihood of your creditors calling the debts even if they are, in truth, at call debts as, for example, bank overdraft is.

MR GYLES: Quite, and this Court has established that proposition in Sandell v Porter, and it has been applied ever since.

HAYNE J: If the creditor is the holding company or one further up the line, it may be, in certain circumstances - directors might properly conclude that that debt is unlikely to be called.

MR GYLES: Quite. That really relates to trading whilst insolvent, but the - - -

HAYNE J: And concerned with solvency, perhaps.

MR GYLES: Perhaps, yes.

HAYNE J: Solvency may, perhaps, depend on whether the company is cash positive or cash negative on its cash flow.

MR GYLES: Yes, indeed, and it may also depend upon the arrangements between the secured lenders and the group as a whole. Now, your Honours, none of this was investigated before his Honour. The bald facts are in paragraph 4, and there is nothing to suggest that these values are shams, there is nothing to suggest that the transactions were not for proper value, and there is nothing to suggest that there was anything financially irregular about this at all and, your Honours, if there is, the administrator will, no doubt, be looking into it.

BRENNAN CJ: The real significance of it is whether or not the result of these transactions, regularly though they may be, is to ensure that, at the end of the day, the employer companies are mere shelves.

MR GYLES: Well, yes, your Honour, but there is no suggestion - your Honour, I respectfully submit if - - -

BRENNAN CJ: If so, that gives the transactions of September 1997 a particular flavour.

MR GYLES: Yes, quite. I understand that, your Honour. But if the problem has been the lack of profitable trading from September to the present time, which on our case it is, then, your Honour, looking at those figures, they had an excess of assets over liabilities of $17 million in September 1997.

BRENNAN CJ: What did they use to buy back the shares?

MR GYLES: No, your Honour, the share buy-back does not affect the availability of assets for creditors.

BRENNAN CJ: Is that so? It takes $60 million a way.

McHUGH J: It reduces the capital of the company by returning the money to the shareholders. You see, when I said to you earlier that this may have been insolvent for a long period of time, I was using it in the technical sense as to whether they - assuming that the loans were on call, whether they could have paid them as they came due. There seems no doubt, from these figures, that on a winding up they were not insolvent in the sense that their assets exceeded their liabilities, but they had fixed assets and, perhaps, concurrent liabilities. But as these transactions show, at the end of the day, even after they paid their $298-million odd in debts, there was a surplus.

MR GYLES: Yes.

McHUGH J: Now, that surplus was used by the employee companies not to trade, but to reduce its capital by returning it to the shareholders, is that so?

MR GYLES: That, your Honour, is not as I understand the position.

McHUGH J: What else is a share buy-back apart from the company using its funds to reduce its share capital and transferring the money to the then shareholders?

MR GYLES: Your Honour, I am struggling to find in the evidence what - - -

CALLINAN J: Mr Gyles, paragraph 5 of the affidavit that you were referring to - and I do not, I hasten to say, understand the meaning of it - but it seems to suggest that $60 million in new money, as it were, was actually provided and that there may - I do not know. Was there any liability created in respect of that 60 million so that somebody had to repay it? I do not know. I am just asking.

MR GYLES: Your Honour, there is no evidence to suggest that that is the case. Indeed, I am not aware of any evidence, your Honour, going beyond these paragraphs.

McHUGH J: Yes, I know, and that seems to lead me to the view that, when you spoke about a share buy-back, it may be that there was no share buy-back of the employing companies.

MR GYLES: Yes, your Honour.

McHUGH J: It rather looks as if it is PSO 2.

MR GYLES: Yes, it relates to the stevedoring companies who had to fund the acquisition of the assets.

McHUGH J: Yes, but what do we know about the employing companies? Did they get rid of their funds? It would seem that they could not. They certainly could not have got rid of 60 million in the share buy-back because they only had 17 million.

MR GYLES: Your Honour, we have the balance sheets and auditor's reports for the financial year ended 30 September 1997, which is the position after the restructuring. They were exhibits to paragraph 6. We then have, your Honour, evidence given by Mr Butterell in affidavit and orally about his assessment of the situation and we have the evidence of the sole director which was given orally.

HAYNE J: And we know as part of the evidence, do we not, that shareholders' funds of the companies described as PS1, 2 and 3 which are the labour hire companies, are they not - - -

MR GYLES: Yes.

HAYNE J: - - - were reduced. That appears at tab 7, page 5, paragraph 13(d).

MR GYLES: Yes.

HAYNE J: And whether by way of buy-back or reduction or whatever mechanism, was there not, by means of that transaction, a return of capital to the holders of capital and a return of capital involving an outflow of funds from the labour hire companies to its shareholders?

MR GYLES: Paragraph 21 of the same affidavit, your Honour - - -

BRENNAN CJ: I am afraid I am lost, Mr Gyles.

MR GYLES: Tab 7, your Honour.

BRENNAN CJ: Tab 7, yes. There is the affidavit of Mr Hara.

MR GYLES: Hara.

BRENNAN CJ: Page 5 and 6, your Honour, or page 5.

KIRBY J: Is this tab 11 or tab 7?

MR GYLES: Tab 7, your Honour. Paragraph 13 states the elements of the restructure.

KIRBY J: These complex facts are looking more and more like matters that should go to trial rather than be dealt with on this interlocutory application before us, or appeal from an interlocutory order.

MR GYLES: Your Honour, I am in the hands of the Court, really. I am meeting an argument that - - -

KIRBY J: I realise that. I realise that. But does it not demonstrate that it is exceptional for the High Court of Australia to be rummaging around upon facts that have not been fully explored at trial.

MR GYLES: Your Honour, no doubt the fault is mine, because I have not been clear enough about it, but - - -

GUMMOW J: Paragraph 21 on page 6.

MR GYLES: Yes, that is the paragraph I was going to draw your Honour's attention - - -

GUMMOW J: The last sentence of that. Justice Hayne points out - - -

HAYNE J: When it says that the amount of the inter-company receivable was reduced by a consideration paid, that is the amount of the price which was owing to the labour hire companies for the sale of their business was satisfied in part through the mechanism of the share buy-back, is that right?

MR GYLES: That, your Honour, is the only way one can sensibly read paragraph 21. The balance sheet post the reconstruction is to be found as WH18, 19 and 20; that is, your Honour, the same volume C, D and E.

McHUGH J: If you want an explanation of the share buy-back, it is to be found at page 10 and following in exhibit WH16 in 11, and it shows that 46 million shares in PS1 were bought back for 38-odd million.

MR GYLES: Yes.

McHUGH J: PS2, 25 million, PS3 for 6 million.

MR GYLES: Your Honour, the situation post the restructuring is to be found, as I have said, in tab C, D and E, at the back of that same volume, and the net assets, your Honour, are, in the case of No 1 - - -

BRENNAN CJ: We have the 1997 balance sheets, do we?

MR GYLES: No, it is said to be 1997, your Honour, but it is actually 1996. Your Honours, may I - - -

BRENNAN CJ: That might be looked at over lunch and - - -

MR GYLES: Yes, I think I will regroup a little on that, your Honours, if I may.

BRENNAN CJ: Yes, thank you.

MR GYLES: Could I, your Honours, go to the effect of the orders and undertaking before taking your Honours to a couple of authorities?

GUMMOW J: Well, we were on order (6), were we not?

MR GYLES: Yes, we were on order (6), which his the - - -

GUMMOW J: Mareva injunction.

MR GYLES: - - - Mareva injunction. I submitted that, and I was in the course of submitting that there was no material to justify that blanket injunction, and I will come back to that later, if I may. Your Honours, the next order which needs to be looked at is order (7), which grants leave to proceed under the Corporations Law against the first, second, third and fourth respondents for proceedings as to interim relief, that is under the Corporations Law, your Honours. And your Honours also need to look at, in that context, order (3) of the Full Court, which orders that Part 3A of the Corporations Law operate in relation to each of Patrick Stevedores 1, 2 and 3, and the National Stevedoring, Tasmania, in such a way that 443A(1) is not to operate in respect of services rendered to those companies by employees or members of the Maritime Union of Australia.

So, before coming back, your Honours, to look at the interim relief more broadly, can I take your Honours to the relevant part of the Corporations Law, which is Part 3A. It is, your Honours, a new concept in Australian company law, and provides - the object of this Part is at 435A:

to provide for the business, property and affairs of an insolvent company to be administered in a way that:

(a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or

(b) if it is not possible for the company or its business to continue in existence - results in a better return for the company's creditors and members than would result from an immediate winding up of the company.

Now, your Honour, an administration begins and ends when - it begins when there is an appointment made under section 436A, B or C. In the present case, 436A is relevant:

A company may, by writing in its common seal, appoint an administrator of the company if the board has resolved to the effect that:

(a) in the opinion of the directors voting for the resolution, the company is insolvent, or is likely to become insolvent at some future time; and

(b) an administrator of the company should be appointed.

The alternatives are the liquidator may appoint an administrator and a chargee may appoint an administrator.

GUMMOW J: It will also come to an end under section 435C(3)(e), which would be if the meeting simply cannot achieve any result.

MR GYLES: Yes. There are normal outcomes, which are deeds of arrangement, a resolution that the administration ends or a resolution that the company be wound up. Then, your Honour- - -

GUMMOW J: What is happening about this meeting? The period is running obviously, the convening period - - -

MR GYLES: Yes, your Honour, there has been - 11 May I am instructed, your Honour.

GUMMOW J: 11 May, and it may then be adjourned, may it?

MR GYLES: It could easily be, your Honour.

GUMMOW J: Once under 439B? But there is a finishing point. If nothing is done 435C(3)(e) will operate and the management will be over.

MR GYLES: Yes. Your Honours will also note that it may end because the court orders under 447A or otherwise, that the administration is to end, for example, because the court is satisfied the company is solvent. Now, that is relevant, your Honour, because of the order the Full Court made, which we say is beyond power, but this contemplates that the court can order that the administration is to end, not that some other course be taken. As his Honour has pointed out, B, if there is a failure to convene or an application to extend or the various subsections of (3) all provide end points. The provisions about the first meeting, your Honours, are section 436E, there is a committee of creditors- - -

GUMMOW J: But does not all this mean that one way or another this administration is going to end before there is a trial, just on the time scale?

MR GYLES: More than likely, your Honour, yes.

MR GYLES: More than likely, your Honour, yes. There are functions of the committee of creditors and membership of the committee of creditors. The administrator assumes control of the company's affairs under 437A, which sets out the role of the administrator, and he:

has the control of the company's business, property and affairs -

and has all of the powers given by 437A. By 437B he acts as the company's agent.

BRENNAN CJ: Now, 437A gives him power to carry on a business or to "terminate or dispose of all or part of that business". They are discretionary powers.

MR GYLES: Yes, your Honour.

BRENNAN CJ: Is there any prohibition on an administrator from carrying on business when the business is unprofitable or when to carry on the business might put the company into insolvency or prejudice a company already insolvent?

MR GYLES: Your Honour, the power under 437A is not confined but is subject to the power of a court under 447A and 447B.

HAYNE J: And subject, most importantly, to 443A, that the administrator ordinarily is personally liable for the debts incurred.

MR GYLES: Quite.

BRENNAN CJ: And that is really the reason why the power is given in such broad terms in the earlier section, is it not? In other words, the power is there under 437A but the price for the exercise of the power is the personal liability of the administrator.

MR GYLES: Yes.

HAYNE J: And the protection for the third party that deals with the company in administration is the protection of looking to the administrator.

MR GYLES: Yes. We say it is not a situation which should be all care and no responsibility; on the contrary.

BRENNAN CJ: The administrator's entitlement to indemnity is limited to the functions that he performs as administrator under the Act?

MR GYLES: Yes, your Honour, and the indemnity, of course, is - - -

BRENNAN CJ: Out of the assets of the company.

MR GYLES: Yes.

GUMMOW J: The creditors could be subrogated to that indemnity, I suppose.

MR GYLES: I presume so, your Honour.

GUMMOW J: But if the administrator has not got an indemnity from someone, a third party out there, and if the company's assets are minuscule - - -

MR GYLES: He has got to have something worthwhile.

GUMMOW J: - - - how is he going to carry on?

MR GYLES: Well, your Honour, if there are no surplus assets, you cannot, unless - I mean, even borrowing does not help if you are going to lose money.

McHUGH J: In any event, it must have, or potentially has the effect on the existing creditors of the company, what is available for them.

MR GYLES: Indeed, your Honour.

GAUDRON J: I do not follow that it - potentially, but let us say there had simply been a waiver, which would be operative by way of estoppel, in due course, a waiver of rights against the administrator, how would that potentially affect the position of other creditors?

MR GYLES: Do you mean by the employees, your Honour?

GAUDRON J: Yes.

MR GYLES: Well, first of all, your Honour, there is a real problem about the existence of an award here, and the certified agreement. There is a line of authority which says an employee simply cannot agree contrary to the award or the agreement, and as a matter of policy one can understand that, whilst one has that regime. But, your Honours, waiver is - one of the problems with the case is that the undertakings which underpin this regime, are really not enforceable.

HAYNE J: Even if they are, whose obligation is waived? The obligation of the administrator or the obligation of the corporation?

MR GYLES: With respect, your Honour, one significant difficulty is that if the administrator is not liable personally, it says nothing about the liability of the company, but the employees have rights under the awards and under the agreements, and they - - -

HAYNE J: They have a right in winding up, too. They have a right to priority of payment.

MR GYLES: Correct.

MR HALE: To the detriment of the third party creditor.

MR GYLES: So that any creditor will be affected by this arrangement. More importantly, the whole purpose of administration when one goes through it, is to have a neutral party come in, look at the situation and, in effect, make recommendations: should there be a scheme of arrangement; should there be winding up; should it come out because it is a solvent business?

GUMMOW J: But he does that under time constraints.

MR GYLES: And there is a very strict time constraint in all of this. The appointment of the administrator here is no sham. He exists. He is there under the Act.

McHUGH J: These orders, in effect, turn the clock back to before the appointment of the administrator, do they not?

MR GYLES: That is the objective, your Honour, and the avowed objective. That is the difficulty. The administrator is there and he has, amongst other things, a duty to investigate the company's affairs. The directors have to help him. He can look at the books and he reports upon them. Then the meeting of creditors decides the company's fate under 439A. The creditors, under 439C can decide between the three things. In the meantime, your Honours, there is protection of the company's property during administration. It cannot be wound up voluntarily except under 446A. The company is not to appoint a provisional liquidator, except in special circumstances, and any application to it to wind the company up is to be adjourned.

BRENNAN CJ: That is exactly, I think, what we will be doing at the moment. We will adjourn until 2.15.

AT 12.45 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.16 PM:

BRENNAN CJ: Yes, Mr Gyles?

MR GYLES: Your Honour, can I return to the topic on which I was in some disarray?

BRENNAN CJ: Yes, please.

MR GYLES: By way of explanation, but not excuse: your Honour, our statement of facts did not have any of this, and neither did my learned friend's correction of it. The best guide, your Honour, is Mr Justice North's judgment at page 3 where, at about point 6 of the page to the bottom, he recites the bald facts. Having looked at the evidence over lunch hour, your Honours, there has been no relevant attack on those findings by anybody. I can, your Honours, however, say this; that the evidence would show that prior to the September transactions the companies which owned the infrastructure and the assets, who were also conducting the business, owed very considerable sums of money.

The sale price for the assets was substantially taken in repayment of that money, however, there was a surplus which was effectively distributed by way of share buy-back. The result is what one sees here, and one can deduce this from the evidence. Immediately after the transactions, the companies were solvent. They had inter-company assets - these loans owed to each of them. They had provisions - - -

BRENNAN CJ: What do you mean "loans owed to each of them"? Are they the creditors or debtors?

MR GYLES: They are the creditors. In other words, they had an asset owed - - -

GUMMOW J: But subject to security.

MR GYLES: I will come to that, your Honour, if I may. Each of them had an asset which more than equalled the accrued liabilities which were provisions at that time. They owned no infrastructure. They had no liabilities by way of lease or maintenance or any of these things. They were, as the evidence showed, labour hire companies who were solvent, had employees and had the benefit of the labour hire contracts. The position the companies now find themselves in is a result of the trading between 1 October 1997 and the present day. That is what the evidence shows, your Honour.

KIRBY J: But the suggestion is that that is the result of a strategy which is evidenced in the briefing note which Justice North also sets out in his reasons.

MR GYLES: Yes, your Honour, that is another aspect of it, if I may put it that way. First of all, the facts have got to be understood and I hope that is now clear. His Honour found an arguable case of conspiracy, which involved an arguable case of breach of 298K.

McHUGH J: What is the share capital of these companies now after the share buy backs, do you know?

MR GYLES: I do not, your Honour. I know that the excess of assets over liabilities at the time was, I think, in the order of $1 million in two of the companies and half a million in the other. So for all relevant purposes, that is the capital. It is the excess of assets over liabilities which counts; it is not the nominal capital.

McHUGH J: No, that is shareholders' funds.

MR GYLES: Shareholders' funds.

KIRBY J: I asked my question because the inference that Justice North suggests should be drawn is that despite this problem of - the suggested problem of insolvency, that the companies would have just kept on trading and that we would not have had any of these very complex inter-company arrangements which have given rise to this litigation.

MR GYLES: Not really. His Honour, I do not think, was in a position to do that, and nor did he. His Honour focused on the position which the companies found themselves in but against the background of these other transactions, which were attacked - - -

KIRBY J: I am only referring to the briefing notes which he sets out.

MR GYLES: Yes, quite, which were attacked by the applicants in their principal claims.

McHUGH J: But you have got to conduct your case on the basis that there is a prima facie case of conspiracy; there is a prima facie case of a breach of section 298K. The question is, what flows from it?

MR GYLES: I think I have so far, your Honour. We accept that that is the - I mean, there it is. The only other postscript, your Honours, is this: we would refer the Court, without reading passages at the moment, to the decision of the Court in Commonwealth v SCI Operations Pty Limited 26 March 1998, in particular the decision of his Honour Justice Kirby at 40 - - -

KIRBY J: It is a somewhat different case. I mean, there, there was customs legislation. Had this construction that was advanced been accepted, it would have been extremely expensive. That would have had great implications for the consolidated revenue, Parliament had not provided it; whereas this case is a case of going to a court and asking a court to provide remedies that, arguably, are the sort of remedies courts will give in order to uphold the utility of their jurisdiction.

MR GYLES: Of their jurisdiction, but not a statutory - I mean, there is a distinction - - -

KIRBY J: That is the question.

MR GYLES: That is the question. But suffice to say, your Honour, we rely upon what is said in that judgment at pages 40 and following, particularly 43 to 44, where his Honour applied Josephson v Walker.

May I then return, your Honours, to tracking through the orders and their effect. We have come, your Honours, to a combination of leave to proceed against the administrator and order 3, and we are exploring the effect of the administration. Before coming back to that, however, may I go on, your Honours, to go back and look at the undertakings which supported the orders, then look at the reasoning of the trial judge or the judge below as to what the rationale for this regime was, because one must see it, or your Honours must see it, as a whole. The undertakings, your Honours, which support the orders made are found on page 1 of Justice North's decision. Now, first of all, there is an undertaking as to damages, and your Honours will note that it is said to be an undertaking by the applicants and we say that in this case that really means the first and second applicants and not the represented parties.

Then, your Honours, there is an undertaking that they will not engage in industrial action. That has been supplemented now by the Full Court's amendment or variation, paragraph 2, page 2 of the Full Court judgment, in two respects. First of all, it was said to be an undertaking also on behalf of the represented parties and then refers to or makes an amendment to the definition of "industrial action" to, apparently, indirectly link it back with the definition in section 4 of the Workplace Relations Act.

Your Honour, what we say about that undertaking is the following. The first thing to be noted is that none of the represented parties was present in court and it is our submission that the enforceability by contempt of such an undertaking would be virtually impossible in relation to anybody apart from the three named applicants. Counsel who represents somebody who is, we would submit, effectively a non-party, has no implied authority to give that undertaking and we imagine that there would be enormous difficulty in enforcing that against an individual who would say, "Who's Mr Burnside?" And what could we do? There is no ostensible authority, counsel cannot prove his own authority, and this is not said facetiously, but we cannot put Mr Burnside in gaol for contempt. Now, in the case of a represented party, of course, it is quite different, because there is authority to bind. So that is the first point we make about that undertaking. The second is- - -

BRENNAN CJ: That applies then to any representative action, does it?

MR GYLES: Well, your Honour, I would submit so; I would submit that where you have represented parties who are not actually parties, to make them responsible in contempt for an undertaking is a very serious matter, and I would submit the courts would not lightly do that without proof of authority.

GUMMOW J: But the answer will be found by construing Part IVA, will it not, of the Federal Court Act?

MR GYLES: Well, your Honour, may I say this also- - -

GUMMOW J: I do not know whether there is a specific answer in there or not.

MR GYLES: As I understand it, the opt-out provisions have not yet been dealt with.

GUMMOW J: That is right.

MR GYLES: That is certainly an important aspect of our submission.

KIRBY J: Would it not be possible to deal with officers of the MUA in the event that there was a breach of the undertaking?

MR GYLES: Not if they do not do it.

KIRBY J: But the practical realities would suggest that if they give the undertaking, do we completely ignore the very great influence that they would have upon the observance of the undertaking?

MR GYLES: No, your Honour, that is not the equivalent of having the individuals- - -

KIRBY J: I realise the theoretical; I am talking about the practical.

MR GYLES: So am I, your Honour.

KIRBY J: Whether or not, when you get the undertaking of the Union, that effectively that would mean that the undertaking would be observed and if it were not, then the Union is brought back to court.

MR GYLES: Your Honour, that is not, with respect, the real order world as your Honour puts to me at all. I mean, an order against the Union is an order against the Union and it may be provable or it may be not; it may be that they can be prosecuted for contempt if they have encouraged counsel and procured, et cetera, but the Court should make no presumption that members of a union will obey a union directive or not act without a union directive or disclose a union directive if it has been received. I mean, one just does not know.

GAUDRON J: But in any event the orders could be made subject to the undertakings by individual employees, that would not be a big difficulty, would it?

MR GYLES: Your Honour, it has not been done and there has been one attempt to fix it and we say that cannot work.

KIRBY J: Given the other matters that you have argued, this looks like scraping the bottom of the barrel sort of arguments.

MR GYLES: Your Honour would not expect me to agree because, at the end of the day, we will be putting to your Honours that this is a package and each part of it is essential and your Honour will see why it is essential when we come to - - -

GAUDRON J: It is an argument that cuts both ways.

MR GYLES: Perhaps so, your Honours, but we submit that it cuts our way because the undertaking is not to be afforded any real value. Secondly, your Honours, to define "prohibited conduct" by reference to a general statutory definition is something which the courts have often said should not be done. It involves all the problems of deciding whether there has been a breach of a statute. Thirdly, your Honours, we will be putting that to prove contempt by taking industrial action is one thing, securing efficient operation is quite another and absent the second, the scheme proposed by the judge simply will not work and one could not imagine it would work.

Your Honours, the next undertaking is that those same parties undertake they will not hold the administrators appointed personally liable for their wages and other benefits, et cetera. Now, the argument that we have put is that that suffers the same vice as the second undertaking and the first undertaking for that matter. Is an individual bound by this undertaking and, if so, what are they to do or not to do?

HAYNE J: But is that not picked up and cured by the Full Court variation and the variation of the voluntary administration provisions as they are to apply to these companies?

MR GYLES: Yes, your Honour. What I am about to put is that that difficulty which existed in his Honour's order was sought to be cured by order (3) in the court below. In relation to that order, your Honours, it was not sought by the applicant at any stage - - -

GUMMOW J: There was no cross appeal of any sort, was there?

MR GYLES: No. It is not sought by the applicant, was not sought by the applicant. It was, if I may say so, floated in argument by Mr Justice Finkelstein as a means of securing this position.

GUMMOW J: It appears in the top of page 14 of the reasons.

MR GYLES: And then it just appeared. Your Honours, it is our submission that to do that is a serious procedural defect apart from the - - -

GAUDRON J: It may be, but what is your interest in it? You are not directly affected by it.

MR GYLES: As your Honour will see from his Honour's reasons, his Honour puts together a package to achieve a result.

GAUDRON J: Yes, but your direct interest is not in all parts of the package except in so far as you seek to undermine it so that there is none at all, but order (3) of the Full Court's orders would not seem to go to the position of those whom you represent.

MR GYLES: It does, your Honour, in - - -

HAYNE J: Is your client a creditor of the companies and administrations or not?

MR GYLES: I am not sure I have instructions about that, your Honour, at the moment but, when we go in a moment to his Honour's reasons for this, it will be seen that we are brought into 1, 2, 3 and 4 effectively, which are all part of a scheme to achieve a particular result. In one sense, I suppose, it could be said we can live with some of this. Let me go straight to his Honour's reasons. They start at page 15 under the heading Insolvency. At the foot of page 15 his Honour explains the point. He then says at page 16:

However, circumstances have changed 7 April 1998. The Court is able to restore the benefits of the LSAs to the employees by appropriate orders.

I will take your Honours to the actual terms of these agreements shortly.

This would give the employers the capacity to continue trading and generating revenue.

I interpolate, your Honours, also the capacity to continue making losses.

There would be no industrial action because the employees and the Union are prepared to give undertakings to the Court to that effect.

That is why this is not scraping the bottom of the barrel. This is very close to the top of the barrel in the reasoning of his Honour as to why it is that he can breathe life into this company. He concludes:

There would be no industrial action -

That, your Honours, is a triumph of hope over experience.

The employees have also told the Court that they offer the administrators their labour at no cost to the extent necessary to get the employers' business back to profitable operation. I would not regard this as a significant factor.....if it placed the employees in an unrealistic or overly burdensome position. But the figures produced by the employers for January and February 1998 suggest that employees may need to sacrifice wages for only a few days per month. The revenue in January and February 1998 was $19.7 million and the expenses were $20.2 million.

McHUGH J: Just stopping there, how is profitability to be determined? Is it on a daily basis, weekly basis, monthly basis or - - -?

MR GYLES: Your Honour, it is a fee for a period - I will have to check the period - and we match the expenses for the fee against the same period. It is not a situation where there would be any difficulty in matching - well, you know the period and you know the income - - -

HAYNE J: Well, that is Micawber accounting, is it?

MR GYLES: There is a formula in the agreement.

HAYNE J: It is Micawber accounting, is it not; income 20 shillings, et cetera.

MR GYLES: Effectively, your Honour, yes. Your Honour, the labour agreement contains the formula by which it is done, and it is transparent as to how you calculate it.

McHUGH J: That is calculating income.

MR GYLES: And expenses. Well, sorry, then your expenses are what they are.

McHUGH J: Well, you say that, but what are the expenses?

MR GYLES: Wages.

McHUGH J: What about percentage of fixed costs? What about depreciation? What about those - - -

MR GYLES: We do not have those things, your Honour. Those companies have no infrastructure. No, it is not complicated by any of those factors. In any event, his Honour looked at the evidence and that was the conclusion. He said in that period:

Break-even would be achieved by salary sacrifice of $500,000, which is a few days wages for the whole work force.

Now, your Honour, one of the points which arises from that is that his Honour is apparently reasoning not that there shall be the effect of the order that has now been made by the Full Court, or, indeed, the undertaking which was proffered, his Honour is thinking of a wages sacrifice sufficient to put the company into a break-even situation, regardless of the - well, the break-even situation. That, your Honour, first of all, is not a commercial result; secondly, how do you possibly work out what each employee should forego to achieve that result. Furthermore, it is not achieved by either the undertaking or the order.

What is achieved by those, if they are valid, is that the liability for the wages and all the on costs associated with the employment of labour will be incurred by the companies, but the administrator will not be incurring them. Who will be? The company, at the expense of creditors. His Honour goes on:

The co-operation exhibited by the employees in taking these positions also removes one of the barriers to successful future trading referred to by Mr Clayton.

He says Mr Butterell - he was favourably impressed with him and, to the extent that a lack of co-operation was a past problem, Mr Butterell will solve it. Now, your Honours, this is in the face of a good deal of evidence which was before the Court as to not only the unsatisfactory relationships which had continued for some time, but that there would be wholesale resignations by managers if the work force were employed.

KIRBY J: Now, his Honour seems to have been very impressed by Mr Butterell and to have been affected by his impression of him, and he says so. I mean, he says it depends upon his impression as a witness. We who do not have all the evidence - it may be somewhere here in all the books - can hardly, as it were, substitute our impression. One gets an impression for oneself that his Honour, having seen all the evidence of the administrators, came to the view this can be done. It is unusual but, as you have said, this is a very special case, it is exceptional, and it can be done and ought to be done. Now, how can we substitute our view for that?

MR GYLES: Mr Butterell is an administrator, no more and no less.

KIRBY J: Yes. Neutral, independent and experienced.

MR GYLES: Yes, but he is not an experienced stevedore or manager of stevedoring labour. I am merely pointing out that the evidence was that there would be wholesale resignations by those with that experience upon whom he would have to depend. Why? Because there had been personal threats and so on which these managers take seriously.

McHUGH J: I take it he is never been on the docks.

MR GYLES: No.

McHUGH J: He would be in some office.

MR GYLES: He would have to be. He does not go to the docks. He is an accountant.

BRENNAN CJ: There is a lot of points that you have got to raise and this is a special leave application.

MR GYLES: Yes. Your Honour, his Honour goes on:

a critical factors will be whether PSO will have work to provide to the employees through the employers.

And there was evidence given about the reduction of that work. He does not know whether it is retrievable in the short term. So you have less work available. He does not know whether it is retrievable or not and he says:

The commencement of trading by the employers with an undertaking by employees not to take industrial action could be expected to influence the customers who have decided not to use PSO presently. The significance of the reduction in business on the grant of an injunction is reduced by the employees' willingness to sacrifice wages.

Then, your Honours, there is a reference, of course, to the secured creditor and its position, which is one of the matters affected by the grant of administration. His Honour says:

In any event, the administrators are able to apply for relief against a chargee under Div 7 of Part 5.3A of the Corporations Law. The evidence is that the labour cost of the operation constitutes most of the expense of the employers' business. Further, Mr Butterell has sought payment of $10 million of the $14 million to $16 million owing to the employers by other Patrick companies as a result of the BPAs. He is currently investigating recovery of this sum. Mr Clayton also made a demand for this sum shortly before he appointed the administrators. If it is paid, any non-labour expenses.....will be easily met from it.

And his Honour goes on to deal with the constant supervision point.

BRENNAN CJ: Now, is that amount the amount that is subject to the fixed charge?

MR GYLES: It is, your Honour, yes. Any amount which is - your Honour, there is no agreement, as I understand it, there is any immediately repayable loan, but even if there were, it would be caught by the crystallised charge. Now, merely to state that would indicate that there are matters which an administrator or the company would need to investigate: rights of indemnity and - - -

BRENNAN CJ: Is this the only inter-company loan that was the subject of the crystallisation of the floating charge?

MR GYLES: No. The evidence, your Honour, was that the floating charge was crystallised.

BRENNAN CJ: And were all the assets of the group?

MR GYLES: I believe so, your Honour. I will check the evidence, but that is my understanding, your Honour. We are checking that now. Now, your Honours can glean from this that one has a package. You have a company which is in the view of the director insolvent. It is insolvent because trading was unprofitable. An administrator is appointed and properly so in those circumstances and the appointment of the administrator is to satisfy the policy of the Corporations Law.

HAYNE J: And at least at one stage of the evidence the administrator was of opinion that the companies were insolvent; see paragraph 18 of his affidavit at tab 15.

MR GYLES: And he maintained that in oral evidence, your Honour. Now, his Honour's answer to that is to say, "I will recreate a situation in which I will depend upon the following: the undertakings that there will be no industrial action, undertakings that there will be no responsibility of the administrator for wages." What effect that has on the company, your Honours, might wonder about. "I will rely on the administrator - - -"

McHUGH J: What do you say about the capacity to extract such an undertaking when, what is it, 437A of the Act says that the administrator is liable?

MR GYLES: Quite. Your Honour, there is also a problem with the award.

McHUGH J: Underpayment, yes.

MR GYLES: Underpayment of the award. You cannot do it by consent.

KIRBY J: I thought the undertaking was somewhere refined to, that they would not hold the administrator personally liable.

MR GYLES: Yes, it is, and that is the vice of it, your Honour. I mean the administrator - - -

KIRBY J: Would that be inconsistent with the provision of the Act? That if the person waives right or undertakes not to pursue their right, is that contrary to the terms of the Act - the corporation - - -?

MR GYLES: Your Honour, they are not agreeing not to pursue their rights. The order allows them to pursue their rights but not to the expense of the administrator. The company remains liable - - -

McHUGH J: The company remains liable, although 437A of the Act, says the administrator could be liable.

MR GYLES: If you examine the Act, and that part of the Act, your Honours, that personal responsibility is the sanction for insolvent trading. If he is left, he just trades on. You have got the creditors meeting, and so on, but it is the - - -

HAYNE J: Personal liability might be seen as that which takes a company in voluntary administration, out of insolvent trading. You have a solvent person, liable personally.

MR GYLES: It enables what I might call "COD" trading, that is, you start with an insolvent company. In order to trade you can acquire services, if the administrator can fund it, and that there is no risk to the third party. That is the way the administration works, but once you destroy that, you destroy the efficacy of that particular form of administration. What is it based upon? It is based upon no industrial action; it is based upon, as I have said, this offer to rebate obligation which is not rebated by this provision, and it involves the notion that all the lost customs will come back because there is an administrator in place, and that the administrator will be able to work much better with the Union than the previous employers, although the administrator does not go on to the docks and he does not supervise the labour and in the face of the fact that the evidence showed that many of the experienced managers would resign, instanter, if the labour was restored to the docks.

GAUDRON J: It might ensure profitability.

MR GYLES: Well, your Honour, it might, but that is not something which a court, in the short or the long term, can do. You cannot put people in the position where they are forced to trade and run the entrepreneurial risks of loss, in this way. Your Honours will see how integral to the scheme is paragraph (4). A right never given before - never existing before, because he said, "I will ensure the lifeblood by stopping you using anybody else", and that affects my clients directly. They are also directly affected by the order which says, not only can we not terminate but we must abide by the labour hire agreements.

Now, can I take your Honours to those agreements. This is what the administrator is being told to administer. It is what the companies are told to carry out and what we, by order of the court, on pain of contempt are being told what to do. Now, your Honours, volume 3, tab B, is a sample.

Each are in identical terms, your Honour, I am instructed. The basic provisions:

the Contractor agrees to accept the engagement as Contractor to PS ESD and undertakes to provide the services described in clause 2 of this Agreement in return for the fee described in clause 3 of this Agreement.

Section 2, your Honours will see, the servides:

The Contractor agrees to provide sufficient labour resources to carry out the services specified in Schedule 2 of this Agreement ("the Services") at the locations specified in Schedule 3 -

Schedule 2, your Honours - I am afraid it is not paginated - appears towards the back of this exhibit, about five pages in, there is a heading "Schedule 1 Liaison Officer", the next page is Schedule 2:

The Services which the Contractor shall provide will include the following:

(a) The provision of suitably qualified personnel to man the Facilities, and to supervise the performance of work at the Facilities;

(b) The driving of container, luffing, mobile and ship cranes;

(c) The driving of straddles, forklift machines, transtainers and other mobile equipment;

BRENNAN CJ: This is all reproduced in his Honour's judgment, is it not? It does not matter - - -

MR GYLES: No, I think most of it is.

BRENNAN CJ: What is the point of it? What is the point you are making?

MR GYLES: The point I am making, your Honour, is that the services to be provided are a complex range of services, not just people on fork-lift trucks. The performance of those services under - there is an acknowledgment in 2.2, which your Honours know about:

that other Patrick labour hire companies and providers of Outside Labour Services may also provide the Services to PS ESD at the Locations and that this Agreement does not contain an exclusive right for the Contractor to provide the Services.

Your Honours, that does no more than state what the legal position was prior to this agreement coming into force. There is no inhibition which pre-existed this agreement either. Then, your Honours, "Performances of the Services" - and without reading them to your Honours, your Honours will see, from (a) to (j) that they include a range of obligations which can only be described as complex in the running of a business. 2.4 has "Performance Requirements". I am reminded that the performances in 2.3 must be, to a large extent, a matter of expert opinion, not something a court would readily know - or not - - -

KIRBY J: Is this all to establish that, notwithstanding what apparently the administrator said, that we should not believe him, notwithstanding that his Honour accepted that he could manage and run the companies doing all these complex services; that we should reject that? I mean, how can we do that? His Honour saw him and reached a judgment.

MR GYLES: Your Honour, we will have a look at the evidence. Your Honour, Mr Butterell - I will take your Honour to the evidence.

KIRBY J: His Honour was obviously very influenced by and very impressed by the administrator.

MR GYLES: Perhaps so, your Honour, but Mr Butterell is merely, for this purpose, an officer of the company; he is an agent of the company. What I am pointing to, your Honours, is that this - to oblige us to accept this type of service and to oblige the labour companies to provide this sort of service is the sort of relief courts never grant. It does not matter whether it is Mr Butterell or the best manager in the world, you do not grant it. The fact that he is not the best manager in the world is another matter that I have drawn attention to.

GAUDRON J: You say they do not grant it, but you are talking in a different context. This is a different context which, in an Act which deals with different relationships from those that have previously been the subject of court proceedings. I mean, there is no real reason that I can see why the limitations which are usually brought to bear in relation to purely commercial transactions should be brought to bear in the context of the Workplace Relations Act.

MR GYLES: Your Honour, the Workplace Relations Act says nothing about contracts between labour hire companies and people who take that hire and that is a mistake into which the Full Federal Court fell and we submit that that distracted them from the real point. This is a contract like any other and we are being told to perform it and accept performance of it. The judgment as to whether this is performed, the performance requirements which are involved, your Honours, the obligation to provide acceptable personnel in 5, the indemnities, the responsibilities for health and safety risks, leave, taxes, superannuation, insurances and so on, are all typical of a labour hire agreement, the nature of which is such that there would not be specific performance ordered of it, whether final or interlocutory, because the objections in principle to this sort of contract apply whether it be done for a week or a month or a year. The risks involved in mandating that sort of agreement on the basis we have here, your Honours, is simply not something which a court would enter into.

Before going back to some of the cases on that issue, could I take your Honours back to the Corporations Law because our submissions are put more widely than simply focusing on the orders made by the Federal Court, important as they are. It is our submission that Chapter 5 of the Corporations Law - I am sorry, I will put it another way. Administration is one part of Chapter 5 external administration. That includes, your Honours, arrangements in reconstructions, receivers and other controllers of property, administrators, administration, winding up in insolvency, winding up by the court, voluntary winding up and winding up generally.

Your Honours, this constitutes a carefully devised regime for dealing with insolvency or threatened insolvency in the Corporations Law and some of it, including this particular division or part, are novel in Australian law. We submit that to - and it is true that the court is given an important role in most of those arrangements. The court, in exercising its discretions under the Corporations Law should do so with the Corporations Law in view and I submit it is quite disorderly to have a court hearing an appeal with no claim for an order under this Part, make that order, when the only suggestion of it came in argument from the Bench, never called back for submissions about it and the impropriety, with respect, of the Full Court giving an order under this law to facilitate what they saw as rights under another law need only be stated to be appreciated.

There is no hint in the judgment that they gave any consideration at all to the effects of this upon the administration of companies whilst insolvent. It is, in my submission, not only procedurally wrong, it should never have happened the way it did. That court was not constituted properly to exercise these rights or exercise these discretions; it was a totally judge made, judge volunteered remedy. Because they did not hear submissions, they got it badly wrong. They were wrong as a matter of construction - - -

GUMMOW J: Is that not all that matters really, that it is wrong?

MR GYLES: Your Honour, I suppose so but - - -

GUMMOW J: It has a colourful background maybe, but the order is there and you want us to get it - - -

MR GYLES: Yes, it is an order of a superior court.

GUMMOW J: You want to get it overthrown, and you have reasons for doing that.

MR GYLES: But I do submit that the procedural point is, however, a legitimate point to be made by us, but we say that in principle it is not - even assuming that 447A grants power to dispense with the provisions of 443A - - -

GUMMOW J: Well, 447A(1) is talking about how the part is to operate, not about how it is not to operate.

MR GYLES: Precisely. But assuming against ourselves that as a matter of construction you can get section 447A to dispense with 443A in a particular case, we say that there is no reason in principle why that should have happened in this situation. There is no examination by their Honours of why it should have happened in this situation or any recognition of the fact that to make that order, if valid, would negate the very purpose of an administration which is to hold the fort whilst the matter is investigated, giving creditors the opportunity to make a better informed judgment as to the future of the company, including, your Honours, if I may say so, any proper investigation of dealings which were not proper beforehand. If these inter-company arrangements are not proper, then they will be investigated by the administrator and by the creditors and by all of the means which are available under this chapter.

Your Honours, we then say that in any event there is no power under 447A to simply dispense with a vital part of the Act. Section 447A, no matter what its limits, is in the nature of giving directions about discretions which exist. There are particular provisions which may say that - I mean, you may say administration should end. That was contemplated as one of the reasons why administration should end. That is fine. You then know that regime has ended and another one will take its place. I should in this context tell your Honours that the question of the width of 447A has been argued, I am told, before the New South Wales Court of Appeal but in a different context. It is Brien's Case, which is 26, the last case in the Court book. This is the judgment at first instance of his Honour Mr Justice Santow. The issue, your Honours will see from the headnote, was whether 447A could operate as a validating section effectively by abridging periods for holding meetings and curing the invalidity which was occasioned by a failure to follow the procedures laid down.

GUMMOW J: There are sections up the back of the Act dealing with that sort of - - -

MR GYLES: Yes, your Honour, it is also 1322(4). His Honour looked at both of them and his Honour held that it could be used to validate in that way and it could be done retrospectively, and that is a matter before the Court of Appeal at the moment. We would submit that whatever else may be said about 447A, it does not enable the Court to dispense with the obligation of complying with 443A.

KIRBY J: Is that the only decision on the section so far?

MR GYLES: I believe so, your Honour.

KIRBY J: Is there anything in the explanatory memorandum?

MR GYLES: There are a number of applications of it and his Honour looks at them. His Honour in fact sets out a schedule of all the cases at the back of the judgment, or somebody does, and- - -

KIRBY J: His decision is against your construction?

MR GYLES: Not really, your Honour, we say it is distinguishable, because his Honour is dealing with validating due to failure to comply with a- - -

KIRBY J: But that is not on how the part is to operate, which is an administrative view if you take that theory of the section.

MR GYLES: Well, I would say, with respect, that a dispensing power, if it be one, is of the nature of the administrative-type provisions with which we are familiar. Your Honour, there are provisions of- - -

BRENNAN CJ: For the sake of the record it is perhaps desirable to say that this is (1997) 15 ACLC 1359.

MR GYLES: Yes, thank you, your Honour. There are provisions of the Act in which, I think, the commission was given the power to dispense with the law- - -

HAYNE J: Well, Part VI or the takeover provisions are the classic example, are they not?

MR GYLES: There are those and, your Honours, the legislature there says, in effect, that you can dispense with compliance with the law and section 447A- - -

HAYNE J: And rewrite the provisions of the part.

MR GYLES: Indeed. We say that 447A is simply not drafted along those lines. One of the points, of course, which arose in the case before Mr Justice Santow was an argument that, if the section were construed otherwise, it would be constitutionally invalid; a point which is clearer here because of the fact that it is the Federal Court. Now, your Honours, we say as a matter of construction one does not get to that, but to have the Federal Court legislating would, in our submission, be totally inappropriate constitutionally.

Your Honours, can I then go back to consider some of the authorities on the principles on which interlocutory relief is granted and I would firstly take your Honours to No 9 on the list, Garden Cottage Foods Limited v Milk Marketing Board (1984) AC 130.

GUMMOW J: What will that tell us we do not already know?

MR GYLES: In your Honour's case, not very much, I am sure, but the submission is, your Honour- - -

GUMMOW J: What new proposition does it lay down?

MR GYLES: That the status quo is the status quo immediately prior to action, per Lord Diplock at page 138.

GUMMOW J: Lord Wilberforce as well?

MR GYLES: Lord Wilberforce did not, I think, note - I am not sure about that, your Honour.

GUMMOW J: He dissented in the result.

MR GYLES: He dissented in the result, and I do not think he dealt with that particular aspect of it. Your Honours will appreciate that if these principles are right that you preserve the status quo and that is the purpose of an interlocutory injunction, you must find a status quo, and Lord Diplock says it is a status quo immediately prior to action. Now, even if one were to take a more expansive view and take it back to 30 September 1997 - and I submit that would be against authority - you are left with a status quo which has no inhibition upon Patrick employing who they liked.

GAUDRON J: But if you take the view that some of the orders are a new species of Mareva injunction, different considerations apply, do they not?

MR GYLES: Well, if you did, I would submit that is not correct. A Mareva injunction has been examined in a number of cases, both in this Court and in the House of Lords, and it is seen as a sui juris remedy and it deals with the - - -

GAUDRON J: All that means is that it has only been applied in one situation, I think, does it not, to say it is sui generis?

MR GYLES: Well, I think what is intended by that is to say it is to be looked on its own. But, your Honour, this is not a Mareva injunction. There is a Mareva injunction here, which is orders - - -

GAUDRON J: Well, if one took the view that orders (4) and (6) were orders of a kind permissible by reason of the same principles that allow the grant of Mareva injunctions, questions of the status quo would be different. They may be irrelevant, really, that is what I am putting to you.

MR GYLES: Yes. Well, your Honour, I respectfully submit that the principles lying behind interlocutory injunctions are to preserve the status quo pending the final hearing, bearing in mind that these days an arguable case is not a very high barrier, and is not a very high barrier in this case, I might say. I have not troubled the Court with the contrary arguments which I submit will be unanswerable at the trial, but his Honour does not make any forecast. It is not a very high barrier, and the objective is to keep the status quo. To do more is to alter the status quo, and this case is authority for the proposition that I am putting, and is consistent with, and founded upon, American Cyanamid, which is now regarded as being the guiding authority in this field, and I might say, your Honours, that is - I will not read that case to your Honours. It is American Cyanamid v Ethicon [1975] UKHL 1; (1975) AC 396 and, your Honours, I respectfully submit that the whole of what is said in that case by Lord Diplock relate to the maintenance of the status quo.

McHUGH J: The learned judge, at first instance, seemed to regard the two issues as quite discrete but, in determining what orders you may make, is it no longer the law that in some situations you have to look at the degree of strength of the applicant's case?

MR GYLES: Yes, your Honour.

McHUGH J: That does not seem to have been done here.

MR GYLES: I respectfully submit that it has always been the law, and still is the law, that you must judge - the more Draconian the relief sought, the greater you must look, or the more closely you must examine the strength of the case. Now, that simply was not done here, your Honour.

GAUDRON J: There was, however, a presumption or there is a presumption.

MR GYLES: On one point.

GAUDRON J: Yes, on one aspect.

MR GYLES: Your Honours, the real issue is this. Let me assume that at trial it is found that the motivation for doing what was done was the result of completely inadequate performance, obdurate behaviour, indeed, mutinous behaviour and that union membership, whilst a common factor, was really beside the point. I mean, the law of conspiracy does not give liability in those circumstances.

McHUGH J: It may not on 298K, but the difficulty from your point of view is that the onus is reversed and it is going to require some very sophisticated fact finding to distinguish between the conduct of the employees as such and the conduct of the employees as unionists.

MR GYLES: But, your Honour, let me just float this. It is a part dealing with freedom of association. It cannot be that that part ultimately can be used to give a substantial remedy for those who are misbehaving themselves at the behest of the Union.

McHUGH J: Well, it may be and it is. It is drawn very widely the section.

MR GYLES: I know, your Honour, but I am putting the opposite point of view, bearing in mind purposive construction, it will be compelling, but, I mean, the bare fact that one may conclude that these steps were taken with a view to what has happened does not establish the proposition that that is an actionable conspiracy, nor does it establish that 298U can, as it were, unscramble all eggs. There are a number of things that can be done under U but you cannot always unscramble everything and our point, your Honours, to come back to what Justice McHugh asked me earlier in the submissions, (4) cannot be viewed as, in effect, a sort of method of maintaining a body against whom an effective order might be made. I submit, reading what his Honour said below, one could not come to that conclusion. Even if that were an appropriate question, which we submit it is not, you could not come to that view.

BRENNAN CJ: Mr Gyles, can I just take you back to September 1997 where a couple of times you have said that this was not a status quo situation so far as September 1997 was concerned. Before the labour supply agreements were entered into and the businesses of the employer companies were sold, was it not the fact that the employer companies had their own work force and were discharging their own functions in accordance with whatever they saw fit for the conduct of their business?

MR GYLES: They were conducting their own business, yes, with their own employ - - -

BRENNAN CJ: And the work force was only one work force, the one that has remained with them ever since?

MR GYLES: Yes, the same employees, your Honour.

BRENNAN CJ: Who was it that had the liberty to employ others?

MR GYLES: The company. The company could employ - - -

BRENNAN CJ: The employer companies?

MR GYLES: No, no, your Honour - yes the companies who are now the employer companies were conducting the whole of the business, the stevedoring, et cetera.

BRENNAN CJ: That is right, yes.

MR GYLES: And they could employ who they liked. Your Honour, companies upstream could start a stevedoring business and employ who they liked.

BRENNAN CJ: That depended on whether they had the facilities available to do so.

MR GYLES: But, your Honour, they are not inhibited. They could do so. If they can get the facilities they could do so.

McHUGH J: They cannot now.

MR GYLES: Pardon?

McHUGH J: They cannot now.

MR GYLES: They cannot now under these orders.

McHUGH J: Yes.

MR GYLES: I mean, it is impossible to construct a status quo which this is preserving or maintaining or even re-creating, I would respectfully submit.

McHUGH J: It seems to me that the difficulty from both sides' point of view about this order is that one has to say that it is sustainable only - that is order (4) - on the basis that it will set in train economic pressures which may ultimately cause your clients to hire labour from the employing companies and, in turn, then the employing companies, by reason of the injunctions will employ the applicant workers.

MR GYLES: Your Honour, I submit that it is no more and no less an economic duress imposed by a court. It could be the only purpose of it.

HAYNE J: The employing companies when they employ it will, in truth, be permitted by law to carry on business, that is, that they are not trading past insolvent.

MR GYLES: Indeed. Now, your Honours, can I remind your Honours that in Beecham Group v Bristol Laboratories [1968] HCA 1; 118 CLR 618, this Court at 623 - no matter what view one takes about the prima facie case aspects of it, what is clear at 623 is that the Court say - - -

GUMMOW J: It is a balance of inconvenience, really. That is what they are saying.

MR GYLES: Yes, but this:

"is what the Court has to do-to keep things in statu quo-until the final decision of the question."

That is 623 point 2 or 3. So, your Honours, the principle, I submit, is clear enough.

The other strand of authority to which I should refer is that which starts with Pakenham Fruit Company [1924] HCA 55; 35 CLR 386 - it is No 13 in our list - through J C Williamson v Lukey [1931] HCA 15; 45 CLR 282 which is No 12 on our list and H. Jones v Talbot (1946) 180 CLR 63 which lead to a similar conclusion to that arrived at in the Co-operative Insurance v Argyll Case, and if I could briefly remind your Honours of these passages. I go firstly to Pakenham's Cas

e 35 CLR. This was a case, your Honour, of a fruit growing co-operative and the articles provide that:

each member should deliver to the company at one of its packing shed 95 per cent of his fruit immediately after each variety thereof should be ready, suitable and fit for harvesting or picking but not later than a certain date -

and the Court would not grant specific performance or injunction.

That each member "shall deliver to the Company at one of its packing sheds 95 per cent of his said fruit immediately after each variety thereof is ready, suitable and fit for harvesting or picking, but not later than -

a certain date, and the court would not grant specific performance or injunction. Now, your Honours, the then Chief Justice, at 391 point 9, perhaps starting earlier, about 5 lines into the first full paragraph:

The practical effect of such an order would be to compel the respondent to perform the agreement to deliver 95 per cent of his crop to the Company. In this case the agreement contains no express stipulation binding the respondent not to sell his crop or any part of it to persons other than the appellant, but it is said that such a stipulation should be implied..... It cannot be denied that the sale by the respondent of more than 5 per cent of his crop to persons other than the appellant is inconsistent with the performance of his obligation to sell 95 per cent to the appellant.....this is not sufficient to entitle the appellant to the injunction claimed.

This agreement.....is of such a nature that it cannot be specifically enforced, and the application for an injunction is in effect an application for the specific enforcement of the agreement.

And the well known passage from Kerr is then set out. Their Honours Mr Justice Isaacs and Mr Justice Rich made quite a thorough analysis of the issue, and at 394 point 6 to 395 point 2, draw the distinction between true specific performance, that is, ordering parties to execute the contract which they had entered into, on the one hand, and that which is called sometimes "specific performance", that is, carrying out the substance of the agreement that is actually agreed. At 395 their Honours say this, the foot of 394:

There is no doubt the present case is of the latter class. The legal relative positions of the parties are finally settled, and all that can be asked is that effect shall be given to whatever legal rights have arisen. The distinction has importance for the reason that before injunction can be applied some equity attracting it must be shown. In cases of true specific performance the equity is the obligation of placing the parties in the relative legal positions contemplated. In the second class the equity must be sought in some other consideration appropriate to the actual legal relative situations of the parties.

Then, without reading to your Honours all of the passages, but we do, with respect, commend it to your Honours, at 401 their Honours say:

The plaintiff claims specific performance of the provisions of this article, which means, we take it, a mandatory injunction or order to enforce the obligation so created. But the discretion.....was "confined within well known rules". It did not, for instance, exercise that discretion in the case of contracts of service, or for the sale of goods, or "where a continuous series of operations is involved," or where the agreement lacked "that element of mutuality" required to make it enforceable in a Court of equity, or where damages would afford an adequate remedy for any breach of agreement.

Now, with respect, your Honours, that would be as clear a statement as one could find of many of the reasons for the defects in these orders. They are against principle and the well known rules.

McHUGH J: Except that in England there are quite a number of cases since Pakenham was decided, which are rather to the contrary. For example, Ryan v Mutual Tontine is a case about employing a porter, but there is some case in England in the last 15 or 20 years where they actually made such an order.

GUMMOW J: It is called Posner v Scott-Lewis.

McHUGH J: That is right, yes.

GUMMOW J: Chancery.

MR GYLES: There are some odd cases, your Honour, and they are odd. I mean, there is an occasional case which is odd - - -

GUMMOW J: It is not a question of whether they are odd or not, it is a question of, what is odd these days?

MR GYLES: There is an occasional case which is odd, but, your Honour, the principles have never been departed from in this Court, and they have recently been reaffirmed in the House of Lords in Argyll. So that, it is a big step to say that a trial judge, or judge at first instance, can write his own ticket.

GAUDRON J: They are not principles which would necessarily.....orders under 298U if contrary to your submissions. They extend to the making of interlocutory orders.

MR GYLES: Well, your Honour, we would submit that there would not be very much difference, because it has been said that section 80(2) of the Trade Practices Act, which has an interlocutory aspect, is to be looked at according to those principles. The reason is, with respect, that that sort of interlocutory relief under that section, just as with ordinary sections, is necessarily confined by and limited to the final relief which might be granted.

Here is the problem. I mean, you cannot have an order (4) final relief, for example, and on these principles you could not have an order (2) part (b) final relief. I realise that 398U may go beyond, in final orders, what you might do in some cases, but we submit that the interlocutory power, if there is one, would only be in aid of the substantive power.

McHUGH J: This is your big point in respect of order (4), that I suppose the courts below do not seem to have considered the fact that it seems impossible, on any view of the case, even if they wind the whole thing back, to make order (4) on a final hearing.

MR GYLES: Indeed.

McHUGH J: If they do not wind it back, it does not seem possible to make it, and if they do wind it back, it is irrelevant. So it can only be supported at the moment, subject to hearing the other side, on the basis that it is a necessary order to put pressure on your clients to make them trade with the employing companies because, without it, they could go somewhere else and so they are forced either to trade with the employers or do nothing. It does not necessarily, of course, mean - it does not mean that they will trade, but there will be enormous economic pressure on them to trade with the employers.

MR GYLES: Quite.

BRENNAN CJ: I suppose there are some cases, are there not, where there is an injunction granted in order to mitigate loss which is consequential upon the commission of a tort.

MR GYLES: Your Honour - - -

BRENNAN CJ: Exceptionally, but the jurisdiction is there.

MR GYLES: May I leave 298 aside, except - is your Honour putting the conspiracy proposition?

BRENNAN CJ: Yes.

MR GYLES: I would submit that the only orders which - so far as conspiracy is concerned, it does sound in damages, your Honour, and - - -

BRENNAN CJ: We know that, because it is an action on the case.

MR GYLES: Yes.

BRENNAN CJ: But that does not say anything about whether or not you can get an injunction.

MR GYLES: Your Honour, final injunctions in relation to that sort of tort are, if not unprecedented, your Honour, certainly not known to us.

BRENNAN CJ: You will find one in British Motor Trade Association v Salvadori (1949) 1 Ch, the relevant page is at the end of the judgment at 572, where an injunction was granted by Justice Roxburgh. It is an exceptional case. It does not mean it is an odd case; it is an exceptional case. And if in this case the situation is that the operating companies are in the position of either continuing to engage the employer companies or to pay damages for conspiracy for those who are without work, subject to the usual limitations, there is not much difference, is there?

MR GYLES: All the world of difference, your Honour.

BRENNAN CJ: Is there? What is it? Economically, I mean.

MR GYLES: Your Honour, the damages will not be paid until there has been liability found.

BRENNAN CJ: Yes.

MR GYLES: That is the difference, and, at that point, the parties who have been wrong will pay for it, and they will pay whatever is necessary. Whether it be as large as your Honour says, or much smaller, as we submit, is not relevant for this point, because there is no case made that the Commonwealth cannot pay, or, indeed, the Lang Corporation could not pay whatever damages could be reasonably anticipated.

BRENNAN CJ: Well, I do not know about the Commonwealth. The Commonwealth's liability in tort is a different matter, is it not?

MR GYLES: Well, anyway, Lang Corporation - - -

BRENNAN CJ: Individuals, perhaps, but not the Commonwealth.

MR GYLES: Yes. But, your Honour, that order is made when the liability is found, and it does not assume that there will be reinstatement, or anything like it. It just pays the damages. To step in with an interlocutory order which compels, by economic pressure, in the way that has been explained, your Honour, is to step in before any fault has been found and radically interfere with the way in which a company, which might be insolvent - probably is insolvent, at the moment - is conducting itself, and radically alter, in the case of my clients, their ability to do any business at all other than through this route. Now, that is a radical interference with rights before any fault is found.

To say there is an arguable case, your Honour, says no more than that there is an argument there might be a conspiracy of this character on these facts, that it is not beyond the bounds of possibility, that it is a reasonably arguable case. Now, to step in with, effectively, this sort of order, which is effectively mandatory is, we maintain our submission, unprecedented, and one of the reasons is that the very nature of the agreement is such that will not be specifically enforced.

Your Honours, we commend to your Honours the analysis of their Honours Isaacs and Rich in Pakenham, because they explain, particularly at 397 through to 399, why that is so. We also call in aid what was said by Justice Gavan Duffy and Stark at 401 and 402, and I submit that, in some ways, it is a better explanation, if I may be so bold as to put it, than that offered by Lord Hoffmann. It explains the problems of this sort of agreement, and the problems of a court involving itself in those sort of agreements, and the principles apply whether or not it is interlocutory.

Your Honours are probably well familiar Williamson v Lukey [1931] HCA 15; 45 CLR 282, which is case No 12. This was:

The lessees of a theatre agreed with a confectioner to give him an exclusive right to sell sweets and confectionery in the theatre and its precincts during the continuance of a lease of a shop which the confectioner took from the owner of the theatre for a period of more than one year.

And so on, and held no specific performance and no injunction. At 292 to 294 Justice Starke explains the reasons why there would be no specific performance and no injunction. Justice Dixon at 298 to 300 in the passage which has generally been thought to govern this situation since, and if I could take your Honours to 299 point 6:

It is said that the agreement in this case imposed upon the Company a duty not to revoke, during the term contracted for, the licence to the plaintiffs to go into the theatre to sell confectionery, and, during the term, to admit to the theatre no one else for the purpose of selling confectionery. To grant an injunction restraining the defendants from doing either of these things may appear an indirect way of compelling specific performance of the Company's part of the agreement. Probably the true rule is that an injunction should not be granted which compels, in substance, the defendant to perform his side of the agreement when the continuance of his obligation to do so depends upon the future conduct of the plaintiff in observing conditions to be fulfilled by him. If the contract is one the execution of which the Court cannot superintend, it does not seem to be in accordance with principle to bind one party to performance in specie leaving him to a remedy in damages only if the other fails to fulfil the conditions on his side to be observed.

Now, your Honours could not find a clearer exposition of the real point.

GUMMOW J: I think the real point is at 298, is it not, about point 5?

MR GYLES: Well, that is as to specific performance, your Honour, yes.

GUMMOW J: Yes. Well, then they had an alternative argument and there was a negative covenant applied to

get an injunction.

MR GYLES: Yes, quite. I accept that, your Honour, but we are - - -

GUMMOW J: But why was it so impossible in that case to superintend the appearance, stress and behaviour of the people selling the chocolates and so on?

MR GYLES: Well, because, your Honour, it really depended upon, as his Honour says - you have a contract which is executed in the sense of laying out mutual obligations. It is not fair to either party to be bound as against the other and we would also submit that the supervision of the specific fulfilment of the conditions, to which his Honour refers at page 298, is a reason why the court cannot supervise it.

McHUGH J: I have always been troubled by this question of supervision. Is not a better justification for these cases that they promote that you will not enforce the contract if the obligations are too uncertain rather than the fact that you have a supervisor, and "supervise" simply means that from time to time somebody will come up and get orders for breach of the injunctive relief or the specific performance. If the breach is clear, what does it matter if the court has to enforce it on a number of occasions?

MR GYLES: Because as Mr Justice Dixon says, to hold somebody to that particular promise, out of all the range of things to be done, is of necessity arbitrary. I mean, the thought of having every interdependent promise enforced, your Honour, when it is in breach- - -

McHUGH J: Well, it depends how certain they are.

MR GYLES: Well, your Honour, it is certainty of order.

McHUGH J: In a sense courts supervise contracts which they specifically perform; there may be quite a number of steps that have to be taken.

MR GYLES: Usually not. I mean, traditionally it is that you execute that contract which is what you have entered into. The query is whether it will ever do - where you have got a contract with mutual obligations over a period of time, it is a question of certainty; that is, the court ordering you to do that does not give you a touchstone to judge how you do it. It is like saying comply with a statute, comply with your contract. It means that every time there is a breach you have got to come up and that is why, of course, your Honour, we stress the interdependent and subjective or judgemental issues in the labour supply agreements.

McHUGH J: There are quite a number of cases, are there not, about maintaining if somebody will be injuncted or required to maintain something in accordance with it?

MR GYLES: Not usually, your Honour. It is hard to think of an example.

McHUGH J: I thought there was some cases about building walls or railways, even in the last century on it.

MR GYLES: Yes. That is touched on by Lord Hoffmann, your Honour, as explicable because it is a result which is achieved, not how you get there.

KIRBY J: The suggestion of the commentators is that this is - Lord Hoffmann's speech was unduly conservative in that the civil law countries have a much more hands-on judicial attitude in these things and that we should move in that direction. If you look at judges today, say, in comparison with 30 years ago, motion lists and practice lists and supervision lists, and it is much proactive than it was in the old days.

MR GYLES: Much more proactive in management of a case to final hearing.

KIRBY J: What is the logic of that? Is not the logic of that, that they should not shy away from supervision of orders of this kind if in the exceptional case and for in a peculiar situation it is required to do so. I mean, judges should just do what they have to do.

MR GYLES: Yes. Your Honour, I think the answer does lie, with respect, in my - perhaps understand a little better what Justice McHugh put a little while ago. It is that the answer lies in certainty. The Court should make orders which are certain of fulfilment, and it is - - -

KIRBY J: I think that is a better explanation than saying that it is an awful trouble for judges to have to come in and do these things.

MR GYLES: No, no. Your Honour, for a court to make an order that somebody comply with their contract which contains manifold obligations, many of which are interdependent and may depend upon questions of judgment and degree - - -

KIRBY J: And also unpredictable events that may unfold in ways that cannot be foreseen - - -

MR GYLES: - - - is against our principle of judgment once and for all. I mean, you should have an enforceable obligation which can be enforced by contempt if you breach it. At the end of the day, that is the problem with this notion. Once you get involved in looking at individual breaches, it is like saying, "Don't have industrial action", no more than the statute tells you. Here, your Honour, of course, we are not being asked to restore a building, we have to add another storey to it, or block up the doors, or one can think of various differences.

Your Honours, we then, of course, do rely upon the Co-operative Insurance Society Ltd v Argyll Stores - sorry, before I go there, I should remind your Honours of Jones v Talbot 180 CLR 63. It is an interlocutory case where:

a fruit grower entered into an agreement with a jam manufacturer to sell and deliver to its factory in each season during the currency of the agreement specific quantities of certain berry fruits grown on his property. The agreement gave the manufacturer an option to take the whole of an excess of the crop if it exceeded the stated quantities and provided how the option was capable of being exercised.

Held, that an injunction should not be granted to restrain the fruit grower from delivering his crop of a particular year or any portion thereof to anyone other than the manufacturer so as to put it beyond his power to perform the agreement.

Per curium. The fact that the manufacturer depended upon a regular supply of berries from growers under contracts did not show that damages were not an adequate remedy.

Your Honours, Justice Williams, at 66 and 67, in our submission, gives a good guide to how this sort of case should be dealt with. That was an interlocutory case and, we submit, it is directly in point.

KIRBY J: Justice Starke said that he regretted the encouragement given by special leave.

MR GYLES: Yes. Well I do not have any leave your Honour can revoke. Your Honour, then may I turn to the Co-Operative Insurance v Argyll Stores decision [1997] UKHL 17; (1998) AC 1. It is No 5 in the book and I suppose, in one sense, it is rather like Lukey's Case but it is a very strong case on its facts where the defendant simply closed the shop. Now, at one level one can say, "That is a breach which is clear" but the difficulty with the relief of specific performance is that the remedy would be against the settled practice to which we have referred. Between pages 11 and 16 his Lordship goes through that settled practice and we respectfully submit that the way in which his Lordship deals with it is in accordance with accepted practice in this Court and in this country.

KIRBY J: It is pretty orthodox material and it is very nicely written, if I could respectfully say so, but at the end of it his Lordship says - first of all this is a final order. Secondly, he can imagine exceptions and thirdly, it is a case about commercial dealings between commercial people where money is what is at stake. The suggestion in this case is that more than money is at stake. An important principle established by Parliament that you do not sack people for their union membership is what is at stake and that the judge has to fashion exceptional remedies to ensure that that is not completely rendered nugatory.

MR GYLES: Yes, well, your Honour - - -

KIRBY J: Which, if you succeed in your application and in the appeal, will be what will happen except for damages later down the track which may not be an adequate remedy.

MR GYLES: Your Honours, I submit that the principles in Co-Operative Insurance, reflecting as they do the authority in this Court, if applicable, apply equally to interlocutory relief in this type of case where the obligation or the mutual obligations called for require much greater or are much more complex than were the obligations here at stake and the reasons in principle why they should not be ordered apply equally to an interlocutory injunction which is to last for more than just a holding injunction, if it lasts for weeks or months the same difficulties, your Honours, apply.

We just pick up a couple of passages, your Honour. At the foot of 12 at G and the top of 13 his Lordship points out how inappropriate it is that business should be conducted under threat of contempt and, your Honours, we respectfully submit that is applicable in this very case. At the foot of page 13 is the imprecision in the terms of the order. There is no difficulty about the order that we cannot employ other labour, that is clear enough, but that order which obliges us to carry out the terms of the contract is subject to all of the difficulties of lack of precision to which we referred in drawing your Honours' attention to this case - to the High Court line of authority. Then, your Honours, at 15C:

There is a further objection to an order requiring the defendant to carry on a business, which was emphasised by Millett LJ in the Court of Appeal.

And, with respect, it is not just Lord Hoffmann and the rest of the House of Lords which the commentators have got to deal with. It is Lord Justice Millett of the Court of Appeal, engaged again - - -

GUMMOW J: He dissented.

McHUGH J: He dissented in the Court of Appeal.

MR GYLES: Yes, I know, in the Court of Appeal, but he was upheld in - what I am saying is you have got to add to all the members of the House of Lords Lord Justice Millett, who, with respect - - -

KIRBY J: And no doubt the primary judge in the County Court.

MR GYLES: Mr Justice Millett, we submit, gave a very sound exposition of principle to be added to the - but his Lordship says:

This is that it may cause injustice by allowing the plaintiff to enrich himself at the defendant's expense. The loss which the defendant may suffer through having to comply with the order (for example, by running a business at a loss for an indefinite period) may be far greater than the plaintiff would suffer from the contract being broken.

And, your Honours, that is entirely possible in the present circumstances. It may be that arrangements can be made or will be made in due course which would leave these employees with no effective loss at all, either because they lose the case or because there is another remedy, and in the meantime damage is being done to the insolvent companies because they carry on business at a loss and that is borne by others, third parties. My clients may be either driven out of business or be forced to conduct unprofitable business and what have they got? An undertaking of damages by a union and some unionists. Your Honours, the amounts at stake here, the balance sheet of the union I think had an excess of 19 million - - -

GAUDRON J: It seems to be doing somewhat better than the employer companies.

MR GYLES: Perhaps so, your Honour, but there is a very great limit to that amount if one gets to the - - -

BRENNAN CJ: Mr Gyles, on the special leave application you may well be granted special leave on questions relating to the power of the court to make the orders in question. If it comes to a question of balance of convenience of that kind, that is a rather different question, is it not?

MR GYLES: It is a different question, your Honour, but I grapple with that by putting this submission: many commercial, industrial and administrative disputes are dealt with at the interlocutory stage and effectively settle at the interlocutory stage. This will, no doubt, be such a case. In the months that will take this to come to hearing, the evidence would show real prospects of the alternative sources of labour going out of business, and the evidence is that this is the first alternative which has appeared in living memory. If this fails, there will be no other.

Now, you talk about the status quo, your Honours. It would be a most unfortunate result of this case if the Court, applying economic pressure to my client to maintain union labour - and that is what the Full Court said, and I repeat it again - that that would mean that the alternative supply represented by my learned friend, Mr Merralls, would go out of business, leaving no alternative to my client, or, indeed, anybody else from then on. There is a federal election in the next six months.

BRENNAN CJ: Really, Mr Gyles.

MR GYLES: Well, your Honour, with respect, I respectfully submit you cannot look at the interests of one party without looking at the lot.

BRENNAN CJ: Well, for my part, I find the reference to the existence of a possible federal election in the High Court of Australia as something which needs some justification.

MR GYLES: Well, your Honour, I give it, because, your Honour, we are looking at the justification for this Court now entering upon an examination of an interlocutory order. What I put is that this - - -

McHUGH J: Mr Gyles, this Court will decide this case on the legal issues and nothing else, and political considerations are of no relevance whatever.

MR GYLES: Your Honour, that may be so, but the effects upon my client are things I must put forward.

BRENNAN CJ: Well, not if they have only a political significance, because that is irrelevant to our considerations.

MR GYLES: No, your Honour, it is not political - the landscape, your Honour, over the next few months may change enormously and, if by creating a status quo, and then entrenching it, it has the effect that opposition - or the ability to obtain labour goes, I submit that is a factor to be taken into account. Indeed, your Honours, in NWL Limited v Woods (1979) 1 WLR 1294, which is No 7 - I perhaps do not need to read it, your Honours, but his Lordship, at page 1306D makes the point, in having dealt with American Cyanamid:

By the time the trial came on the industrial dispute, if there were one, in furtherance of which the acts sought to be restrained were threatened or done, would be likely to have been settled -

and so on. Your Honours, we submit that the interlocutory nature of a case may often be critical to the determination of the dispute.

KIRBY J: What is the earliest that you say the final hearing could be heard?

MR GYLES: Your Honour, I have not been involved in the directions aspect of it, but I imagine, looking at realities, it would be the second half of this year and for a- - -

GUMMOW J: It is not a question of just when it is heard, it is a question of when it is decided.

MR GYLES: I was going to say, when the decision would be given, your Honours, is- - -

KIRBY J: Well I think you cannot criticise the Federal Court here; they have acted with great speed and given their decisions very quickly. They realise how urgent the matter is.

MR GYLES: Yes, your Honour, but the parties are confronted with the possibilities which have been talked about in this Court today. It is a conspiracy case. There are significant issues of fact and law involved. All one can say, your Honour, is that it will be difficult to be certain there would be a decision in the case this year, with the best will in the world. That would be fast-track of all fast-tracks in the conspiracy cases.

KIRBY J: Is there any of it that is severable that could be dealt with, especially relating to the administrator's lawful duties under the Corporations Law?

MR GYLES: Not really, your Honour, that is really an interlocutory aspect. It does not deal with the final case. And the administrator is only part of the problem. The administrator will go quite soon.

GUMMOW J: He will not be there; something else will have happened.

MR GYLES: The administrator will go quite soon, but then there are the range of other issues which arise under the chapter of the Corporations Law, all of which, your Honour, the Union and their members have scrutiny. I mean, they are creditors. They know what is happening, and I think at each point in the Corporations Law they are entitled to approach the Court and make application. Nothing serious can be done, your Honours, without the knowledge of the creditors, of which the Union is a part.

Your Honours, reverting to the issue of interlocutory relief, it is accepted that the necessity for judges at first instance to deal with many disputes by way of interlocutory relief must give to them a very considerable degree of discretion which this Court has always recognised. However, it is the duty of the intermediate appellate court to scrutinise the exercise of that discretion and do so with an eye to making sure that when principle is departed from the intermediate appellate court steps in.

In this case, your Honours, the defects, which we submit - and leaving aside questions of power - are so serious in relation to existing principle that it requires this Court to say that you do not have to follow Williamson v Lukey; it requires this Court to say that you do not follow Argyll.

KIRBY J: It does not require us to say, you do not follow Argyll; Argyll is a foreign decision of a foreign court.

MR GYLES: Well, talking of trial judges, your Honour, they are bound to give some respect to these courts, but it is the High Court- - -

KIRBY J: They are not bound by the House of Lords?

MR GYLES: Anyway, your Honour, Williamson v Lukey and Pakenham will do me; they should not depart- - -

KIRBY J: You are on safer ground there.

MR GYLES: Your Honours, so far as the damages being an adequate remedy, the necessity for restricting interlocutory relief to the status quo, these, your Honours, are principles which judges as first instance have followed for decades and they should not be departed from without the intermediate court closely examining what was happening, particularly where you have public policy aspects involved in the Corporations Law, which we have discussed, the Trade Practices Law, Part IVA, and yet, one has, effectively, a monopoly of labour.

GAUDRON J: Can I again take you back to what is my problem in this area? If contrary to your first submission you take the view that section 298U, whether alone or in combination with V, allows the making of such order as the Court thinks necessary to remedy its effects, that does not seem to have in it at any notion, either by which the orders are limited to preserving the status quo nor, indeed, does it seem - yes, well that is all I would say. If you come to that view and if you have regard to the industrial context, a new province for law if not for order in light of this Act, why would you read the need to maintain the status quo into it?

MR GYLES: Because, your Honour, the section, whatever may be said about it, and even assuming that there is the interim power, ultimately would not, in my respectful submission, warrant an order to a third party limiting them to the supply of labour services from any particular - - -

GAUDRON J: If they are parties to the proceedings? I mean, it may be just an accident the way they are here, but - - -

MR GYLES: Well, perhaps so, your Honour, but they were never the employer.

GAUDRON J: But if you take the view that the Act means what it says, "remedy its effects", and if you face up to the reality that companies can, and probably will be, interposed in matters of this kind, whether or not, for the purpose of avoiding a provision of the Act, or whether for legitimate commercial purposes, then why read down the words "remedy its effects", by reference to the status quo?

MR GYLES: Your Honour, whatever they do mean, I submit they do not entitle the Court to impose an obligation on any of the companies for whom I represent in this case, an obligation only to take services from these companies. That could not be a legitimate result. That was never the status quo, it was never the position and the law does not countenance it.

GAUDRON J: But it may be necessary to remedy the effects, that is what I am putting to you.

MR GYLES: I submit not, your Honour. It could be appropriate, ever, to stop my companies, companies whom I represent, engaging labour services, or any other services, from whomever they see fit. Orders which may be made for recompense and - - -

GAUDRON J: We are not talking about compensation. The words are to "remedy its effects", not to provide compensation, not to provide damages.

MR GYLES: They could then, in a variety of ways, and the principle in approaching any interlocutory relief is that enshrined, your Honours, or referred to in the Optus Networks Case, No 6 on our list, Optus Networks v City of Borondoora (1997) 2 VR 318. However, this was referred to by the court below at 337, where you interfere as little as possible. Now, in the present case, your Honours, the existence of the employer entities is not at risk.

Even if by some chance they were liquid without the creditors knowing, liquidation can be stayed, the entity will remain. The wider issues as to what, if anything, can be done under 298U to people other than the employer entities remains for argument. It is our submission - and we have, we submit, at least substantial support from the Full Court below - the answer may be nothing but, if it is something, your Honours, then the present situation or the regime which the judges laid down is inappropriate to do it. The Full Court endeavoured to assist and that still does not do it. Nobody has here suggested any other way of doing it which would not - - -

GAUDRON J: Well, they have not had a chance yet.

MR GYLES: - - - infringe the principles which apply or other statutory provisions. Your Honours, I did say I would come back to the Mareva injunction. I would submit that to have that form of Mareva injunction based upon the evidence which the judge refers to is, with respect, hardly appropriate. The only reasoning appears at the top of page 26:

The inter-company transactions of September 1997 are an instance of a rapid rearrangement of assets within the group to the detriment of some members of it.

Your Honours, that is not a conclusion which follows from his Honour's analysis of the facts. There is no indication that this is to the detriment of the companies within the group.

McHUGH J: No, that they received cash or its equivalent in substitution for assets.

MR GYLES: Or the equivalent, yes. There is no question of the process of the Court being abused, your Honours, at that stage, no matter what be said about 298K, Mareva injunctions limited to those things which might frustrate the order of the Court. There is no suggestion that that is a prospect here. At that stage that was a corporate reconstruction. The issue ultimately will be decided as to what its purposes were or were not, and evidence has been led about it, but there is no suggestion from that that you would find that the Court's processes would be thwarted in some way. We simply say the Court is - - -

BRENNAN CJ: The problem that arises in relation to order (6) is simply that there are two possible breaches, it seems, of 298K(1). The first is the September 1997 events which might enliven paragraph (c). The second, which has not yet occurred, is the dismissal of the work force of the employers, which is paragraph (a). That may be thought to be, if the events occur, something which was the consequence of a conspiracy that is alleged. If all of that comes to pass and there is a work force that is without work and whose members find employment difficult to obtain, then the measure of damages, having regard to all the usual mitigation and qualifications, cannot be otherwise than enormous. The question then is: why should these corporations not be restrained from dissipating assets otherwise than in the ordinary course of business when there is such a claim being made?

McHUGH J: Can I add to what the Chief Justice has said. Perhaps it is more important to retain order (6) if you succeed in getting the other order set aside.

MR GYLES: Your Honour, I have filed some reports and nonetheless there has to be, surely, with the defendants here - there is the Commonwealth as a defendant and a substantial public company as a defendant.

GAUDRON J: The Commonwealth can pass an Act.

MR GYLES: There is absolutely no evidence that either of them are dissipating their assets to avoid this judgment and, indeed, on the contrary, your Honour - - -

BRENNAN CJ: The question of the Commonwealth's liability for a conspiracy is a very difficult problem.

MR GYLES: But, your Honour, also the evidence - - -

BRENNAN CJ: We are not talking about liability of individual persons, such as, for example, the Minister but the Commonwealth itself is a different kettle of fish.

MR GYLES: Yes, your Honours, I should mention this matter too. The evidence is, from the administrator, that he is negotiating with the Commonwealth to provide funds which would fund all the redundancy obligations. Now that is a factor which must be borne in mind.

BRENNAN CJ: Those are redundancy obligations.

MR GYLES: Yes, your Honour, and that is a redundancy obligation, if I may say so with respect, under the certified agreement. They are considerable in total, no doubt, your Honours, but they are obligations which set the tariff for redundancy.

That being so, if those negotiations succeed, then what we would submit is really that the effective maximum would be funded by the Commonwealth. The workers are not entitled to any particular enrichment because of a breach of 298K. They are entitled to be put in the position they might have been in and that could not exceed - - -

BRENNAN CJ: Not "might have been". "Would have been in but for". That is the proposition, is it not?

MR GYLES: I appreciate that, your Honour.

BRENNAN CJ: Yes.

MR GYLES: But all I say is that the administrator is negotiating with the Commonwealth for funds to fund those redundancies.

BRENNAN CJ: Well, be it so.

MR GYLES: We submit it is a factor. Your Honour, they are our submissions.

BRENNAN CJ: Mr Gyles, you obviously will not finish this afternoon and the stay order is one which is to expire at 5 o'clock. What do you have to say about the question of the stay?

MR GYLES: I submit it should be extended, your Honour. Your Honours are in the middle of hearing an application. We were invited to address as on appeal. The Court is exercising its jurisdiction. Both the Full Court and Justice Hayne at the interlocutory stages here recognised the disadvantages of chopping and changing or yo-yoing work forces and we submit that consideration is as powerful now as it was then.

BRENNAN CJ: Why do you say that the stay order should be imposed in relation to order (6), which, after all, permits the - - -

MR GYLES: I do not think that is stayed, your Honour. I think it is only (1), (2) and (4) which is stayed, your Honour.

BRENNAN CJ: (1), (2) and (4).

MR GYLES: Yes.

HAYNE J: And were stayed on the proffering of an undertaking.

MR GYLES: Yes.

HAYNE J: Is that offer of undertaking renewed?

MR GYLES: That is, your Honour.

BRENNAN CJ: Now, I take it that - we may as well dispose next of the stay aspect before calling on the next counsel and I take it you would have something to say, Mr Burnside?

MR BURNSIDE: At the moment, your Honours, it is not clear to us when the stay is sought to be extended to. If it is until the end of the hearing tomorrow, hopefully tomorrow, we have an instruction not to oppose that.

BRENNAN CJ: Very well. Then orders (1) (2) and (4) will be stayed until the conclusion of the hearing - tomorrow, I am reminded.

HAYNE J: I wonder if counsel heard.

BRENNAN CJ: The question is the order of submissions from this point onwards. Is there any agreement amongst counsel, first of all?

MR BURNSIDE: What has happened thus far is that since all of the rest of the Bar table are opposed to us and supporting Mr Gyles, they go first and we follow.

BRENNAN CJ: Yes. It would seem to me that it would be desirable to leave the employer companies until the last of those that put their submissions.

MR BURNSIDE: If the Court pleases.

BRENNAN CJ: Would you be next, then, Mr Merralls?

MR MERRALLS: That was not the understanding but I would be quite happy to do that, your Honour. Would I begin now or tomorrow?

BRENNAN CJ: Yes, please. Mr Merralls, the Court proposes to sit until 4.30 this afternoon.

MR MERRALLS: If your Honours please, in our submission, your Honour Justice McHugh hit the nail on the head when you said that the intention of Mr Justice North in making these orders was to enable the eggs to be unscrambled at the end of the day if the plaintiffs were to win.

We accept that statement, even though it appears to be at variance with some of the observations made by his Honour himself, when he indicated in his judgment, or in his reasons for judgment, that he had a more limited time frame in mind in making interlocutory orders. But the analogy may be good enough to explain what the learned judge had in mind, even if one disregards his own limitations. What it does not address is the fact that the eggs were not scrambled in a Teflon pan, and it is not only between the original employer parties and the plaintiffs that the unscrambling process would have to take place. That matter was avoided, to some extent, by his Honour's self denial in professing to address the status quo ante as at 7 April.

But, the fact is that contracts have been made with my clients. My clients have engaged a workforce - a workforce of some 350 people who also, in our respectful submission, have legitimate expectations or, at least, legitimate rights, to be considered when equity, the great conscientious system of jurisprudence, considers how its considerable discretionary powers ought to be exercised.

McHUGH J: Does it necessarily require the invoking of equitable jurisdiction? As Justice Gaudron has emphasised, at least so far as 298K is concerned, the question is one of remedying the effects of the conduct. Now, what is there in the nature of the language of that section which would stop a court making an order against third parties or strangers to the proceedings?

MR MERRALLS: Is your Honour referring to an ultimate order, or to an interlocutory order - - -

McHUGH J: I am talking to an ultimate order, because I think unless you work out whether you can make an ultimate order, it is not easy to see what interlocutory orders you can make.

MR MERRALLS: Yes. In our submission, a court would be very loath to make orders which disregarded the interests, perhaps intervening interests, of third parties, under that section.

It may or it may not. An order for reinstatement may, in fact, involve the dismissal of a person who has been retained in employment in the interim. It may not. It may be that the Court considers that it would be inappropriate to penalise such a person, even to give effect to the right involved in the unlawful dismissal of the plaintiff. But in the present matter - - -

McHUGH J: Do you have an exclusive contract with the stevedoring operations?

MR MERRALLS: Do we have an exclusive contract?

McHUGH J: Yes.

MR MERRALLS: No, we do not.

McHUGH J: You do not.

MR MERRALLS: No, but in the present matter, his Honour did not weigh the hardship that would be inflicted upon my clients and their employees as against any other hardship that ought to be thrown on the balance when exercising equitable jurisdiction. May I take the Court briefly to his Honour's judgment at, I think it is page 13.

His Honour adopts the modern style of judgment writing of having subheadings, and on page 13 the subheading attached to the following section of the judgment is headed "The new labour force, cost to Patricks and effect on third parties", and his Honour sets out some of the provisions of the agreement with PCS for 7 April. At the foot of the page he refers to clause 16.1, which is a sort of force majeure provision. Now, he expresses a view about the effect of that provision at the top of the next page; a view, I might say, that the Full Court was inclined to doubt, but he says:

The clause would appear to apply to the situation where PSO was unable to use labour from PCS as a result of an injunction granted by the Court. The parties seem to have anticipated the possibility that fulfilment of the obligations may be rendered impossible.

I do not know whether that sentence is intended to relate to the previous one. The comment applies, of course, to the provision as a whole and is not confined to the consequences of an injunction.

The timing of the contract supports this view.

Why the timing of the contract should support the view a force majeure clause is also open to doubt.

On 6 April 1998, the applicant filed a notice of motion, returnable on 8 April 1998, in the previous action seeking orders -

Then his Honour says:

Given the corporate relationship, it is likely that the action against the present first and second respondents and Mr Corrigan would have been known to PSO. The affidavit in support of the notice of motion, sworn by Joshua Bornstein on 6 April 1998, stated that the basis of the application included a concern by the National Secretary of the Union that the Patricks' work force would be terminated and:

"that if this should occur, and binding contractual arrangements are entered into with third parties, the Applicants will be seriously prejudiced in the prosecution of this proceedings and in relation to the remedies that they seek".

And then his Honour proceeds:

PSO entered into the obligation aware of the risk of such an injunction. This consideration reduces the force of the contention that the PCS contract is a factor against granting the injunctions.

But there is not a word of PCS's position, and no finding is made of any knowledge, no prima facie finding is made of any knowledge or conduct that would deny PCS the right to have hardship being inflicted upon it being taken into consideration when the court exercised its discretionary power.

Then his Honour goes on to refer to accounts, the undertaking for damages by the Unions and in the next page to contracts made also on 7 April between PSO and other companies and they are companies concerned with the maintenance of equipment and, in the case of the company, KSK Contractors, the supply of stevedoring labour and equipment, but there is no consideration in that section, notwithstanding the subheading, of the effect or likely effect of the making of an order in terms of paragraph 4 upon my client companies and the employees work force of one of them. Now, the matter was adverted to - - -

BRENNAN CJ: Do you represent any of the work force?

MR MERRALLS: No, but we say that the work force are in the position that many third parties are when the court is invited to exercise jurisdiction to grant interlocutory injunctions and it is always said that if it appears that a third party is likely to be affected, that is a matter which the court must take into consideration.

That is where the third parties are not before the Court in such a case, that the Court must tread very warily, and it has always been said that it ought to pay particular attention to possible harm that would be inflicted upon persons who are not before the Court. So their position is, in a sense, a fortiori to the position of my clients who are before the Court and, through the feeble efforts of their advocate, are able to present their case to the Court.

McHUGH J: Past or present?

MR MERRALLS: May I take the Court to the corresponding section - it is quite short - in the judgment of the Full Court, which has two subheadings. It is on page 14. The first is "Misconstruction of the PCS Resources Agreement" and the second is "Effect on Third Parties". Their Honours say:

A variety of submissions were put substantially to the effect that the orders had the effect of adversely affecting the rights of innocent third parties and that it was wrong to make the orders in those circumstances.

It is true that if an interlocutory order, especially an interlocutory injunction, would operate unfairly on an innocent third party that is a reason against making of the order. North J clearly understood this. His reasons for judgment demonstrate that this factor was taken into account.

In our submission, it requires a good deal of inference from his Honour's reasons for judgment to make that statement.

His Honour considered that, in the circumstances of the case, the effect of the injunctions on third parties should not assume the importance that it otherwise would do.

Well, he may have considered that, but he did not say so.

The principle reasons was that the relevant third parties, being those who had entered into agreements with the Patrick employers that would for practical purposes be rendered ineffective by the injunctions, did so knowing of the risk that a Court might make some order that would affect their rights.

Well, that is not a reason that was given by his Honour Mr Justice North at all. There is no evidence to come to that conclusion or to support that conclusion, in our submission.

It seems to us, on the evidence, there cannot really be a dispute about this finding. Further, we do not accept the assertion that the learned trial Judge did not have in mind the effect that the injunctions would have had on employees of the third parties who would also be affected by the grant of the injunctions.

In our submission, a most remarkable statement, because there is absolutely nothing in his Honour's reasons for judgment which suggested that he had paid the remotest attention to the effect that the injunction would have. It is all very well to say what it should have, because he should have known that there were employees, but he did not say so. In our submission, where a judge, exercising equitable jurisdiction, is doing so in a way that can have deleterious effects upon people, such as the 350 employees, then he should say so and he should give his reasons why he regards the infliction of harm on one element of the work force, as being justified in the interests of another element of the work force. There is not a word in his judgment which suggests that he adverted to that consideration at all. In our submission, it is quite wrong for the Full Court of the Federal Court to have attributed to him that consideration.

It goes without saying that if the third parties are adversely affected by the orders, so would be the expectations of their employees. The failure to express mention of the employees does not demonstrate any error. I see it is witching hour, your Honour.

BRENNAN CJ: Yes. How long would you expect the remainder of your submissions to take?

MR MERRALLS: Ten minutes.

BRENNAN CJ: Yes, thank you. What estimates could I have from other counsel? First of all, Mr Murdoch?

MR MURDOCH: We would think in the vicinity of half an hour to 45 minutes.

BRENNAN CJ: Yes, thank you. Mr Harris?

MR HARRIS: If it please the Court. At this stage, your Honours, I do not intend to make any submissions.

BRENNAN CJ: Mr Pagone?

MR PAGONE: Your Honours, I expect to say nothing but if I say something it will take a minute or two.

BRENNAN CJ: Yes, and Mr Burnside?

MR BURNSIDE: More difficult to estimate. Between one and two hours, depending I think, in large part, on your Honours.

BRENNAN CJ: Yes, I would think that is probably right. The Court will adjourn until 10 am tomorrow morning.

AT 4.32 PM THE MATTER WAS ADJOURNED

UNTIL TUESDAY, 28 APRIL 1998