Legal database - View: Cases: Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia

Patrick Stevedores Operations No 2 Pty Ltd & Others v Maritime Union of Australia & Others
(1998) 195 CLR 1

(Judgment by: Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ)

PATRICK STEVEDORES OPERATIONS NO 2 PTY LTD & OTHERS v MARITIME UNION OF AUSTRALIA & OTHERS

Court:

HIGH COURT OF AUSTRALIA

Judges:
Brennan CJ, McHugh, Gummow, Kirby and Hayne Gaudron
Callinan JJ

Subject References:
HIGH COURT AND FEDERAL JUDICIARY
Federal Court of Australia
Power under s 298U of the Workplace Relations Act 1996 (Cth) and s 23 of the Federal Court of Australia Act 1976 (Cth) to grant interlocutory injunctions to restrict purported termination of labour supply agreements, termination of employment of employees, obtaining stevedoring services, engaging in conduct having the effect of termination employment of employees, and engaging in conduct having the effect of the divestment of assets or dealing with assets otherwise than in the ordinary course of business.
EQUITY
Equitable Remedies
Mareva injunctions and other interlocutory injunctions
Whether within jurisdiction of the Federal Court of Australia to grant injunction with the effect of fettering discretion of administrators appointed under Pt 5.3A of the Corporations Law
Whether effect of such injunction requires company to trade while insolvent
Whether injunction necessary to prevent frustration of process
Whether confined to maintaining status quo at the time of making application
Whether available to protect the subject matter of litigation conferring greater rights than when application made
Whether serious question to be tried
Whether appropriate on balance of convenience
Effect on third parties
Exercise of supervisory jurisdiction.
CORPORATIONS
Companies
Management and Administration
Appointment of administrators under Pt 5.3A of the Corporations Law
Powers and duties in administration of company
Personal liability in administration of company
Jurisdiction of court fettering discretion of administrators
Jurisdiction of court to make orders compelling administrators to retain employees and to trade while insolvent contrary to responsibilities under the Corporations Law.
INDUSTRIAL LAW
Commonwealth
Stevedoring Industry
Whether restructuring of companies so as to remove assets from employer company with the effect of dismissing, injuring or altering the position of employees by reason of their membership of a union contravenes Pt XA of the Workplace Relations Act 1996 (Cth)
Nature of interlocutory injunctive relief available under s 298U of that Act.
TORT
Joint or Several Tortfeasors
Conspiracy
Whether interlocutory injunction an appropriate remedy
Whether interlocutory mandatory injunction an appropriate remedy.

Other References:
Corporations Law, Pt 5.3A, s 1321
Federal Court of Australia Act 1976 (Cth), ss 23, 32
Workplace Relations Act 1996 (Cth), Pt XA, ss 298K, 298L, 298T, 298U, 298V

Judgment date: 4 MAY 1998

Judgment by:
Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ

The Application

[1] This is an application for a grant of special leave to appeal. However, the parties were invited to present as full an argument as would be put on the hearing of an appeal. It has become apparent that issues of general public importance are involved and that special leave should be granted. The issues are complex and, as the reasons which follow will show, important questions of law arise for consideration. These reasons deal with the disposition of the appeal.

[2] The proceeding was commenced in the Federal Court of Australia by the Maritime Union of Australia ("the MUA") a registered Organisation and members of the MUA employed by four companies in the Patrick group against the Patrick group of companies ("the Group") and other respondents. The MUA and the employees ^[F1] obtained interlocutory orders from North J which were designed to protect the employees against imminent termination of their employment. The Full Court (Wilcox, von Doussa and Finkelstein JJ) dismissed an appeal against the orders made by North J and added a further order. This appeal is brought from the judgment and orders of the Full Court.

[3] In order to appreciate the nature of the orders made by North J, it is necessary first to state the statutory provisions on which the employees seek to rely and to recall the facts upon which his Honour proceeded. His Honour's findings of fact were, of course, provisional in nature in the sense that he found there were serious questions of fact to be tried. Those findings are so regarded in this Court. They were not challenged in the argument before us. On those findings, questions of statutory construction, of jurisdiction, of final and interlocutory remedies and of company law arise. We have had full argument upon them. There are circumstances in which, at the interlocutory stage, considered views upon questions of law are appropriate ^[F2] . The present is such an occasion.

The Workplace Relations Act

[4] The Workplace Relations Act 1996 (Cth) ("the Act") defines ^[F3] as one of its objects:

"ensuring freedom of association, including the rights of employees and employers to join an organisation or association of their choice, or not to join an organisation or association".

In pursuance of this object, the Act prohibits an employer from engaging in certain conduct for a "prohibited reason", that is to say, because (inter alia) the employee -

"is, has been, proposes to become or has at any time proposed to become an officer, delegate or member of an industrial association" ^[F4] .

The proscribed conduct is set out in s 298K(1) of the Act:

" An employer must not, for a prohibited reason, or for reasons that include a prohibited reason, do or threaten to do any of the following:

(a)
dismiss an employee;

(b)
injure an employee in his or her employment;

(c)
alter the position of an employee to the employee's prejudice;

..."

Paragraph (a) covers termination of employment; par (b) covers injury of any compensable kind; par (c) is a broad additional category which covers not only legal injury but any adverse affection of, or deterioration in, the advantages enjoyed by the employee before the conduct in question. Proof of the reason for engaging in the prescribed conduct is the subject of s 298V:

"If:

(a)
in an application under this Division relating to a person's or an industrial association's conduct, it is alleged that the conduct was, or is being, carried out for a particular reason or with a particular intent; and

(b)
for the person or industrial association to carry out the conduct for that reason or with that intent would constitute a contravention of this Part;

it is presumed, in proceedings under this Division arising from the application, that the conduct was, or is being, carried out for that reason or with that intent, unless the person or industrial association proves otherwise."

A contravention of s 298K(1) is not an offence ^[F5] but the Federal Court of Australia is given a wide jurisdiction to make orders in respect of contravening conduct. Section 298T(1) reads:

"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."

Section 298U provides:

"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:

(a)
an order imposing on a person or industrial association whose conduct contravened or is contravening the provision in question a penalty of not more than:

(i)
in the case of a body corporate - $10,000; or

(ii)
in any other case - $2,000;

(b)
an order requiring the person or industrial association to reinstate an employee, or to re-engage an independent contractor;

(c)
an order requiring the person or industrial association to pay to an employee or independent contractor, or to a prospective employee or independent contractor, compensation of such amount as the Court thinks appropriate;

(d)
an order requiring the person or industrial association not to carry out a threat made by the person or association, or not to make any further threat;

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

(f)
any other consequential orders."

The employees submit that a series of steps taken by the members of the Group and by certain officers of the member companies were taken because the employees were members of the MUA. They claim the steps taken altered the position of the employees of four companies in the Group to their prejudice and that, if the intended conclusion of those steps be realised, the employees of those four companies would be dismissed.

The facts

[5] The facts hereafter set out are taken substantially from the reasons for judgment of North J supplemented by evidence that is not presently in dispute.

[6] Prior to September 1997, Patrick Stevedores No 1 Pty Ltd ("PS1"), Patrick Stevedores No 2 Pty Ltd ("PS2"), Patrick Stevedores No 3 Pty Ltd ("PS3") and National Stevedores Tasmania Pty Ltd ("Stevedores Tasmania") carried on the business of stevedoring at various ports in Australia. These are the four Patrick companies ("the employer companies") which employed and continue presently to employ the employees. The profits derived from the carrying on by the employer companies of their respective businesses were substantial: for the year ended 30 September 1996, PS1's after tax profit was $20,431,000, PS2's after tax profit was $9,322,000 and PS3's after tax profit was $6,943,285. The amount of the after tax profit of those companies reflected large future tax benefits but two of the three companies showed significant operating profits ^[F6] . The profits of Stevedores Tasmania do not appear in his Honour's reasons for judgment, but may have been reflected in the profits of PS1 which held 83% of the issued shares in Stevedores Tasmania, the remaining 17% being held by a company outside the Group. After September 1997, with the exception of that 17%, the shares in each of the employer companies were held, directly or indirectly, by Patrick Stevedores Holdings Pty Ltd ("Patrick Holdings"), a member of the Group the ultimate holding company of which was and is Lang Corporation Ltd. In or before March 1998, the Group acquired the minority shareholding in Stevedores Tasmania.

[7] In or before September 1997, officers of the Group decided to reorganise the Group in a manner which affected the capital structure, business, debts and inter-company accounts of the employer companies. The reorganisation was not then known to the employees. First, the employer companies sold their stevedoring businesses to Patrick Stevedores Operations No 2 Pty Ltd ^[F7] ("Patrick Operations No 2") for a price of $314.9 million. The employer companies thus disposed of their property, plant, equipment and all contractual interests save those relating to their employees. The employer companies ceased to carry on the business of stevedores. Their businesses were reduced to the provision of their employees' labour to the stevedore - at first Patrick Operations No 2 and subsequently Patrick Stevedores Operations Pty Ltd ("Patrick Operations"), another wholly-owned subsidiary of Patrick Holdings. The agreements ("the Labour Supply Agreements") under which each employer company supplied labour to Patrick Operations No 2 (and, later, to Patrick Operations) gave the stevedoring company the right to terminate the agreement without notice if there were any interference with, delay in or hindering of the supply of labour ^[F8] . Thus the security of the employer companies' businesses was extremely tenuous. The security of the employees' employment was consequentially altered to their prejudice.

[8] The Labour Supply Agreements permitted Patrick Operations to obtain labour otherwise than from the employer companies. The agreements were non-exclusive agreements. But until 7 April 1998 only the labour supplied by the employer companies was used; the right to obtain labour elsewhere was not exercised. In practice the disposition by employer companies of their stevedoring businesses left the carrying on of the actual stevedoring operations in the same state as they were before the Group reorganisation.

[9] The Corporate Legal Counsel to Lang Corporation Ltd gave evidence to North J that the corporate restructuring was "to streamline the business and place it on a more modern footing". He identified various commercial advantages to the Group including being able better to measure the performance of the companies employing the labour and being able to refinance borrowing facilities at lower interest rates than bank rates. He said that the transactions were undertaken at full commercial value and after directors had taken independent legal advice. With reference to this evidence, North J observed ^[F9] :

"There is no express denial that a reason for undertaking the restructure in this particular way was to facilitate the termination of the employees' employment. The reasons given do not explain why clause 13(1)(b) of each LSA took the particular form. Furthermore, the reasons given are not inconsistent with the reason alleged by the applicants. Section 298K(1) requires the prohibited reason to be one reason, but not the only reason. In my view, there is a serious question to be tried that one reason why the employers made the BPAs and LSAs in the form they took and the reason why they appointed the administrators was because the employees were members of the Union, and the employers wanted to dismiss them to replace them with a non-Union workforce."

[10] Although the level of shareholders' funds in the employer companies would have been unchanged by the disposition of the employer companies' businesses at full commercial value, the businesses were exchanged for a receivable, not all of which was received and retained by the employer companies. The effect on the employees might have been less had the purchase price for the businesses of the employer companies been paid to and retained by those companies. But, after applying so much of the purchase price as was needed to discharge intra-Group loans and other debts owing by the employer companies, a significant amount - counsel variously stated the amount as $60 million or $70 million - was expended in buying back shares in the employer companies. Assuming that the buy-back was authorised by s 206B of the Corporations Law and thus avoided ^[F10] the prohibition against a company acquiring its own shares ^[F11] , the shares bought back were cancelled immediately after the registration of their transfer ^[F12] . The issued capital and shareholders' funds of the employer companies were reduced accordingly. The result of this restructuring was that somewhere between $60 and $70 million of the capital of the employer companies, which would have been available to finance their business operations, was returned to the shareholders. Apart from the 17% holding of an outside company in Stevedores Tasmania the shareholders of the employer companies were other members of the Group. The $60 to $70 million transferred to these shareholders was no longer available to employees and other creditors or potential creditors of the employer companies in the event of the loss of or significant downturn in the business of the employers. The shareholders' funds of the employer companies were reduced to approximately $2.5 million. It seems that those funds might have been exhausted by April 1998 when the employer companies were placed under administration.

[11] The employer companies are said to be owed an amount of $16 million or $17 million by other companies in the Group but the security trustee of the Group's financiers gave notice of a crystallisation of its charge over that debt on the evening of 7 April 1998 - a date of some significance in the history of the relevant events - and counsel for the Group (other than the employer companies) asserted that whatever was owing to the employer companies was exceeded by the liabilities for which the employer companies were bound to provide. The material tendered in evidence before North J was not sufficient to demonstrate conclusively that the employer companies were insolvent at the time when his Honour was sitting. However, North J proceeded on the footing that the employer companies were insolvent.

[12] In early 1998, there were interruptions in the supply of labour which enlivened Patrick Operations' power to terminate the Labour Supply Agreements. On 7 April 1998, that company exercised that power. This action left the employer companies with no work for their workforces to perform. The employer companies, most of their capital having been consumed by buying back their own shares from other members of the Group and their source of income having been taken away by the termination of the Labour Supply Agreements by Patrick Operations, were then put under administration under Pt 5.3A (ss 435A-451D) of Ch 5 of the Corporations Law. Mr Clayton, the sole director of each employer company ^[F13] , resolved that, in the opinion of each of the boards of PS1, PS2 and PS3, the company was then insolvent and, in the opinion of the Board of Stevedores Tasmania, that company was likely to become insolvent: see s 436A(1) of the Corporations Law.

[13] The position of the workforces of the several employer companies thus became parlous in the extreme. Counsel for the Group informed North J that the Administrators of the affairs of the employer companies intended to dismiss the workforce because the employer companies were insolvent. One of the Administrators gave evidence that that was their intention.

[14] In January 1998, the Group had transferred the right to use No 5 Webb Dock in Victoria to companies associated with the National Farmers' Federation ("NFF"). North J found:

"[The Group] also agreed to provide cranes and other equipment to those companies so that they could conduct the stevedoring operations at No 5 Webb Dock. This transaction was seen by the [MUA and its members] as part of a plan by Patricks to replace its workforce. No 5 Webb Dock, they thought, would be used to train an alternative workforce and then that workforce would be used to do the work which the employees had previously done. The [MUA and its members] believed that Patricks had some involvement with the NFF companies."

[15] The events relating to the transfer of use of No 5 Webb Dock and of the equipment to allow the transferee companies to carry on stevedoring operations there had two immediate consequences. First, some of the employees of the employer companies took "industrial action" (by which we assume his Honour meant that they withheld their labour) in some facilities as a protest against the transfer by the Group of No 5 Webb Dock. This was the interruption in the labour supply which enlivened the power of Patrick Operations to terminate the Labour Supply Agreements with the employer companies. Secondly, the MUA and its members (or some of them) filed an application in the Federal Court of Australia seeking relief on the footing that the transfer of No 5 Webb Dock was part of a plan to replace Patrick's workforce.

[16] On 6 April 1998, the Monday before Easter, those applicants filed a notice of motion seeking to prevent the dismissal of the employees of the employer companies - a step which they apprehended was proposed over the Easter period. The motion was set down for hearing on Wednesday 8 April. However, on 7 April 1998, Patrick Operations, having terminated the Labour Supply Agreements with the employer companies, entered into three new agreements for the provision of services to enable Patrick Operations to carry on its stevedoring business. It entered into agreements with KSK Contractors Pty Ltd and PCS Resources Pty Ltd ("PCS Resources") for the supply of labour and with Ganelect Engineering Services Pty Ltd for the provision of consulting services in connection with the maintenance of equipment. Patrick Holdings decided to discontinue funding any of the employer companies. These steps were taken before the employer companies were placed under administration.

[17] Late in the evening of 7 April 1998, the Group published a press release which included the following:

"Patrick today accepted offers and entered into contracts for a range of services from nine separate companies including the National Farmers Federation (NFF) backed P & C Stevedoring which will provide some crane and machinery operators.

...

Patrick has taken steps to ensure all displaced employees of the relevant companies will be eligible to receive their full leave and redundancy entitlements.

...

Patrick expects to continue stevedoring under the new contracted arrangements."

[18] On 8 April, Patrick Operations proposed to continue to carry on its stevedoring business with a new workforce supplied by KSK Contractors Pty Ltd and PCS Resources. This was the position when the employees sought interlocutory relief from North J.

The pleadings to date

[19] At the time of the application to North J for interlocutory relief, the employees had filed their application and amended Statement of Claim. The employees' pleadings seek at the trial of the action orders against the employer companies and other companies in the Group to remedy the effects of what is alleged to be conduct contravening s 298K. In addition to the allegation of conduct contravening s 298K, the employees allege that the sale of the employer companies' businesses, the Labour Supply Agreements and the share buy-back expenditure alienated the employer companies' property with the intent to defraud the employees. The employees seek orders that will undo the Group reorganisation and place the stevedoring business back in the hands or under the control of the employer companies. Interlocutory relief was sought in order to keep the employer companies in existence and to restore, as far as practicable, the situation that existed before the reorganisation of the Group took place.

[20] The employees also allege that the members of the Group, Mr Corrigan (the Chief Executive of Lang Corporation Ltd), Mr Clayton (the Director of the employer companies), Mr Dunn (a Director of Patrick Operations No 2), PCS Resources and other companies that are under the control of the National Farmers' Federation, Messrs McGauchie, Houlihan and Ferguson (who are Directors of PCS Resources and its associated companies) and Mr Reith, the Minister of State for Workplace Relations and Small Business, conspired together by unlawful means - chiefly by conduct in contravention of s 298K(1) of the Act - to injure the employees. These parties are alleged not only to have agreed to alter the position of the employees to their prejudice (in contravention of par (c) of s 298K(1)) but also to dismiss the employees (in contravention of par (a) of s 298K(1)) for the reason that they were members of the MUA. Interlocutory relief was sought to protect the employment of the employees by the employer companies.

[21] The interlocutory relief that was sought by the employees was directed only to members of the Group. Although it was necessary for North J to consider the effect of that relief on persons other than the members of the Group, the first question for his Honour's determination was whether there were serious questions to be tried as between the employees and the members of the Group as to the liability of the members on the causes of action for contravention of s 298K(1) of the Act and in conspiracy. North J found that there were serious questions to be tried as to those causes of action. One of the conditions for the grant of interlocutory injunctions was thus satisfied ^[F14] ; the other, balance of convenience, was resolved in favour of the employees. North J accordingly granted interlocutory relief.

The orders made by North J

[22] On 21 April 1998, North J made the following orders:

"UPON THE APPLICANTS by their Counsel undertaking to pay to any party adversely affected by the interim injunctions granted by the Court on the motion, notice of which was filed by the Applicants on 14 April 1998, such compensation if any as the Court thinks just, in such manner as the Court directs -

AND UPON THE APPLICANTS by their Counsel further undertaking that until the hearing and determination of this proceeding, or until further order, they will not engage in any industrial action -

AND UPON THE APPLICANTS by their Counsel further undertaking that they will not hold the administrators appointed to the First, Second, Third and Fourth Respondents personally liable for their wages and other benefits arising from their employment with the First, Second, Third and Fourth Respondents for which the administrators would otherwise incur personal liability as administrators during the course of their administration -

In this undertaking `industrial action' ^[F15] does not include action by an employee if:

(a)
the action was based on a reasonable concern by the employee about an imminent risk to his or her health or safety; and

(b)
the employee did not unreasonably fail to comply with a direction of his or her employer to perform other available work, whether at the same or another workplace, that was safe and appropriate for the employee to perform.

THE COURT ORDERS THAT:

1.
Until the hearing and determination of this Application, or further order, the Fifth Respondent, Patrick Stevedores Operations No 2 Pty Ltd, and the Seventeenth Respondent, Patrick Stevedores Operations Pty Ltd, each by itself, its servants and agents, are restrained from acting upon or giving effect to:

(a)
its purported termination of the Labour Supply Agreement made on 23 September 1997 between it and the First Respondent, Patrick Stevedores No 1 Pty Ltd;

(b)
its purported termination of the Labour Supply Agreement made on 23 September 1997 between it and the Second Respondent, Patrick Stevedores No 2 Pty Ltd;

(c)
its purported termination of the Labour Supply Agreement made on 23 September 1997 between it and the Third Respondent, Patrick Stevedores No 3 Pty Ltd;

(d)
its purported termination of the Labour Supply Agreement made on 23 September 1997 between it and the Fourth Respondent, National Stevedores Tasmania Pty Ltd.

2.
Until the hearing and determination of this Application, or further order, the First, Second, Third, Fourth, Fifth and Seventeenth Respondents shall subject to paragraph 4 of these orders ^[F16] :

(a)
continue to treat the Labour Hire Agreements referred to in paragraphs 1(a) to (d) as remaining on foot and binding upon the parties to those agreements;

(b)
give effect to the terms of those agreements.

3.
Until the hearing and determination of this Application, or further order, the First, Second, Third, Fourth, Fifth and Seventeenth Respondents by themselves, their servants or agents, are restrained from terminating the Labour Hire Agreements referred to in paragraphs 1(a) to (d) for any reason without first giving to the First Applicant 14 days written notice of that intention and the reason for that proposed termination.

4.
Until the hearing and determination of this proceeding, or further order, the Fifth Respondent and the Seventeenth Respondent, by themselves, their servants or agents, are restrained from acquiring the stevedoring services, which until 7 April 1998 they acquired from the First, Second, Third and Fourth Respondents, from any person other than the First, Second, Third or Fourth Respondents.

5.
Until the hearing and determination of this proceeding, or further order, the First, Second, Third and Fourth Respondents by themselves, their servants or agents, are restrained from:

(a)
entering into any agreement, arrangement or other transaction; or

(b)
taking any action or doing anything;

having the effect that the employment of the employees engaged in their stevedoring business is or will be terminated.

6.
Until the hearing and determination of this proceeding, or further order, the Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth, Thirteenth, Fourteenth, Fifteenth, Sixteenth and Seventeenth Respondents, by themselves, their servants and agents, are restrained from:

(a)
entering into any agreement, arrangement or other transaction, or taking any action or doing any thing, having the effect of divesting itself of their assets or undertaking, otherwise than in the ordinary course of business;

(b)
dealing with or otherwise disposing of any of their assets or undertaking otherwise than in the ordinary course of business.

7.
Leave is granted to the Applicants to proceed against the First, Second, Third and Fourth Respondents until further order, for the purpose only of further proceedings, if any, relating to the grant of interim relief.

8.
The Respondents file and serve their Defences by 12 May 1998."

Order 9 provided for discovery within a limited period expiring shortly after 26 May 1998. His Honour added:

"10. There be liberty to all parties to apply in relation to the foregoing orders upon 24 hours written notice to all other parties.

11. The directions hearing is adjourned to 10.15 am on 28 May 1998."

[23] The appeal to the Full Court against these orders failed. That Court made a further order that is material to the present application. That order reads as follows:

"Part 5.3A of the Corporations Law operate in relation to each of Patrick Stevedores No 1 Pty Ltd, Patrick Stevedores No 2 Pty Ltd, Patrick Stevedores No 3 Pty Ltd and National Stevedoring Tasmania Pty Ltd in such a way that s 443A(1) is not to operate in respect of services rendered to those companies by employees who are members of the Maritime Union of Australia."

[24] This appeal against the orders of the Full Court is brought by the members of the Group other than the employer companies ("the appellants"). They have joined as respondents the MUA and the personal employees, the employer companies, Messrs Corrigan, Clayton and Dunn, PCS Resources and its associated companies, Messrs McGauchie, Houlihan and Ferguson, Mr Reith and the Commonwealth of Australia. The employer companies were represented by counsel for the Administrators of those companies.

The jurisdiction of the Federal Court

[25] The jurisdiction of the Federal Court under the Act is conferred by s 412(1). Relevantly, that section provides that the Federal 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; or

(b)
actions may be brought in it under this Act; or

(c)
questions may be referred to it under this Act; or

(d)
...

(e)
penalties may be sued for and recovered under this Act; or

(f)
..."

The terms "matter" and "arising under" are constitutional expressions found, in particular, in s 76(ii) and s 77(i) of the Constitution. Their reach is explained in decisions such as Fencott v. Muller ^[F17] and LNC Industries Ltd v. BMW (Australia) Ltd ^[F18] . It follows that jurisdiction is conferred upon the Federal Court with respect to a matter which arises under the Act in relation to which an application for orders under s 298U may be made to it. The applications which may be made to the Court under s 298T and the orders which may be made by the Court under s 298U are defined in the same terms, namely, "in respect of conduct in contravention of this Part". Counsel for the appellants submits that those words preclude the exercise of any of the powers prescribed by s 298U unless the Court is satisfied on a final hearing that the contravening conduct has in fact occurred. But s 298T is not defining a condition that must be satisfied before an application can be made or the jurisdiction to hear and determine the application can be exercised; that section is defining the subject matter of the Court's jurisdiction under the Act. Whether or not an application is "in respect of" contravening conduct depends not on the facts that are ultimately found but on the basis of the relief which is sought by the party invoking the jurisdiction. If the relief sought is an order of the kind prescribed in the lettered paragraphs of s 298U and if the basis of the relief is alleged conduct in contravention of Pt XA of the Act, the jurisdiction of the Court is effectively invoked.

[26] True it is that the only person who can engage in conduct contravening s 298K(1) is an "employer" (a term that is defined to include a person who is usually an employer ^[F19] ). But applications under s 298U(e), unlike applications made under pars (a) to (d) of s 298U in respect of conduct contravening s 298K(1), can be made against persons other than an employer. Given that an application is "in respect of" contravening conduct and that the Court is empowered to make any order it thinks necessary to remedy the effects of the conduct, the order may be made against persons other than the person who has engaged in the contravening conduct. In so far as the power of the Court under s 298U(e) is to make an order necessary to remedy the effects of contravening conduct, counsel for the appellants may well be correct in submitting that the power conferred by s 298U(e) is exercisable only when those effects have been found to exist. That is the condition upon the power to make a final order; it is not the definition of the jurisdiction to hear and determine an application in respect of alleged contravening conduct. The power to make an interlocutory order is exercised by reference to the relief finally available but that is not, or is not necessarily, to say that the power to make the final order is the source of the power to make an interlocutory order or confines the power to make an interlocutory order.

[27] Once the jurisdiction conferred on the Federal Court by the Act is invoked, that Court has power under s 23 of the Federal Court of Australia Act 1976 (Cth) ("the Federal Court Act") to make "orders of such kinds, including interlocutory orders ... as the Court thinks appropriate". That power may be exercised in any proceeding in which the Federal Court has jurisdiction unless the jurisdiction invoked is conferred in terms which expressly or impliedly deny the s 23 power to the Court in that class of proceeding. It cannot be invoked to grant an injunction where the Court acquires its jurisdiction under a statute which provides an exhaustive code of the available remedies and that code does not authorise the grant of an injunction ^[F20] . But this is not such a case.

[28] It was emphasised in the joint judgment of four members of this Court in Thomson Australian Holdings Pty Ltd v. Trade Practices Commission ^[F21] that s 23 of the Federal Court Act "does not provide authority for granting an injunction where there is otherwise no case for injunctive relief", whether "under the general law or by statute". In Jackson v. Sterling Industries Ltd , Brennan J ^[F22] and Toohey J ^[F23] expressed the point as being that s 23 confers on the Federal Court such powers as are necessary or incidental to the exercise of the jurisdiction of that Court. Toohey J also emphasised ^[F24] :

"To formulate the question in the present case by reference to the existence and history of Mareva injunctions tends to obscure the basic question which goes to the power of the Federal Court. Nevertheless decisions relating to Mareva injunctions may throw light on the question of powers arising expressly or by implication from legislation conferring jurisdiction and they may also throw light upon the existence of such powers as may be incidental and necessary to the exercise of that jurisdiction or the powers so conferred."

[29] Both Thomson Australian Holdings Pty Ltd v. Trade Practices Commission and Jackson v. Sterling Industries Ltd concerned relief in respect of claims founded upon laws made by the Parliament. Here the claims are for relief under s 298U(e) and in the tort of conspiracy. For present purposes and as indicated later in these reasons, it may be taken that the common law claims in conspiracy are founded either in the accrued jurisdiction as explained in Fencott v. Muller ^[F25] or as an associated matter within the meaning of s 32 of the Federal Court Act ^[F26] .

[30] The orders which the Federal Court is authorised to make under s 298U(e) include an order to "remedy" the effects of conduct in contravention of Pt XA. The final orders sought in the present proceeding include orders which undo the reorganisation of the Group and once more place the stevedoring business now being conducted by Patrick Operations in the hands or under the control of the employer companies. The basis on which that relief is sought is that it is necessary to remedy the reorganisation of the Group in which the employer companies, in alleged contravention of s 298K(1)(c), altered the position of the employees to their prejudice. That remedy is sought in reliance on s 298U(e) of the Act. Similar remedies are sought in reliance on the auxiliary jurisdiction of equity to prevent the commission of a tort or the accruing of continuing damage from a tort committed. Before examining the power of the Federal Court to grant interlocutory injunctions, that Court's jurisdiction to grant final relief of the kind sought by the employees should be considered. The jurisdiction to grant relief in tort - whether at law or in equity - is not conferred by the Act; it is conferred by s 23 of the Federal Court Act or by s 32 of that Act ^[F27] .

[31] Given that the claims in conspiracy are part of the controversy which, by reason of s 412 of the Act, attracts the jurisdiction of the Federal Court, that Court has jurisdiction to hear and determine the conspiracy claims and to grant the remedies appropriate under the general law ^[F28] . What remedies are available and against whom?

[32] Although only an employer can engage in conduct contravening s 298K(1), all parties to a conspiracy that the employer companies should engage in such conduct are liable as concurrent tortfeasors ^[F29] . If the conspiracy to perform an unlawful act is completed by the performance of the act, it is only necessary for one of the conspirators to have performed the act or to have procured the act to be performed for an action to lie against all ^[F30] . If damages are recovered, each is liable for the whole amount ^[F31] . The conspiracy alleged - more accurately, the conspiracies alleged - were to engage in two examples of contravening conduct. The first alleged conspiracy was an agreement to reorganise the Group whereby the position of the employees would be altered to their prejudice for reasons which included the reason that the employees were members of the MUA. This would be a conspiracy in contravention of par (c) of s 298K(1). The second alleged conspiracy, which has not yet been brought to completion, was an agreement to take action whereby the employees would be dismissed (by the employer companies) for the reason, or for reasons which included the reason, that the employees were members of the MUA. This would be a conspiracy in contravention of par (a) of s 298K(1). The dismissal of the employees has not occurred. If it were to occur, and the employees were without work and were to find employment difficult to obtain, the consequences for them would be extremely serious. And, of course, if damages were awarded, the measure of damages, having regard to all the usual qualifications and factors in mitigation would be very large. The seriousness of the consequences for the workforce and the magnitude of the damages that might be payable in the event that the workforce is dismissed are relevant in two respects to the relief which the Federal Court might grant under the general law.

[33] A court whose jurisdiction is invoked in a conspiracy case has power to grant an injunction to prevent the completion or effecting of the conspiracy ^[F32] . Where the acts contemplated by the conspirators have all occurred and the tort is complete, the remedy available to an injured plaintiff is ordinarily limited to the recovery of pecuniary damages ^[F33] . But for over a century it has been established that "there is no rule which prevents the court from granting a mandatory injunction where the injury sought to be restrained has been completed before the commencement of the action" ^[F34] . Where the damage caused by tortious conduct is ongoing and is "extreme, or at all events very serious", a mandatory injunction may issue compelling the wrongdoer to prevent the occurrence of further damage ^[F35] . Here, if attention be focused on the conspiracy to engage in conduct in contravention of s 298K(1)(c) and it is found on trial that that conspiracy was entered into and completed, there would be power to make mandatory orders to prevent damage to the employees flowing from the Group reorganisation. If attention be focused on the conspiracy to engage in conduct in contravention of s 298K(1)(a) and it is found on trial that that conspiracy was entered into there would be power to restrain the dismissal of the employees for a "prohibited reason". These remedies would be available against any or all of the conspirators according to the exigencies of the situation then existing.

[34] If the employees were dismissed before trial in contravention of s 298U(a) or pursuant to a conspiracy in contravention of that provision, the damages would be likely to be enormous. The huge amount of the likely damages is a factor relevant to the scope of the relief available against the Group by way of interlocutory injunction.

Interlocutory relief

[35] The powers of the Federal Court under s 23 of its Act are powers "to make orders of such kinds, including interlocutory orders, as it `thinks appropriate'", as Deane J noted in Jackson v. Sterling Industries Ltd ^[F36] . He added:

"Wide though that power is, it is subject to both jurisdictional and other limits. It exists only `in relation to matters' in respect of which jurisdiction has been conferred upon the Federal Court. Even in relation to such matters, the power is restricted to the making of the `kinds' of order, whether final or interlocutory, which are capable of properly being seen as `appropriate' to be made by the Federal Court in the exercise of its jurisdiction."

One limitation on the powers of the Federal Court to grant interlocutory injunctions is that those powers must be exercised for the purpose for which they are conferred. In a later passage of the judgment of Deane J in Jackson v. Sterling Industries Ltd ^[F37] , his Honour said a power to prevent the abuse or frustration of a court's process should be accepted "as an established part of the armoury of a court of law and equity" and that "the power to grant such relief in relation to a matter in which the Federal Court has jurisdiction is comprehended by the express grant to that Court by s 23 of the Federal Court of Australia Act ". But, his Honour observed ^[F38] , orders must be framed "so as to come within the limits set by the purpose which [the order] can properly be intended to serve". The Mareva injunction is the paradigm example of an order to prevent the frustration of a court's process ^[F39] but other examples may be found ^[F40] . The moulding of an interlocutory injunction must depend upon the circumstances of each case. As Brennan J observed in Jackson v. Sterling Industries Ltd ^[F41] :

"A judicial power to make an interlocutory order in the nature of a Mareva injunction may be exercised according to the exigencies of the case and, the schemes which a debtor may devise for divesting himself of assets being legion, novelty of form is no objection to the validity of such an order."

The general principle which informs the exercise of the power to grant interlocutory relief is that the court may make such orders, at least against the parties to the proceeding against whom final relief might be granted, as are needed to ensure the effective exercise of the jurisdiction invoked ^[F42] . The Federal Court had jurisdiction to make interlocutory orders to prevent frustration of its process in the present proceeding.

[36] Before the September 1997 reorganisation of the Group, the employees of the employer companies enjoyed the security of an award that bound the employer companies which were carrying on the stevedoring businesses of the Group. The security of their employment and of the terms of their employment was dependent, inter alia, on the worth of the employer and the commercial viability of its business. But when, in effecting the 1997 reorganisation, the employer companies disposed of their assets including their stevedoring businesses, reduced their issued capital and disposed of a substantial amount of money by the buy-back of their shares and became the mere suppliers of labour, they exposed their continued commercial viability to the discretion of Patrick Operations No 2 (and later to Patrick Operations) in the event of any disruption in the supply of labour. After the reorganisation, the principal asset of the employer companies was an inter-company debt which appears to have been matched by liabilities in the form of employee entitlements.

[37] Given the weakened financial structure of the employer companies, the commercial death knell of those companies was sounded by the termination of the Labour Supply Agreements by Patrick Operations, the refusal of further funding by Patrick Holdings, the fixing by the security trustee on 7 April 1998 of the charge over any debts actually or contingently owing to the employer companies by Patrick Holdings and the non-payment of the receivable of $16 million or $17 million. If the power of the Federal Court to prevent the frustration of its process was to be effective, extraordinary orders were needed to ensure that, if the employees were successful in the final hearing, the employer companies, from which the employees derived such security of employment as they had, could be maintained in existence as stevedores or as the continuing suppliers of labour in the stevedoring business. If that could not be done, the conduct of the Group which had altered the position of the employees to their prejudice would lead inevitably to the dismissal of the employees.

[38] Presuming, in accordance with s 298V (even without reference to any inference to be drawn from the facts), that one of the reasons for the conduct which weakened and then contributed to the commercial unviability of the employer companies was that the employees were members of the MUA, the Court had power to make orders to prevent irremediable prejudice or damage to the employees pending the trial of the action. The orders made by North J were designed to provide the commercial framework in which the employer companies could be maintained in existence with a workforce that would allow it to carry on the business of supplying labour to Patrick Operations. That was the status quo which his Honour sought to maintain until the time came (if it were to come at all after trial) when orders to re-establish the employer companies either as the stevedore or as the suppliers of labour in the stevedoring business might be made.

[39] However, the granting of those orders as against the employer companies under administration and as affecting the interests of innocent third parties raises further issues for consideration.

The position of the employer companies under administration and the functions of the Administrators

[40] When the employer companies were placed under administration, the Administrators were invested with the powers prescribed by ss 437A and 442A of the Corporations Law. Section 437A reads:

"While a company is under administration, the administrator:

(a)
has control of the company's business, property and affairs; and

(b)
may carry on that business and manage that property and those affairs; and

(c)
may terminate or dispose of all or part of that business, and may dispose of any of that property; and

(d)
may perform any function, and exercise any power, that the company or any of its officers could perform or exercise if the company were not under administration."

This section reposes in the Administrators the duty of determining whether, during the period of administration, the employer companies should attempt to continue to trade. The employees submit that the Court should not be deterred by the intervention of voluntary administration from giving appropriate interlocutory relief, including orders which - at least in part - undo the Group reorganisation. The alleged insolvency of the employer companies is (so the argument goes) but the last, or next to last step, in the effectuation of a conspiracy to injure the employees of the employer companies by terminating their employment for the reason that they were members of the MUA. An important element of the conspiracy, so it is alleged, was the dismissal of the employees through the innocent agency of the Administrators. It was submitted that North J was right to prevent the dismissal of the employees and to do whatever was necessary to ensure that the employer companies would continue in business, employing the employees until the trial of the action.

[41] It is well established that the jurisdiction of this Court directly conferred by Ch III of the Constitution cannot "be affected by the exercise of the authority of [a] State legislature" ^[F43] , nor can a State law diminish the jurisdiction or power conferred on a court by a law of the Commonwealth: by s 109 of the Constitution, the law of the Commonwealth prevails. But the powers of the Federal Court under s 23 are limited to the making of orders that are "appropriate" and that limitation directs attention to the rights and liabilities of the parties to the proceeding under the applicable law, both Commonwealth and State or Territorial laws. The Corporations Law, though substantially uniform throughout Australia, is a law enacted by the Parliaments of the States. How do the provisions of Pt XA of the Act and the Corporations Law operate together?

[42] The answer depends on the true construction of the two laws and the fields of their operation. When one law - the Corporations Law - deals with the constitution, administration and assets of a corporation and another law - the Workplace Relations Act - deals with relationships between employers and employees or conduct in which persons engage qua employer or employee, there is not likely to be any general inconsistency between them. Corporations, like natural persons, can be subject to laws governing relationships and conduct. A law of the Commonwealth which governs the relationship of employer and employee does not purport to alter, and would not be construed as intending to alter, a State law prescribing a general regime for the administration of the assets of insolvent companies or the assets of companies which are, or are likely to become, insolvent. Just as the Bills of Exchange Act 1909 (Cth) was held not to be inconsistent with the regime created by the Moratorium Act 1930 (NSW) in Stock Motor Ploughs Ltd v. Forsyth ^[F44] and just as the Defence Housing Authority Act 1987 (Cth) was held not to be inconsistent with the relevant provisions of the Residential Tenancies Act 1987 (NSW) in Re Residential Tenancies Tribunal ^[F45] , so in the present case the provisions of Pt XA of the Workplace Relations Act and s 23 of the Federal Court Act are not shown to be inconsistent with Pt 5.3A of the Corporations Law.

[43] There is a substantial reason why that should be so. Part 5.3A and other provisions of the Corporations Law are concerned to regulate the control and distribution of the assets of a company in the interests not only of the statutory entity itself, the company, and its members but also in the interests of the company's creditors. The company is an entity brought into existence to provide the vehicle for organising, deploying and distributing its assets. The Corporations Law prescribes the regime which defines and protects the interest of third parties - the creditors - in the deployment and distribution of a company's assets. Another law which governs conduct in which companies and natural persons may engage and relationships which companies and natural persons may enter should not be construed as intending to affect or modify a regime that affects the interests of third parties. Prima facie, a law which deals indifferently with companies and natural persons does not affect the regimes prescribed by laws dealing with bankruptcy and insolvency; a law of the former kind would have to manifest clearly an intention to affect those regimes before it would be held to do so.

[44] It follows that the orders which might properly be made by the Federal Court under s 298U(e) of the Act or s 23 of the Federal Court Act ought not to interfere with the exercise by the Administrators of their powers in respect of the employer companies provided the Administrators act lawfully. Relevantly, that means that the Administrators cannot dismiss the employees for the reason, or for reasons which include the reason, that they are members of the MUA.

[45] Section 440D(1) of the Corporations Law forbids the commencement or prosecution of proceedings against a company during administration except, inter alia, with the leave of a court. North J gave leave and that was an appropriate order in so far as it allowed the prosecution of a proceeding designed to remedy the effects of an alleged contravention of s 298K(1) of the Act. However, the other orders made with respect to the business of the employer companies during administration require some qualification as will subsequently appear.

[46] The orders appear to assume that the Administrators will remain in office for a significant period of time (if not for the whole of the time until the action is tried). They are also designed to assist the bringing back of the employer companies to profitable operation. Further, the orders (as varied by the Full Court) are intended to relieve the Administrators of personal liability for the wages that the employees of those companies will earn pending the trial of the action.

[47] There are some features of the operation of Pt 5.3A of the Corporations Law which should be noted. First, voluntary administration under Pt 5.3A is intended to be a temporary measure. There are times within which steps in the administration must be taken ^[F46] . Thus, there are times set within which meetings of creditors must be convened ^[F47] . That period can be extended by court order ^[F48] or a meeting of creditors can agree that the meeting will be adjourned. But the meeting cannot agree to adjourn to a day more than 60 days after the first day on which the meeting was held ^[F49] .

[48] Next, the fate of a company in voluntary administration is in the hands of its creditors - at least in the sense that it is that group which decides whether the company will execute a deed of company arrangement or the administration will end or that the company will be wound up ^[F50] . No doubt that is subject to the supervision of the Court in various ways. But in the end it must always be remembered that the company that is subject to voluntary administration is one that the board has resolved is insolvent or is likely to become insolvent at some future time ^[F51] . Any step that the Federal Court takes to prevent the frustration of its jurisdiction must be taken having regard, inter alia, to the interests of creditors of the company. It must also be taken in light of the fact that the board of the company has concluded that its debts cannot be paid as and when they fall due now or at some future time.

[49] Ordinarily, administrators of companies are not in office very long. They must decide quickly whether the company and its business is beyond rescue. If the company or some or all of its business might be rescued, a deed of company arrangement will be proposed. It is the creditors of the company who decide whether the company should make that deed of company arrangement ^[F52] . The administrator will ordinarily become the administrator of the deed but the affairs of the company are then regulated by the deed. Although the creditors may resolve otherwise ^[F53] , the deed will ordinarily provide for the application of money received under the deed in the order of priorities that would apply in a winding up ^[F54] .

[50] If the company and its business cannot be rescued, the company will go into liquidation and its assets will be realised and the proceeds distributed among creditors in the manner prescribed by the Corporations Law ^[F55] . The entitlements of employees are then to be paid in priority to the debts of third parties ^[F56] .

[51] Although an administrator has power to conduct the business of the company during administration ^[F57] the administrator is personally liable under s 443A for debts he or she incurs in doing so. The administrator then has a right of indemnity against the company's assets ^[F58] , ranking in priority to unsecured debts and, generally speaking, debts secured by a floating charge ^[F59] . The administrator has a lien over the company's property to secure that right ^[F60] . But if an administrator forms the view that the company is and is likely to remain insolvent, it is unlikely that a decision would - or ought - be taken to continue trading. Personal liability of the administrator for the debts incurred would be the price of unsuccessful trading by an insolvent company. If the employer companies are indeed insolvent and if there be no prospect of supplying their employees' labour to a stevedore under a profitable contract, the Administrators are not likely to incur debts in carrying on trading, without a third party indemnity.

[52] An administrator has the power to carry on trading though the company is insolvent, the personal liability of the administrator being the protection given by the Corporations Law to the company's creditors. But the statutory protection of the creditors generally cannot be set aside by a court's order in litigation between a plaintiff party and the company purporting to suspend s 443A of the Corporations Law ^[F61] ; nor can a court order an administrator to incur, or to run the risk of incurring, a personal liability under s 443A in order to preserve the rights of a plaintiff against the company. The administrator must act impartially as among all parties having or claiming to have an interest in the present or future assets of the company and must make those decisions which, in the light of contemporary circumstances, best serve those interests. It is for the administrator, in exercise of the discretionary powers conferred by s 437A, to decide whether or not to carry on the company's business and the form in which it should be carried on during the administration.

[53] The central difficulty about the orders made by the primary judge is that they are orders which took away from the Administrators of the employer companies the discretions conferred upon them by s 437A of the Corporations Law. At least on one view of the effect of the orders, they would oblige the Administrators to continue to trade while the employer companies were insolvent. Freeing the Administrators from personal liabilities for wages incurred by employees - pursuant to the undertaking given by the employees - was not to the point. The companies themselves would remain liable for those wages.

[54] It is one thing to restrain Patrick Operations from giving effect to the termination of labour supply contracts and restraining those companies in ways that would, if the employees were to succeed at trial, permit the making of orders that would undo the transactions alleged to have been undertaken as a party to a conspiracy to engage in conduct in contravention of s 298K of the Act. But it is a very different thing to fetter the discretion of the Administrators (and of the creditors) in the exercise of the powers they possess under the Corporations Law. It is for the Administrators and the creditors (including the majority creditors, the employees) to take the decisions about continued trading.

The financial state of the employer companies

[55] A report to the directors of Patrick Holdings tendered in evidence before North J said that following the sale of the employer companies' businesses, the balance sheets of the three employer companies other than Stevedores Tasmania "will consist only of employee provisions, associated future income tax benefit, an intercompany receivable and shareholders funds". It also recorded that following the share buy-back which has been mentioned earlier, the shareholders' funds of those three companies would be reduced to an aggregate amount of $2.5 million. The inter-company receivable owing to employer companies by other members of the Group does not precisely appear in the evidence but the argument proceeded both in this Court and before the primary judge on the basis that it was of the order of $16 million to $17 million.

[56] The 1997 financial statements of the employer companies were not in evidence. The balance sheets of PS1, PS2 and PS3 for the financial year ended 30 September 1996 show that the amounts then provided for current employee entitlements (such as long service leave, annual leave and the like) totalled $18,915,840. The provisions for non-current employee entitlements added a further $14,566,563. The evidence does not disclose whether the amount required to be provided for employee entitlements was markedly different by April 1998.

[57] Mr Clayton, the sole director of PS1, PS2 and PS3, gave evidence to the primary judge that when he took over control of those companies (in September 1997) he started with all four companies on what he described as "with a level playing field". This, taken with the other evidence, would lead to the conclusion that in September 1997 the four employer companies had balance sheets which had a provision for employee entitlements of about the same amount as the inter-company receivable owing to them as part of the price for the assets they had sold and a total of the shareholders' funds of PS1, PS2 and PS3 (representing the excess of their assets over liabilities) amounting to $2.5 million ^[F62] . The evidence does not show whether Mr Clayton was taking account of the non-current liabilities in speaking of a level playing field.

[58] According to Mr Clayton the companies incurred running losses of $6 million in the period from September 1997 to April 1998. If that is so, shareholders' funds in the employer companies would be exhausted, the inter-company debt owing to the employer companies would be taken up by employee entitlements and, given the stated unwillingness of Patrick Holdings and Patrick Operations to continue to support the employer companies as they had until then by paying their wages bills of $2 million per week, there is an obvious basis for the conclusion that PS1, PS2 and PS3 were then insolvent.

[59] Mr Butterell, one of the Administrators, gave evidence before North J that he was of the opinion that, to the best of the information available to him at that time, the employer companies were insolvent. It is apparent that, in forming that conclusion, he took account of the existence of the inter-company receivable. He had in fact made statutory demand for some or all of that amount. North J proceeded on the premise that, at least after the termination of the Labour Supply Agreements, each of the employer companies was insolvent. Indeed, in considering whether the companies could be conducted profitably, his Honour appears to have concluded that the cash inflows of their businesses would exceed the outflows only if employees did not hold the Administrators responsible for their wages. That is, the companies would be "profitable" only if, to adopt and adapt his Honour's words, the employees were to "sacrifice wages" for a few days each month. On that basis, the companies would be trading while unable to pay their debts as they fell due.

[60] The parlous condition of the employer companies means that a continuation of trading runs the risk of causing detriment to third party creditors or the risk of the Administrators becoming personally liable for any losses incurred. But s 437A confers on the Administrators a power to be exercised in their discretion to continue or to desist from trading. That power is to be exercised in the interests of those affected (general creditors as well as employee creditors and shareholders) and having regard to the object ^[F63] of Pt 5.3A -

"to provide for the business, property and affairs of an insolvent company to be administered in a way that maximises the chances of the company, or as much as possible of its business, continuing in existence; or ... 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."

[61] The orders made by North J fettered the discretion. In particular, order 5 precluded the Administrators from deciding whether, if trading were resumed, it would be feasible to retain the whole workforce of the employer companies. Decisions of that kind are for the Administrators to make, not the Court. They are to be made having regard to all of the circumstances known at the time.

[62] It was submitted on behalf of the employees that if the Administrators wanted to exercise their powers they could always approach the Federal Court pursuant to the liberty to apply that was reserved. If they could justify their proposed course of conduct, the orders could then be varied to permit it. This contention identifies an error in the orders made by the courts below. The Administrators cannot be deprived of the discretion which the Corporations Law reposes in them. True, they must obey the general law in exercising their discretions ^[F64] , including the law governing the dismissal of redundant employees, but that is not to say that their discretionary power is subject to court approval. No doubt, a decision made by an administrator may be challenged by appeal under s 1321 of the Corporations Law but there is a radical difference between a challenge to an exercise of discretion under s 1321 and a denial of the administrator's discretionary power without the court's prior approval.

[63] Section 447A of the Corporations Law empowers the Court to "make such order as it thinks appropriate about how [Pt 5.3A] is to operate in relation to a particular company". Assuming that the Federal Court could exercise that power, it would not support an order taking away the discretionary powers of the Administrators. The Full Court invoked s 447A to support an order to exonerate the Administrators from personal liability under s 443A for wages and other benefits for which the employees (including the MUA) undertook not to hold the Administrators liable. It is unnecessary to consider the validity of the Full Court's order as the order was unnecessary. The undertaking related to the enforcement of claims for wages and other benefits, not the existence of claims susceptible of enforcement. The employees' claims for the wages and the other benefits for which the employer companies would be liable in the event of resumed trading were understood to remain enforceable against the relevant employer companies.

[64] As the orders made by North J were not subject to the power of the Administrators to determine whether or not to resume trading by the employer companies, there was an appealable error which can and will be rectified by the insertion of an appropriate qualification. But before turning to the precise form of the orders to be made, the position of third parties which were affected by the orders made by North J should be considered.

Third Parties

[65] In applications to grant interlocutory injunctions, the court is concerned to examine and in appropriate cases to protect, pending the trial, the moving party's right to relief against that party's opponent. But the rights of plaintiff and defendant are not the only rights considered in determining where the balance of convenience lies. In Wood v. Sutcliffe ^[F65] Sir Richard Kindersley v. C said:

"whenever a Court of Equity is asked for an injunction in cases of such a nature as this, it must have regard not only to the dry strict rights of the Plaintiff and Defendant, but also to the surrounding circumstances, to the rights or interests of other persons which may be more or less involved: it must, I say, have regard to those circumstances before it exercises its jurisdiction (which is unquestionably a strong one), of granting an injunction."

The principle in Wood v. Sutcliffe was approved by Cumming-Bruce LJ in Miller v. Jackson ^[F66] :

"Courts of equity will not ordinarily and without special necessity interfere by injunction where the injunction will have the effect of very materially injuring the rights of third persons not before the court."

His Lordship cited with approval a passage from Dr Spry's Equitable Remedies ^[F67] . We too adopt the author's statement:

"the interests of the public and of third persons are relevant and have more or less weight according to the other material circumstances. So it has been said that courts of equity `upon principle, will not ordinarily and without special necessity interfere by injunction, where the injunction will have the effect of very materially injuring the rights of third persons not before the courts'. Regard must be had `not only to the dry strict rights of the plaintiff and the defendant, but also the surrounding circumstances, to the rights or interests of other persons which may be more or less involved'. So it is that where the plaintiff has prima facie a right to specific relief, the court will, in accordance with these principles, weigh the disadvantage or hardship that he would suffer if relief were refused against any hardship or disadvantage that might be caused to third persons or to the public generally if relief were granted, even though these latter considerations are only rarely found to be decisive. (Conversely, detriment that might be caused to third persons or to the public generally if an injunction were refused is taken into account.)"

[66] Miller v. Jackson has been approved and applied on a number of occasions in Australian courts ^[F68] . However, the weight to be given to third party interests varies according to the circumstances. In the present case, PCS Resources offered to supply labour knowing that the Group proposed to sever the stevedoring operations from the workforce employed by the employer companies. Although North J made no adverse findings against PCS Resources as to the circumstances in which it entered into the hiring agreement with Patrick Operations on the evening of 7 April, the services which PCS Resources contracted to perform were known by it to be in substitution for the services which the employer companies had theretofore performed. In balancing the interests of the employer companies and their employees against the interests of PCS Resources and their employees, North J was entitled in the exercise of a discretionary judgment to conclude that the injunctions directed to the members of the Group should be made. At all events, there is no reason shown why that exercise of discretion should be overturned on appeal.

The undertakings and orders

[67] The orders made by North J were made on the employees giving three undertakings - first, as to damages, second, that they would not engage in industrial action and third, that they would not hold the Administrator of the employer companies personally liable for their wages and other benefits. It is necessary to say something of the undertaking as to damages and the undertaking about the liability of the Administrators.

[68] The undertaking as to damages was offered and accepted in the usual form of such undertakings in the Federal Court ^[F69] . It was, therefore, an undertaking in favour only of parties to the proceeding, not any third party that might suffer damage because of the orders. Counsel for the employees said in argument in this Court that he had instructions to extend the undertaking to any third party that might suffer loss.

[69] We need not resolve the question whether the undertakings given or to be given bind each individual who is represented by those employees whose counsel gave the undertakings or whether the employees named on the record warrant their authority to bind all the parties represented. But the undertakings bind the MUA, an organisation which is not shown to be insubstantial. The significance of the undertakings is that the Administrators, in the light of those undertakings, might be assisted in coming to a decision whether to resume trading. As the employees have chosen (or may choose) to bind themselves in this way there was no occasion for the Full Court to make order 3 (nor is there occasion for this Court to uphold it). And if the employees had not chosen to bind themselves, or were to choose not to offer a like undertaking in support of the varied orders which we will make, there is no warrant for disturbing the priority of claims on the assets of the companies which is prescribed by the Corporations Law. It follows that order 3 of the Full Court's orders should not have been made. That order should be set aside.

[70] Orders 1 and 4 made by North J are directed to Patrick Operations No 2 and Patrick Operations. The effect of those orders is to compel those companies to treat the employer companies as their sole supplier of labour under the Labour Supply Agreements. That was the position before 7 April 1998. Although the Labour Supply Agreements were non-exclusive, and order 4 provides for exclusivity, there is justification for order 4. It is necessary in the first place to ensure that, so far as the companies subject to the orders are concerned, they do not prevent the employer companies being maintained with their workforce until the trial of the action. If the Administrators are able to preserve the commercial viability of the employer companies and if the employees' action succeeds, those companies will then be in a position to resume control of the stevedoring business upon the setting aside of the agreements for the sale of the employer companies' businesses. Next, order 4 is necessary to maintain the employment of the employees to prevent the fulfilment of the alleged conspiracy to dismiss the employees in contravention of s 298K(1)(a) of the Act.

[71] Order 2 is directed to the employer companies and purports to bind them to treat the Labour Supply Agreements as remaining on foot. That order is appropriate if, but only if, the Administrators decide to resume trading. It should be made subject to the power of the Administrators to make their own decision whether to resume trading.

[72] Order 3 is also directed to the employer companies as well as to Patrick Operations No 2 and Patrick Operations. It will take effect subject to the powers of the Administrators. The order's chief purpose is to prevent the completion of the alleged conspiracy to dismiss the employees in contravention of s 298K(1)(a), albeit the dismissal is effected by the innocent agency of the Administrators.

[73] Order 6 is a form of a Mareva injunction. The principles upon which Mareva injunctions are granted were recently considered in Mercedes Benz AG v. Leiduck ^[F70] . This was an appeal to the Privy Council from Hong Kong. The judgment of the majority of their Lordships was delivered by Lord Mustill. His Lordship observed ^[F71] :

"Unlike a suit founded on the cause of action created by a judgment the Mareva injunction does not enforce anything, but merely prepares the ground for a possible execution by different means in the future. Secondly, and more simply, in a case such as the present the injunction does not enforce a `judgment,' but is intended to hold the position until a judgment comes into existence. At the time when the injunction is sought and granted there is no judgment."

In Jackson v. Sterling Industries Ltd ^[F72] , Wilson and Dawson JJ had spoken to similar effect, remarking of the Mareva injunction:

"It exists not to create additional rights but to enable a court to protect its process from abuse in relation to the enforcement of its orders. It is neither a species of anticipatory execution nor does it give a form of security for any judgment which may ultimately be awarded."

[74] In Patterson v. BTR Engineering (Aust) Ltd ^[F73] , Gleeson CJ observed that whatever doubts there may previously have been about the matter, in Jackson v. Sterling Industries Ltd ^[F74] this Court determined authoritatively that orders commonly referred to as " Mareva injunctions" might properly be made by Australian courts ^[F75] . As these two cases themselves illustrate, orders of this nature are made not only in actions to recover liquidated sums ^[F76] but also in aid of such claims as those for the recovery of secret profits and for damages both in tort and under such provisions as s 82 of the Trade Practices Act 1974 (Cth) ^[F77] .

[75] Whatever may be the limitations in the product of the conjunction between the remedies provided by s 23 of the Federal Court Act and the new statutory regime established by s 298U of the Workplace Relations Act ^[F78] (as to which we express no opinion), they do not deny a foundation for order 6. In deciding whether to make an order in the terms of order 6, North J was confronted by considerations of a nature identified by Lord Mustill in the following passage from Mercedes Benz ^[F79] :

"The remedy is now 20 years old and the problems, of which there is no lack, are of a practical kind; how to frame an order which, on the one hand, protects the claimant against the manipulations of a defendant who may prove to be unscrupulous, without strangling the working capital of a defendant at the instance of a claimant who may prove to be unscrupulous; how to form the necessary judgment at a time when every fact is hotly controverted; how to choose ancillary orders which are effective without being oppressive."

[76] In the present case, there is little dispute as to the constituent elements of the basic legal structure which laid the ground for the events of 7 April 1998. Having formed the view that he did as to the existence of a serious question with respect to the alleged conspiracy by unlawful means, it was well open to the primary judge to make an order in the terms of order 6.

[77] The applicants referred to the reliance by North J upon the proposition that the inter-company transactions of September 1997 were "an instance of rapid re-arrangement of assets within the group to the detriment of some members of it". They emphasised that value was received and it appeared to have been adequate. However, a sure foundation for order 6 rests upon a consideration of breaches of s 298K(1) as the unlawful means employed in the alleged conspiracy.

[78] We see in the orders no defect which sometimes is expressed as the involvement of the court in "constant supervision" of continued conduct. Reservations of that nature have been expressed in decisions of this Court ^[F80] . However, questions of degree rather than absolute restrictions upon the scope of curial relief are involved ^[F81] . Reference was made in the Federal Court judgments and in submissions to this Court to the speech of Lord Hoffmann in Co-operative Insurance Society Ltd v. Argyll Stores (Holdings) Ltd ^[F82] . His Lordship affirmed the refusal by the judge at first instance of an order for specific performance of a lease for a term of 35 years containing a covenant to keep premises open for retail trade during usual hours of business in the locality. His Lordship's statement that the usual practice was not to grant specific performance to carry on an activity over a period of time was made in response to a submission by the lessor to the effect that the equitable remedy was no longer to be understood as granted in the auxiliary jurisdiction where damages would be an inadequate remedy. The lessor submitted, without success, that in cases such as Argyll Stores the court "should look at the whole panoply of available remedies and consider the appropriate one rather than the gloss of rules put on them restricting their use" ^[F83] .

[79] The House of Lords discharged the order for specific performance which the Court of Appeal had made. The significance of Lord Hoffmann's speech for present purposes is not the rejection of the lessor's submissions. That rejection, with respect, was virtually inevitable. What is significant is the acceptance by the House of Lords that the concept of "constant supervision by the court" by itself is no longer an effective or useful criterion for refusing a decree of specific performance ^[F84] . Rather, Lord Hoffmann placed stress on other propositions. First, a person who is subject to a mandatory order attended by contempt sanction (which "must realistically be seen as criminal in nature" ^[F85] ) ought to know with precision what is required ^[F86] ; and, second, the possibility of "repeated applications for rulings on compliance" with orders requiring a party "to carry on an activity, such as running a business over a more or less extended period of time" ^[F87] should be discouraged.

[80] Reference to constant court applications should not be misunderstood. The courts are well accustomed to the exercise of supervisory jurisdiction upon applications by trustees, receivers, provisional liquidators and others with the responsibility for the conduct of administrations. The reservation of liberty to apply to the Federal Court in respect of certain of the orders to be made is in no way out of ordinary in the exercise of equitable jurisdiction.

[81] Further, those orders do not, in form or in substance, require the Administrators to carry on business activities in the sense with which the Argyll case was concerned. Nor do the undertakings and orders leave those bound by them not knowing what is expected of them. This is not a case, referred to by Isaacs and Rich JJ in Pakenham Upper Fruit Co Ltd v. Crosby ^[F88] , where the Court "could never be sure that it was in a position to enforce its order without injustice".

[82] The orders leave the factual position as it was prior to 7 April if the Administrators decide to resume trading. No supervision by the Court is required to give practical operation to the legal rights affected by orders 1 to 5, although North J appropriately gave all parties leave to apply: order 10. However, we propose to add a further paragraph to the order of North J relating expressly to the termination of the administration. Whenever that occurs a new regime affecting the control of the employer companies' affairs and the rights of their creditors comes into existence. The parties may need on that occasion to seek some variation of the orders made. Such a liberty to apply is not given in order to revisit the issues in this case.

[83] The orders made by North J and which are to be varied by this Court provide for the restoration of the Labour Supply Agreements that were in force before 7 April 1998 if the Administrators decide to resume trading. It is not the orders made but a decision to resume trading that may see the employees return to work. The courts do not - indeed, they cannot - resolve disputes that involve issues wider than legal rights and obligations. They are confined to the ascertainment and declaration of legal rights and obligations and, when legal rights are in competition, the courts do no more than define which rights take priority over others. In the orders which follow, priority is given to the powers of the Administrators of the employer companies but, subject to those powers, the orders seek to restore the position that existed prior to 7 April 1998. That position will be achieved, however, only if undertakings be given to protect amongst others the creditors of the employer companies. Orders

1. Special leave to appeal granted.

2. Appeal treated as instituted and heard instanter.

3. Appeal allowed in part.

4. The orders of the Full Court contained in pars 3 and 5 of the order of the Full Court set aside and in lieu thereof order:

(i)
Paragraphs 2, 3 and 5 of the orders made by North J on 21 April 1998 ("the orders of North J") be varied by inserting at the commencement of each paragraph the words: "Subject to par 5A of this order".

(ii)
Add as par 5A of the orders of North J the following:

"5A. The orders in pars 2, 3 and 5 of this order are made without prejudice to the powers of the Administrators of the First, Second, Third or Fourth Respondents during the period of administration."

(iii)
Add as par 10A of the orders of North J the following:

"10A. Without limiting the generality of the liberty to apply reserved in par 10, reserve liberty to any party to apply in relation to the foregoing orders upon 24 hours written notice to all other parties upon the administration of any of the First, Second, Third or Fourth Respondents ending."

(iv)
Add as par 12 of the orders of North J the following:

"12. Orders 1, 2, 3, 4 and 5 of this order shall lapse unless by 4.00pm on 6 May 1998 (or such other time as a Judge shall order before the expiry of that time) the Applicants shall give to the Federal Court of Australia an undertaking by their solicitors or counsel in the terms or to the effect of the undertakings given to the Federal Court but with an amendment of the first undertaking to add after the words `to pay to any party' the words `or to any person who is or hereafter becomes a creditor of the First, Second, Third or Fourth Respondents'".

(v)
Vary the order contained in par 4 of the Full Court's order by deleting "these orders" and inserting in lieu "the orders of the High Court of Australia".

5. Remit to the Full Court of the Federal Court any application by a party for an order with respect to costs of the proceedings in the Federal Court.

6. Otherwise dismiss the appeal.

7. The appellants pay the costs in this Court of the First to the Sixth Respondents. Otherwise no order as to costs.

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