Ace Business Brokers Pty Ltd v Phillips-Treby

APPELLANTS Mr M J Kimber SC and Mr R Moore of counsel Solicitor: Mr C Frazis Hancock Alldis

LEGAL REPRESENTATIVES: RESPONDENTS Mr W R Haylen QC and Ms E A Collins of counsel Solicitor: Mr D J Glinatsis Owen Hodge

JUDGMENT:

• 37 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION

CORAM: WRIGHT J, President GLYNN J HUNGERFORD J

ACE BUSINESS BROKERS PTY LIMITED AND MICHAEL GODFREY SMITH v NILDA PHILLIPS-TREBY AND ROBERT PHILLIPS-TREBY

Application for leave to appeal and appeal against a decision given by Justice Schmidt on 11 June 1999 in Matter No IRC 2956 of 1997 re unfair contract. JUDGMENT OF THE COURT [2000] NSWIRComm163 1 The issue raised by this appeal concerns the circumstances in which an agent should properly be made liable, and if so to what extent, for the conduct engaged in by the agent during the formation of a contract whereby work was performed in an industry where such contract was found to be unfair under s 106 under the Industrial Relations Act 1996. In that respect, the appellant identified it as directly raising the proper application of the principles formulated by the High Court in Brown v Rezitis (1970) 127 CLR 157. 2 On 11 June 1999, Schmidt J gave judgment on an application by the present respondents, Nilda Phillips-Treby and Robert Phillips-Treby, in relation to a franchise agreement entered into by them in 1995 with Local Home Services Pty Limited involving the delivery of videos to the residences of customers. It was alleged that the franchise agreement was an unfair contract within the meaning of s 105 of the Industrial Relations Act so as to be amenable to relief under s 106 thereof. The originating summons made claims for orders against Local Home Services as the then first respondent, Colin Godfrey as its sales manager and who was the second respondent, and Felicity Ann Capadonna and Nancy Babette Catsicas who as directors of Local Home Services signed the franchise agreement on its behalf and who were respectively the fifth and sixth respondents; Ace Business Brokers Pty Limited and its managing director, Michael Godfrey Smith, were respectively the third and fourth respondents for their role in Ace Business Brokers acting as agent for Local Home Services in the negotiations with the applicants leading to the making of the franchise agreement. 3 It transpired that prior to the hearing of the claim by her Honour, Local Home Services was placed in liquidation and Mr Godfrey and Ms Capadonna were declared bankrupt; no orders were sought against them. Ms Catsicas, who was not represented in the proceedings, was also declared bankrupt shortly before the hearing concluded but an order was sought against her. For the purposes of this appeal, however, Ms Catsicas is not an appellant so that her position may be put to one side. The only parties actively challenging her Honour's decision are the present appellants, Ace Business Brokers and Mr Smith, as to the findings made against them. Her Honour published reasons for decision and directed the parties to file agreed minutes of the orders reflecting that decision and formal orders were entered on 24 November 1999; in these reasons, however, and as did the parties, we deal with the issues by reference to the decision itself and not to the orders ultimately made. 4 As noted in the judgment of Schmidt J, the parties made the franchise agreement in April 1995 and in December 1995 the appellants, who were the franchisees, abandoned the business. Her Honour observed that many of the factual circumstances were not in issue and that indeed was the way in which the appeal was argued before us. The appellants made it clear that the issue on appeal was not whether her Honour ought to have made a finding that the contract was unfair within the meaning of s 106 of the Industrial Relations Act but rather whether it was properly open, in terms of principle, to find that the appellants should be jointly and severally liable for the payment of certain monies to the respondents under s 106(5). 5 It is convenient, therefore, to cite from her Honour's judgment the way in which the present dispute arose, as follows : Mr and Mrs Phillips-Treby learnt of the franchise opportunity from an advertisement placed in a newspaper by Mr Smith, who met with them at the offices of Ace in February 1995. At the meeting a disclosure document about the franchise business, which had been prepared by LHS, was provided to the applicants by Mr Smith who also made arrangements for Mr Phillips-Treby to accompany another franchisee, Mr Clancy, on his rounds. Mr Clancy confirmed advice already given to the applicants by Mr Smith, that he was earning about $1,000 per week from his franchise.

A second meeting was held which Mr and Mrs Phillips-Treby, Mr Smith and Mr Godfrey attended. At this meeting in March, a franchise agreement was provided to the applicants about which they later sought legal advice. Their solicitors raised two matters of concern with LHS - as to advertising and the franchise operations manual, which the applicants sought to inspect before final agreement was reached. A written response was provided by LHS on 5 April 1995.

A third meeting took place on 12 April, before Mr and Mrs Phillips-Treby had received their solicitor's final advice about LHS' response. The applicants executed the franchise agreement at the meeting. They were then concerned that they might lose the opportunity to secure the particular franchise area in which they were interested.

Mr and Mrs Phillips-Treby paid LHS a franchise fee of $39,950. LHS paid Ace a brokerage fee of $4,000 in respect of this transaction. Under the franchise agreement Mr and Mrs Phillips-Treby received various assets from LHS including a fitted out van, various videos, promotional fliers and stationery. Their evidence was that they initially had some difficulties with the videos not matching what they had been promised, (which was rectified), but they never received other items promised such as business cards or importantly, the franchise operations manual.

The franchise agreement included a term guaranteeing Mr and Mrs Phillips-Treby earnings of $600 per week. The franchise operated until about July 1995, with takings in that period increasing, but never reaching $600 per week and LHS making up the necessary difference. In this period both Mr and Mrs Phillips-Treby worked in the business together, with Mr Phillips-Treby working as the main operator and Mrs Phillips-Treby providing various support, including clerical support. There was a conflict in the evidence of the applicants as to the hours which Mrs Phillips-Treby worked in this period - on her evidence some 40 hours per week and on Mr Phillips-Treby's some 24 per week. Mr Phillips-Treby worked 40 to 48 hours per week.

Towards the end of July 1995, Mrs Phillips-Treby went overseas to visit her ailing mother. She was away until early November and during this time Mr Phillips-Treby worked alone in the business, on his evidence increasing his hours to some 72 hours per week. Mr Phillips-Treby began experiencing difficulties in contacting LHS and did not receive the level of support he was expecting. The franchise began to flounder, with takings declining. LHS stopped making up the $600 guaranteed each week. There was some acrimonious correspondence to LHS from Mr Phillips-Treby as to the level of support it was providing and from LHS as to the level of work which Mr Phillips-Treby was putting into the franchise.

After Mrs Phillips-Treby's return to Australia the position deteriorated further. LHS apparently stopped trading sometime in November. Mr Smith was aware of some of these difficulties. Mr Smith and ACE stopped acting for LHS when he could no longer make contact with LHS or Mr Godfrey. Mr and Mrs Phillips-Treby abandoned the business in December 1995 when their takings had reduced to some $130 per week. In February 1996, Mr Phillips-Treby obtained new employment, but earning less than $600 per week and less than he had been earning in the position from which he had resigned in April 1995 to begin operating the franchise. 6 The respondents' originating summons set out the grounds of alleged unfairness of the franchise agreement in the following way : (a) the Applicants' (Mr and Mrs Phillips-Treby) entry into the franchise agreement was procured by misrepresentations by both the Second (Mr Godfrey) and Fourth (Mr Smith) Respondents;

(b) the Applicants paid $39,950.00 for rights which were worthless;

(c) the Applicants' rights under the franchise agreement to a cooling off period were denied by the First Respondent (Local Home Services) by the late supply of goods essential to the operation of the business;

(d) the Second Applicant was required to work in excess of 40 hours per week for remuneration that dropped to approximately $130.00 per week by December, 1995;

(e) the First Respondent acted in breach of its contract with the Applicants by failing to provide them with marketing support and a wage guarantee;

(f) the failure to communicate with the Applicants in combination with the factors referred to above have occasioned the Applicants serious financial harm and distress; and

(g) the Fifth (Ms Capadonna) and Sixth (Ms Catsicas) Respondents procured or authorised the breach of the franchise agreement by the First Respondent. 7 The specific orders sought by the respondents at first instance were: 1. A declaration that the contract whereby the Applicants performed work in the video rental industry in New South Wales ("the Contract") between the Applicants and the Respondents was unfair pursuant to Section 106.

2. An Order declaring void in whole or in part either ab initio or from some other time the Contract except in so far as the said Contract confers on the Applicants' right to remuneration.

3. An Order that the Respondents jointly and severally pay to the Applicants: (a) the sum of $39,950.00;

(b) a sum in respect of further out of pocket expenses incurred by the Applicants to be particularised at a later time;

(c) the sum of $16,386.50 and continuing at $104.00 per week in respect of monies lost as a result of the Second Applicant leaving his previous employment to work under the Contract; and

(d) such amount of money in connection with the said Contract so avoided or varied as the Commission in Court Session considers just in the circumstances of the case. 4. An Order that the said Respondents jointly and severally pay to the Applicants their costs of and incidental to these proceedings.

5. An Order that the said Respondents jointly and severally pay to the Applicants interest upon the amounts of money ordered to be paid pursuant to Order 2. 8 Section 106 empowers the Court to "make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract": see sub-s (1) thereof. A contract may be found to be unfair "at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason": see sub-s (2) thereof. A contract may be declared wholly or partly void, or varied, "either from the commencement of the contract or from some other time": see sub-s (3) thereof. A further order may be made "as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case: see sub-s (5) thereof. Section 105 defines a "contract" as meaning "any contract or arrangement, or any related condition or collateral arrangement ..." and an "unfair contract" is defined inter alia as one "that is unfair, harsh or unconscionable". 9 In her decision, Schmidt J found in favour of the present respondents by holding that the franchise agreement was unfair due to the reliance placed by them on representations made by the second appellant, Mr Smith, for which there was no foundation and upon which he was aware the respondents would rely. In the process of so finding, her Honour carefully and extensively reviewed the respective cases put in light of the authorities relied upon and, as to the essential nature of the case, said : The evidence of both Mr and Mrs Phillips-Treby in cross examination was that they were satisfied with the bargain which they had made with LHS and that if it had been honoured, they would not have had any cause to initiate these proceedings. There was no particular provision of the written contract which was attacked as being unfair. Rather, it was the representations made by Mr Smith and Mr Godfrey prior to the execution of the agreement and the failure of LHS to honour those representations upon which the case turned. That is the heart of this case, the operation of the contract in the context of particular representations, some of which were never met, others which were no longer honoured after a period of some 2 months and some of which were breached when the franchisor's whole business failed, some 6 months after the agreement was reached. 10 In the result, her Honour concluded : As to this issue, I take the view that the approach urged by the applicants must be accepted. Mr Smith expected that the applicants would rely upon what he had told them. Their evidence was that they did so, even though they also made enquiries of LHS itself through Mr Godfrey and obtained legal advice on the franchise agreement. Mr Smith's explanation that in making his representations he had also relied on what Mr Godfrey had told him, without himself making any independent inquiry in my view, does nothing to assist the respondents in this case.

When Mr Smith first met with the applicants he made representations based on information provided to him by LHS, without at that stage even having seen the proposed franchise agreement. He was never shown any records or other material which would have demonstrated that LHS had the capacity to support the franchise system Mr Smith was marketing on its behalf. Mr Smith's evidence was that he would have only made other enquiries about LHS if he had access to other information which suggested that what Mr Godfrey had told him was not reliable. This raises the immediate question of how Mr Smith would ever be put in a position where he would feel it necessary to make such further enquiries. His approach seemed to be that acceptance of whatever he was told by Mr Godfrey was a proper basis to make representations to Mr and Mrs Phillips-Treby about the potential viability of the LHS franchise, unless he obtained information from some third party which would cause him to doubt what Mr Godfrey had told him.

As a result of this approach, it is difficult to see how Mr Smith protected the applicants from the possibility that Mr Godfrey was misrepresenting the position of LHS. The only independent inquiry Mr Smith ever seemed to have made was to confirm with another franchisee, Mr Clancy, who he had also introduced to LHS, that his earnings had increased to $1,000 per week. Even this confirmation was a very slim basis for Mr Smith's representations, particularly given that he advertised the opportunity as providing for earnings of up to $2,000 per week achieved in 4 days work. While, Mr Clancy told Mr Smith that he had made up to $1,200 in a week, this had required 5 days of 'solid' work.

In all of these circumstances I have no hesitation in concluding that Mr Smith, on behalf of Ace, actively participated in advancing representations about LHS to Mr and Mrs Phillips-Treby, for which there was no proper foundation and which were never in fact met by LHS. In doing so Mr Smith was well aware that the applicants were relying on what he had represented and indeed expected that to be the result of his conduct on behalf of LHS. 11 As to the effect on a contract of it being made following representations and the need for parties to be on "even terms", in the sense discussed by Sheldon J in Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371 at 374, Schmidt J referred to the well known line of cases decided by this Court and its predecessors where the unfairness of a contract flowed from false or misleading representations by reference to cases such as Halim v Fast Food Service Development Pty Ltd [1982] AR (NSW) 332; Swann v Ultratune Aust Pty Ltd [1983] 5 IR 284; and Smith v Nutshack Franchise Pty Ltd (unreported, Maidment J, CT96/1168, 28 August 1998). In concluding on the facts that the parties here were not on "even terms", her Honour then found "that the franchise agreement was relevantly unfair, harsh and unconscionable in not containing as terms of the agreement the representations advanced by Mr Smith and Mr Godfrey on behalf of LHS". In that respect, her Honour expressed much assistance from the approach of Perrignon J in In re Witek v Starr [1971] AR (NSW) 1000 and from the approach adopted by the Court of Appeal in Ex parte Ashfield Brokers and Consultants Pty Ltd; re Witek (unreported, Sugerman P, Asprey and Holmes JJ A, 72/118, 29 June 1972) in upholding the orders made by Perrignon J. After reviewing those authorities as to the culpability of an agent in a business transaction, and hence its liability to an order under the unfair contracts provisions of the statute, Schmidt J then considered the nature and extent of the power as referred to by Barwick CJ (with whom McTiernan, Menzies, Windeyer and Owen JJ agreed) in Brown v Rezitis (127 CLR at p 168); her Honour concluded : Mr Smith and Ace were content to advance representations as to the viability of the LHS business for which they had no foundation. At the least they were reckless as to the representations which they made. As earlier indicated, I am satisfied that it has been amply demonstrated that Mr Smith and Ace were culpably responsible for the acts which induced the applicants to enter into the franchise agreement with LHS which I have found to be unfair.

In all of these circumstances, I am satisfied that a proper exercise of the discretion to make monetary orders under s106(5) of the Act would not restrict the payment which Mr Smith and Ace should properly be ordered to make to the applicants to the $4,000 brokerage fee received by Ace from LHS, but would extend to the $39,500 franchise fee. In my view, on the evidence in this case, it is also proper that the orders made against these two respondents should be made on a joint and several basis as between them. 12 Having so found, her Honour turned to consider the practical implications of such an order in the case before her where it was acknowledged that the appellants as the agent or broker would bear the entire burden even though the respondents were also induced to enter into the franchise agreement by the conduct of the franchisor and its sales manager, Mr Godfrey. Her Honour, therefore, expressly considered the appropriate exercise of discretion as to the appellants bearing the sole burden of repaying the franchise fee to the respondents and in meeting the claim for the make-up of earnings from the business being the difference between what the respondents earned under the agreement and the guarantee of $600 per week for a period of one year. Specifically, her Honour considered the question as to who should be liable for the respective elements to make restitution to the respondents. 13 Again by reference to the judgment of Barwick CJ in Brown v Rezitis , her Honour reviewed the particular facts of the case to determine the relevant culpable association with the franchise agreement in question. Her Honour said : The applicants took legal advice on the proposed venture and while they did not take final advice, were satisfied with the responses made by LHS to their solicitor's enquiries before they entered the agreement. They understood that the expected returns of $800-$1,000 per week depended upon 100-120 customers being achieved, working hard in the business and that Mrs Phillips-Treby, on her evidence, at least understood that this involved the applicants converting leads into customers. There was evidence that telemarketing work was undertaken by LHS, as well as training provided to the applicants; but that the important operations manual was never provided to them. The evidence suggested however that it existed and indeed that Mr Clancy was operating in accordance with it. At the end of the day the necessary level of customers was never achieved by the applicants, but, as was known to the applicants, Ace and Mr Smith, it had been achieved for Mr Clancy, who was seemingly content with the franchise he had purchased, and how it was operating.

Mr Phillips-Treby particularly accepted in cross examination that what he had learnt of the franchise operation from Mr Clancy was an influential factor in his decision to pursue the franchise. There was no suggestion that Mr Clancy had misled either the applicants or Mr Smith and Ace as to his experience. Mr Phillips-Treby on the other hand, on his own evidence, had some difficulty in what was required of him in order to convert leads into customers. There is also to be considered the matters I earlier mentioned, namely LHS' dissatisfaction that the applicants were putting in the necessary effort into the franchise and the discrepancy in the evidence of the two applicants as to how many hours worked was being put into the business. 14 In those circumstances as found on the facts, Schmidt J was "not satisfied that the association between Mr Smith and Ace and the contract in question was of such a nature that a proper exercise of the discretion would warrant the making of orders against them as to the earning makeup claims". 15 We interpose to comment that as to Ms Catsicas, her Honour considered she should be jointly and severally liable for both the re-payment of the franchise fee to the respondents and solely liable for the make-up claim. However, as indicated earlier, the position concerning Ms Catsicas following her bankruptcy may be disregarded for present purposes. 16 In the result, Schmidt J concluded that an order should be made against the appellants for the payment to the respondents on a joint and several basis of the franchise fee of $39,500 (specified earlier in her Honour's reasons and in the originating summons as an amount of $39,950), including the $4,000 brokerage fee, but not the make-up payment as to loss of earnings which was made referable to Ms Catsicas only. 17 The notice of application for leave to appeal and appeal set out the reasons in support of leave in the following way : 1. The issues on appeal are important issues and directly raise the proper application of the principles set out by the High Court of Australia in Brown v Rezitis & Ors [1970-71] 127 CLR 157 by the Commission.

2. The First Appellant acted as agent and the Second Appellant was a servant officer and agent of the First Appellant. The First Appellant received only $4,000 from its participation in the sale of the franchise. The consequential orders foreshadowed by the Commission make the Appellants liable to the same extent as the principal franchisor. It is the position of the Appellants that nothing in their conduct warranted such an order against them. To allow such an order to stand is against both principle and the weight of evidence and would result in injustice as against the Appellants. 18 The grounds of appeal were stated in this way : 1. That the findings of her Honour as to the culpability of the Appellants such as to support the form of order for consequential relief was against the evidence and the weight of evidence.

2. That the findings as to liability and the extent of such liability as found by her Honour as against the Appellants was against the evidence and the weight of evidence and contrary to established principles of the Commission.

3. That her Honour erred in apportioning or assessing a liability upon the Appellants. Her Honour erroneously took into consideration the financial position of the Respondents to the proceedings below other than the Appellants at the time of the making of her findings to support the consequential orders to be made. The fact that each of the other persons who were natural persons became bankrupt either before or during the proceedings and the corporate Respondent was placed in liquidation can have no impact upon the form of order or the assessment of liability.

4. The appellants reserve their right to state further grounds in support of the Appeal upon obtaining the Transcript of the proceedings and following the making of final orders by her Honour.

5. For and upon such other grounds as appear appropriate to the Full Bench of Commission in Court Session on appeal. 19 The relief claimed on appeal by the appellants was for an order effectively setting aside or quashing the decision by Schmidt J with substituted therefor "appropriate orders … based upon the evidence and according to established principle and the proper exercise of discretion such as to reflect the culpability of the Appellants including any order as to liability for compensation". Counsel for the appellants, Mr M J Kimber SC and Mr R Moore of counsel, in a written submission on leave to appeal identified the present facts and circumstances as raising "important issues in terms of the exercise of the Commission's discretion in relation to the finding of an unfair contract" and also as raising "questions as to the manner in which the discretion contained in s 106(5) should be exercised in a case where there is no finding of fraudulent or deceitful conduct by an agent but conduct of a lesser kind (recklessness)". Further, counsel put that the appeal raised "questions as to how the culpability of an agent not acting in concert with a principal to defraud or deceive can have his culpability and liability assessed and whether in making such assessment the necessary connection is established as between the contract avoided and the actions of the agent". On the facts as found here, counsel submitted "that the discretion miscarried in a manner such as to conflict with the principles as laid down [in Brown v Rezitis ] and to result in an injustice in respect of the Appellants". Although it was acknowledged that the appeal was against the exercise of a discretion or a series of discretions, it was submitted that "it is important for the Full Bench to maintain a supervisory role over the exercise of such discretions". 20 Mr W R Haylen QC and Ms E A Collins of counsel, for the respondents, resisted the grant of leave to appeal and emphasised that Schmidt J clearly applied the relevant principle contained in Brown v Rezitis and, further, the appeal was against the exercise of a discretion so as to attract the usual principles that a decision so made will not be disturbed on appeal unless some error had been made in so exercising the discretion: see House v The King (1936) 55 CLR 499 at 504-505. In the circumstances of this case, so it was submitted, the conclusions reached by her Honour were available on the evidence and no relevant error had been disclosed in deciding the material facts. 21 We are constrained to say that during the course of our deliberations in this matter we wavered on the question of leave to appeal but, on balance, we will grant leave. Suffice it to say that we accept the proper application of the principle in Brown v Rezitis in the very many cases coming before the Court as an important issue. It is both timely and appropriate, in our view, particularly in light of the circumstances of this case, for the application of the principle to be revisited. We propose to do so. 22 Nevertheless, and notwithstanding the grant of leave, this appeal falls to be considered in accordance with the ordinary principles as an appeal stricto sensu and having in mind the statutory requirement in s 191(3) of the Industrial Relations Act obliging the Full Bench to follow the principles applying to appeals from discretionary decisions: see Big W Discount Stores v Donato (1995) 58 IR 239 at 242-244; Re Solicitors (State) Award (No 3) (1997) 72 IR 225 at 234-235 and the cases cited therein. In the result, it is only open for us to view the challenged decision on appeal in accordance with the proposition that the exercise of a discretion by the primary judge has long required that an appellate court is not justified in interfering with the decision made unless it reaches the clear conclusion that by reason of some error, whether of fact or of law, the primary judge not only has taken a different view but has failed properly to exercise the discretion conferred: see also Mace v Murray (1955) 92 CLR 370 at 378; and Port Macquarie Golf Club Ltd v Stead (1996) 64 IR 53 at 58-60. The principle was restated by a Full Bench ( Wright J, President, Walton J, Vice-President and Peterson J) of the Court in Drake Personnel Ltd t/as Drake Industrial v WorkCover Authority of New South Wales (Inspector Ch'ng) (1999) 90 IR 432 at 446 and again in Abboud v The State of New South Wales (Department of School Education) (1999) 92 IR 32 at 42-43 (per Wright J, President, and Walton J, Vice-President); it needs no further elaboration here. 23 It is convenient at the outset to quote the relevant extracts from Brown v Rezitis dealing with the statements of principle relevant for present purposes and about which the argument on appeal focused. Barwick CJ said (127 CLR at pp 163-166) : In my opinion, even if the proceedings for the variation or avoidance of the contract or arrangement must be initiated by one of the parties to the contract or arrangement, the parties to the proceedings are not necessarily limited to those parties. It must be borne in mind that one of the purposes of the section is to deal with subterfuges, subterfuges which will take the worker out of the relationship of master and servant and therefore out of the operation of an industrial award designed, amongst other things, for the protection of workers in industry. There may be persons involved in the subterfuge who are not parties to the contract or arrangement but who are in reality the actors deriving benefit from the making or the execution of the contract or arrangement.

The five grounds on which the Commission may vary or avoid contractual arrangements are not homogeneous. Only two of them refer to the avoidance of the award for the underpayment of a worker in industry. Consequently the nature of the orders which may be made under sub-s (2) will of necessity cover a wide field. But underlying sub-s (2) is I think a broad concept of a restitution of the parties to a situation which existed before the making of the contractual arrangement as well as in an appropriate case to make remedial provision for what has taken place or been done under the contract in the meantime. This, it seems to me, cannot of necessity and in all cases and with relation to an arrangement varied or avoided on each of the grounds in sub-s (1) be confined to an order for payment of money by one of the parties. In some cases, as I have said, there will be persons who are not the parties to the contract but who have in fact participated in its making and there may be persons who have received money indirectly from one of the parties to the contract or who may be holding money derived therefrom for one of the parties. Consequently, I am of opinion that the power to order the payment of money is not limited to the making of an order for the payment of money by one of the parties to the contract or arrangement varied or avoided.

But though there is a generality in the language employed in the sub-section the power to make an order for the payment of money is not, in my opinion, unlimited particularly as to the persons against whom such an order may be made. The problem is to ascertain the limitation by construction of the section. It seems to me that the expression "in connection with" the contract or arrangement varied or avoided provides the necessary limitation as to the nature of the orders for payment of money which can be made and as to the person against whom they may be made. The draftsmanship of the section is inadequate: but I think the expressed intention as to this limitation can be derived from the sub-section read as a whole. Whilst it can be said that the expression "in connection with" is of wide import, it does emphasize the need for a close connexion between the order made and the contract or arrangement varied or avoided. In my opinion, the power to make an order for the payment of money is at best no more than a power to make such an order as can reasonably be thought to have a real connexion with the making, variation or avoidance of the contract or arrangement which has been varied or avoided. It may in truth be limited to a power to make an order for payment of money which has in fact a real connexion with the making, variation or avoidance of the contract or arrangement. However, in either case it will, of course, include power to make an order for payment of money which has been paid or which was payable under the contract arrangements themselves. But, in my opinion, the power will not be limited to the making of such orders. It will extend to ordering the payment of money where the order on the larger view of the jurisdiction given by the sub-section could be considered to be appropriate to effect wholly or partially the restitution of the parties to their former position upon the variation or avoidance of the contract or arrangement. In my opinion, the limitation of the power to order the payment of money to such orders either as are or as may be considered in the circumstances to be connected with the making, performance, variation or avoidance of the contract or arrangement sufficiently limits the power and leaves room for supervision of the Commission by a Court having power to issue prerogative writs so as to confine the Commission within the granted power. Consequently I am unable to accept the submission made by the appellants that an order made by the Commission for the payment of money by any person other than a party to the contract or arrangement varied or avoided is necessarily beyond the power of the Commission. Whether or not it is so depends upon all the circumstances and the terms of the order itself. (emphasis added) 24 In analysing the relationship of the parties there and the particular circumstances as leading to a necessary connection with the contract concerned, Barwick CJ added (127 CLR at p 168) as to the ability to make a monetary order against non-parties to the contract that a basis would be "that they had received the proceeds of the contract or arrangement or were in some way culpably associated with its making or operation". 25 In Ashfield Brokers and Consultants; re Witek earlier referred to as relied upon by the parties here, the Court of Appeal in judgments published on 29 June 1972 considered the application of the principles stated in Brown v Rezitis in relation to the liability of an agent to pay money to an applicant for relief under the unfair contracts provisions, being then s 88F of the since repealed Industrial Arbitration Act 1940 as the statutory predecessor of ss 105 and 106 of the present statute, where the amount represented a sum paid to the principal by the applicant in consideration of the making of a work contract negotiated by the agent. The agent was held liable on a joint and several basis to pay the money by an order made under s 88F as being an amount in connection with the contract declared wholly void ab initio . Sugerman P expressly followed the approach of Barwick CJ in Brown v Rezitis (127 CLR at p 168) to the effect that "an order for the payment of money by persons other than the other party to the contract or arrangement in question can be that they have received the proceeds of the contract or arrangement or were in some way culpably associated with its making or operation" (at p 3). Asprey JA was of the opinion (at pp 8-9), upon the findings of fact made in the case by the trial judge, that - … the orders made by him to the effect that both the Agent as well as Starr are liable for the payment of the sum of $2,500, being part of the larger amount of $3,000, were clearly within the Commission's jurisdiction. Both the Agent and Starr were jointly engaged in a scheme to defraud persons of moneys and each of them made representations to Mr and Mrs Witek which each knew to be false in order to induce the purchasers to sign the worthless contracts and to part with the purchase price for a business which each was aware was worthless. In these circumstances, in my view, the actions of the Agent have as real and as close a connection with the loss of the purchase price as those of Starr so as to make them equally responsible with Starr for the restitution to the respondents Witek of the sum of $2,500. This is I think, a proper case for the making of an order for restitution imposing upon both Starr and the Agent a joint and several obligation for the restitution of the moneys in question."

Holmes JA agreed with Sugerman P. 26 The former Industrial Commission in Court Session ( Fisher P, Cahill and Bauer JJ) in TNT Management Pty Ltd v White [1984] 7 IR 331 again considered the necessary "connection" between an order made under s 88F and the impugned contract as to the liability to a monetary order of a person not a party to the contract concerned. After considering the views expressed in Brown v Rezitis and in Ashfield Brokers and Consultants; re Witek , their Honours outlined the facts which involved a contract for the sale of a truck-in-work from one lorry owner-driver to another so as to enable the purchaser to undertake carrying work for TNT Management Pty Ltd, a non-party to the contract concerned. Their Honours observed (7 IR at p 337) : It is clear that TNT had the right to approve or not to approve the reception into its business of prospective purchasers of trucks in work operated by existing lorry owner-drivers. We see that as a real benefit or advantage which TNT possessed. It so approved White in that regard and White thereupon purchased Gilbert's business. By this method of approval of purchasers TNT was able, within reason, to ensure that the standard of lorry owner-drivers was such that the contract between it and Norman Ross would not be impaired through inefficiency or customer dissatisfaction.

The ultimate conclusion was reached by their Honours in the following way (7 IR at pp 338-339) : Our consideration of the whole of the evidence in this case leaves us in no doubt that TNT had a very close connection with the contract between Gilbert and White declared void by Macken J. TNT had, in truth, the right to accept or not to accept the prospective purchaser into its organisation. Without signification of such approval the contract would never have come into being. It was open to be inferred that TNT recognised that a substantial purchase price, largely for "goodwill", was involved. It undoubtedly recognised that a reasonable period of work was important, if not vital, to the purchaser and it informed him, after specific inquiry, that the contract between TNT and Norman Ross had recently been re-executed for a further period of 12 months. The work the subject of the contract was, of course, to be performed by White for TNT. Upon the execution of the contract TNT had the benefit of White's services as a lorry owner-driver and thereupon was able to assume a reasonable degree of supervision and control over his work in order to ensure that that work was performed satisfactorily and so as not to impair the existing obligations resting on it under its contract with Norman Ross. All in all we are of the view that there was sufficient evidence to enable a finding properly to be made that the test of "in connection with" had been sufficiently satisfied to allow the Commission to make an order against TNT.

An order was thereupon made affirming the order at first instance against both TNT and the vendors of the truck-in-work for the payment of money on a joint basis. 27 An instructive case on this aspect of the potential liability of a person not a party to an avoided or varied contract is Custom Credit Corporation Ltd v Goldsmith [1976] AR (NSW) 98 where the former Industrial Commission in Court Session ( McKeon, Cahill and Dey JJ) considered the liability of a lending institution to an order for the payment of money under s 88F in circumstances where the institution loaned money to individual dealers to enable them to purchase equipment to hire out to the public. After finding ([1976] AR at p 134) "that there was a deliberately made plan or arrangement between the vendor and the lender for the purpose or to produce the effect of advancing the business interests of both and under which would be facilitated the obtaining of customers who would purchase dealerships from the vendor with moneys advanced by way of loan from the lender", the Commission then observed ([1976] AR at p 135) : We think that, however good in faith and however in keeping with commonly observed practices may have been its actions, once the lender became a party to an arrangement within the meaning of the section it exposed itself to whatever consequences that might bring, and, should the Commission decide that it was proper to declare void such arrangement, and with it any transaction which was part of it, was liable to bear that consequence.

True it is in that case that the lender was found liable to an order for the payment of money in relation to an arrangement to which it was a party, but, importantly it seems to us, the lender's connection with the contract between the individual dealers and the vendor of the equipment was such as to create a relevant connection. In any event, of course, by applying that reasoning to the present case it may not unreasonably be found that the representations made by the appellants thereby inducing the respondents to make the challenged franchise agreement themselves created an arrangement connected to the agreement itself, or perhaps even collateral thereto, so as to be within the scope of ss 105 and 106 of the Industrial Relations Act . 28 In a very real sense, it seems to us, the making of representations known to be acted upon by a person in considering entry into a contractual relationship and on the basis of which representations an agent as the representor intends the person to act may well, quite apart from any other connection with the contract subsequently made, be itself an arrangement whereby work is performed in an industry or, at the least, a collateral arrangement to such a contract or arrangement. However, it is unnecessary in the present case to pursue that line of reasoning as the matter was decided by Schmidt J and argued on appeal on the basis of a sufficient connection with the principal contract being the franchise agreement itself. 29 Counsel for all parties helpfully made available extensive written submissions and supplemented them orally at the hearing. We indicate our appreciation for the assistance provided by counsel in that respect. 30 In identifying the issue on appeal as being whether the exercise of the discretion to order monetary compensation against the appellants miscarried, it was accepted by the appellants that it was open to Schmidt J to find that the franchise agreement was unfair so that what they sought to address on appeal was whether her Honour appropriately exercised the discretion to make the appellants in their capacity of agency liable to pay money to the respondents. Mr Kimber's approach was, on the authorities, that her Honour was required to consider the relative culpability of the various parties instead of focussing on the culpability of the appellants. In doing so, submitted senior counsel, her Honour was misled by the fact that "so many of the players dropped out of the game either before it started or during it and did not come and did not actively seek to defend the proceedings - allied with the fact that the applicant did not press for orders against some of those respondents". It followed that the discretion miscarried and appellable error occurred. Further, although no challenge was made to her Honour's finding that the appellants were "reckless" in the representations they made to the respondents, the necessary finding to have been made to support the orders was for the appellants to have been "recklessly indifferent" - no such finding was or could, on the evidence, have been made. 31 In summary, Mr Kimber stated the following ten factors which he said Schmidt J failed to have proper regard in deciding appropriate monetary orders - (1) The inducement and representations to enter into the franchise agreement came not only from the appellants but also from Local Home Services and Mr Godfrey. (2) It was relevant that Local Home Services as the franchisor received the franchise fee of $39,500 out of which the appellants received only $4,000 as a brokerage fee.

(3) During the negotiations for the franchise, another franchisee confirmed the appellants' representation that earnings of $1,000 per week were possible. (4) The respondents took legal advice before signing the franchise agreement and were satisfied with what they had been told by Local Home Services and Mr Godfrey before they so signed. (5) The franchise actually operated from April to July 1995 with earnings increasing during that period and Local Home Services complied with the $600 per week guaranteed amount payable to the respondents. (6) The respondents were indeed satisfied with the bargain they had made with Local Home Services and if the agreement had been honoured they would not have taken these proceedings. The promise that about 100 to 120 customers would be available to ensure the representation as to earnings was made by Mr Godfrey and not by the appellants. (7) The second appellant made an independent enquiry of another franchisee as to his earnings and confirmed the amount of $1,000 per week was realistic. (8) It was likely that the appellants would have to pay all of the amount of $39,500 ordered by her Honour even though Ms Catsicas was jointly and severally liable. (9) The default for the non-performance of the franchise agreement could not properly be laid at the feet of the appellants. (10) The information received by the respondents from other franchisees regarding the operation of the franchise was an influential factor in their decision to make the franchise agreement.

Those above factors, Mr Kimber submitted, supported the view that the level of the appellants' responsibility should not have translated into an order against them for re-payment of the full franchise fee. 32 In the result, Mr Kimber put : Her Honour made no findings that the appellants must be taken to have been aware of the position of LHS and its inability to make good its proposition, so there is no finding to that effect. Her Honour made no finding that the franchise was worthless; no finding that the agents had received complaints from others and yet nevertheless went on promoting their franchise; no finding that the appellants knew that what they were doing or saying was wrong; no finding that the appellants' conduct was decisive in the deliberations of the applicant, and we say that the mere fact that the first, second and fifth respondents (at first instance, being respectively Local Home Services, Mr Godfrey and Ms Capadonna) did not participate in the proceedings and no orders were ultimately sought against them did not provide a proper basis for ignoring their relative culpability for the inducement when deciding how much the appellant should pay. …

For all those reasons, the positive findings and the findings her Honour did not make, this is not a Witek case, it is not in that league at all and no other factors identified that justified the level of the order made, although we concede that some level of responsibility was open to her Honour on the evidence. We submit that the appeal, because of the important question that has been raised about the test between culpability, if you like, or responsibility, it is an important question, and her Honour's judgment reveals that was not a good and proper consideration. We submit the orders should be varied to bring my clients', the appellants' contribution down to the extent of their commission or, if not, to such other figure between $4,000 and $39,500, that the Commission thinks is fair in the circumstances of the case. That is the order we seek. 33 In their written submissions, counsel for the respondents emphasised the frank concession made by the appellants that the appeal was essentially not against the jurisdiction or power to make the challenged orders below but against the exercise of a discretion or a series of discretions. The fundamental submission then made was that there were no grounds for concluding that the exercise by Schmidt J of the discretion miscarried as would warrant intervention on appeal in accordance with the principles in House v The King . 34 Mr Haylen characterised the appellant's case as one based on the proposition, as he said, "that one must apportion on the basis of culpability in making orders for payment of money"; to the extent the appellants relied on Brown v Rezitis and Ashfield Brokers and Consultants; re Witek for that approach, it was misconceived. Senior counsel relied upon the 1976 Full Bench decision in Custom Credit Corporation v Goldsmith, which referred to Brown v Rezitis , and on TNT Management v White decided in 1984 which also applied Brown v Rezitis by reference to the 1972 decision in Ashfield Brokers and Consultants; re Witek . Mr Haylen then analysed those cases and submitted : The importance of that analysis as a starting point is this. The appellants come here and say, "We have no difficulty with the fact that there is sufficient connection in the Brown v Rezitis sense". Her Honour had jurisdiction to make the orders. So all that analysis in Brown v Rezitis and in Ashfield Brokers, takes this appellant's case nowhere. It is the next step for which they have no authority, that is that this case was that discretion can only be exercised by apportioning or making an analysis, an assessment of the relevant culpability between respondents. That is where we say the whole fundamental linchpin of their case on appeal falls down.

In concentrating on the relevant discretion to make a monetary order "in connection with" the contract found to be unfair as distinct from the concept of "culpability", senior counsel added : The appellants come into it and say: "No, you read the limitation into the exercise of this broad jurisdiction where the Court is entreated to do justice to the case." Their analysis, in our submission, just does not stand up. Why then have the cases as I have taken you to over such a long period of time accepted the notion that there is power to order more money than you actually have received?

We know from Custom Credit that you do not need to be culpably involved to be joint and severally liable. We know from TNT you don't need to have to receive any money at all. We know that TNT had the run and did not receive any money at all but it just had to pay on a joint and several basis. 35 The conclusion reached by Schmidt J was to be seen, on the respondents' approach, as being that no real attack was made by the appellants on the claim that the respondents in making the franchise agreement relied upon what they were told by Mr Smith, the second appellant; the evidence in that respect was overwhelming and, having in mind the nature of the representations, made it clear that her Honour exercised the discretion in a proper manner. The particular representations, which were not met in the operation of the franchise agreement, relied upon by the respondents' counsel and as accepted by her Honour, were -

(a) the terms of the advertisement for the franchise placed by the second appellant on behalf of the first appellant advised earnings up to $2,000 per week with a guaranteed minimum of $600 per week operating for four days per week; (b) the statements by the second appellant to the respondents that the franchise was "a good one for the money you want to spend", he knew the people involved in Local Home Services and the business was excellent; and (c) the respondents could make a minimum of $800 per week. 36 Of significance, the respondents' counsel emphasised that in making the representations the appellants made no proper enquiries of Local Home Services so that what the principal informed the agent was accepted without any further or real enquiry. The second appellant agreed he was bound by the Code of Ethics published by the Australian Institute of Business Brokers under which he had the duty to protect the public against fraud, misrepresentation or unethical practices in connection with transactions and was to act in a professional manner by ascertaining all available pertinent facts concerning the business for which the agency was accepted so as to avoid error, exaggeration or misrepresentation. Nevertheless, as was stressed, beyond discussions with Local Home Services as the principal, the second appellant agreed he made no independent enquiries about Local Home Services other than accepting the information contained in its disclosure document. 37 Finally for the respondents, it was submitted that no relevant error was made by Schmidt J so that the appeal should be dismissed. 38 A critical finding by Schmidt J, one which was reasonably open on the evidence and which we think was correct, was that the appellants were content to advance the representations to the respondents as to the viability of the franchise but for which they had no foundation other than the instructions of the principal, Local Home Services, and its sales manager, Mr Godfrey. The evidence well established that it was those representations, understandably, which induced the respondents to make the franchise agreement and to pay the franchise fee. True it was that the franchisor received the franchise fee of $39,500 out of which the appellants received the amount of $4,000 brokerage fee as their total benefit from the transaction. However, the real question for her Honour, it seems to us, under s 106(5) of the Industrial Relations Act 1996 was whether the monetary order against the appellants was "in connection with" the avoided contract so as to be "just in the circumstances of the case". That raises the question, not only as to a monetary order in some amount being required and about which there was little contest, but rather the amount ordered to be paid on a joint and several basis and where others in connection with the avoided contract escaped liability. 39 We have cited earlier extracts from the judgment of Barwick CJ in Brown v Rezitis . As was distilled from that judgment, the Industrial Commission in Court Session in TNT Management v White (7 IR at p 335) concluded that the relevant test to apply was whether the monetary order could "reasonably be thought to have a real connection with the making, variation or avoidance of the contract or arrangement which has been varied or avoided". We have indicated by reference to that case the basis upon which TNT was made liable to a monetary order, even though it was not a beneficiary of the purchase price paid for the truck-in-work. It is unnecessary to deal further with it, other than to note the finding (7 IR at pp 338-339) "that TNT had a very close connection with the contract … the right to accept or not to accept the prospective purchaser into its organisation". In any event, it is instructive, we think, in reviewing the bounds within which a monetary order may be made as a matter of discretion to consider what Menzies J said in Brown v Rezitis (127 CLR at p 170), as follows : It seems to me, without exhausting the meaning of the phrase, that a payment of money in respect of (1) work done, or (2) money spent , or (3) obligations incurred, under the avoided contract or arrangement, is properly to be regarded as a payment in connexion therewith so long as the person who is ordered to make the payment is a person who was connected in some way with the making of the contract, or the work done, or the expenditure made, or the obligation incurred thereunder. Such persons could, I think, be ordered as it were to recompense the worker for what he has lost. (emphasis added) 40 As to the construction and operation of the statutory provision enabling the making of a monetary order by reference to what was said in Brown v Rezitis , Asprey JA in Ashfield Brokers and Consultants; re Witek formulated the following principles (at pp 5-6): (1) The parties to the proceedings, respondents to an application made to the Commission pursuant to section 88F, are not necessarily limited to the parties to the contract or arrangement sought to be declared void and there may be other persons who are in reality the actors deriving benefit from the making or the execution of the contract or arrangement. An order made against a person who is not a party to the contract or arrangement declared to be void is not necessarily beyond the jurisdiction of the Commission. (2) The power contained in the section to make an order for the payment of money is not unlimited and is at best no more than a power to make such an order as can reasonably be thought to have a real connection with the making, variation or avoidance of the contract or arrangement which has been varied or avoided; it will include power to make an order for payment of money which has been paid or which was payable under the contract or arrangement and will extend to ordering the payment of money which can be considered to be appropriate to effect, wholly or partially, the restitution of the parties to their former position upon the variation or avoidance of the contract or arrangement. (3) An order for the payment of money against a person, whether a party or not to the contract or arrangement, which is not limited in amount to represent his association with the making or execution of the contract or arrangement cannot be thought to be an order for the payment of money in connection with the contract or arrangement except, perhaps, in some exceptional circumstances. (4) In the appropriate circumstances an order may be made against persons which imposes upon them a joint and several liability for the payment of money. (emphasis added) 41 As to the upper limit of any order which may be made for the payment of money by an agent referable to the amount received by way of commission, Asprey JA added (at pp 6-7) : But, if there is more than one person culpably responsible for the acts which have induced an innocent party to enter into and carry into execution a contract which justifiably attracts the jurisdiction of the Commission to declare it void, I do not think that the amount payable as restitution by a participant in the acts leading to the making of the contract and its execution is necessarily to be measured by the sum of money which, as the result of some agreement between himself and his fellow transgressors, he personally receives from the total amount of the ill-gotten gains. With respect, I do not think that the learned Chief Justice in Brown v Rezitis (supra) laid down any such rule of thumb as that for the implementation of section 88F. 42 His Honour then (at p 7) dealt with the true measure of the extent of the restitution which an agent may be called upon to make as being : … the nature and the degree or depth of his association with the acts which brought the innocent party into the transaction subsequently invalidated . Each case will depend upon its own particular facts but one act may justly require the payment of a larger sum than a series of acts which were of less consequence in the affair which led to the making of the contract and its execution. In the present case, from the findings of fact made by the learned Judge, it is not possible in this respect to make any distinction between the acts of Starr and those of the Agent. (emphasis added) 43 And so it was in that case that Asprey JA concluded (at p 9) : … the actions of the Agent have as real and as close a connection with the loss of the purchase price as those of Starr so as to make them equally responsible with Starr for the restitution of the respondents Witek of the sum of $2,500. This is, I think, a proper case for the making of an order for restitution imposing upon both Starr and the Agent a joint and several obligation for the restitution of the moneys in question.

As regards the balance of the amount of $3,000, namely, the sum of $500 which the learned Judge arrived at as a "fair result" for the period of work in excess of 110 hours performed under the contracts by the respondents Witek, after taking into account the problematical value of the ornaments manufactured by them in that period and left on their hands, I think that the same considerations must apply to it. The contracts provided that the purchasers of the business would provide a manufacturing service for Starr; and the Agent must be taken to be aware that, having parted with their money, their time and energies would be devoted to performing their obligations under the worthless contracts. (emphasis added) 44 The application of the relevant principles as formulated by the authorities to which we have referred has been often given effect in unfair contract cases. Two such cases were relied upon by the appellant here, namely, Grace v Baker [1972] AR (NSW) 433 and Monahan v Gibbons [1981] AR (NSW) 85. In Grace v Baker (at p 439), Cahill J held that a monetary order could be made against an agent in a sum greater than that received by the agent: see also Mestrom v Alison Clint Floral Delivery Pty Ltd (No 2) [1971] AR (NSW) 216. In considering the particular circumstances of the case in assessing the amount for which the agent should be held liable, Cahill J, significantly we think, added ([1972] AR at p 440) that : … the company is blameworthy to some extent because of the exaggerated or untrue representations made by its employee Powell to Grace concerning Baker's reputation and reliability; concerning the sense of satisfaction felt by other purchasers of similar contracts with Baker which the company had negotiated; and about the availability of adequate supplies of doorframes. In my judgment, although these representations were a factor in Grace's decision to enter into and continue with his contract, they were not a decisive one. If I had considered otherwise, I would have been very much inclined to make an order against the company for the full amount claimed, namely $3,500. As it is, the case is a borderline one, and, although my mind has fluctuated, I propose to order the company to pay to Grace an amount of $1,000, the amount of commission received by it. I consider that that order is fully justified. 45 Even though his Honour limited the payment to the amount of the agent's commission, a point relied upon by the appellant here, it is plain that that was done because, as his Honour said, "although these representations were a factor in Grace's decision to enter into and continue with his contract, they were not a decisive one"; his Honour pointedly added that if he had thought otherwise then he would have ordered payment of "the full amount claimed" being the total purchase price of the business concerned. 46 Monahan v Gibbons was another case involving an agent, although decided in its own particular circumstances where the then aggrieved applicants joined the agent as one of the respondents but sought no relief against it. Nevertheless, Bauer J commented ([1981] AR at p 94) that "Substantial authority exists for making orders against business agents both as to the amount of the commission paid but also as to the repayment of purchase price and reimbursement for other losses" by reference to Mestrom v Alison Clint Floral Delivery, Grace v Baker, Brown v Rezitis and Ashfield Brokers and Consultants; re Witek . As to the responsibilities of a business agent, his Honour said ([1981] AR at p 93) that "a business agent does bear a responsibility in a situation such as this to carefully determine the nature of the business being sold and to represent the business accurately to any prospective purchasers". In the result, his Honour made an order against the principals for the full losses but with provision for recovery by them from the agent of the amount of commission received by it. 47 Our review of the authorities results in the conclusion, as to which we are in no doubt, that the proper approach and applicable principles are as laid down, particularly by Barwick CJ and Menzies J, in Brown v Rezitis . Those aspects were extensively considered by the Court of Appeal in Ashfield Brokers and Consultants; re Witek and were summarised therein by Asprey JA with Sugerman P (with whom Holmes JA agreed) to a similar effect. We respectfully agree with the relevant principles as formulated in the four propositions stated by Asprey JA (at pp 5-6); those propositions have been cited earlier by us with emphasis and there is nothing we can usefully add to them. Suffice it to say that each case will depend on its own facts as illustrated by the extracts we have quoted from TNT Management v White , Grace v Baker and Monahan v Gibbons. However, and in a very real sense, it seems to us that the Industrial Commission in Court Session in TNT Management v White encapsulated the relevant test (7 IR at p 335) as being whether the monetary order could "reasonably be thought to have a real connection with the making, variation or avoidance of the contract or arrangement which has been varied or avoided". 48 In the present case, the appellants' senior counsel made much of the fact that her Honour's finding of "recklessness" against the appellants was insufficient for the order made and that it was only open to do so if their conduct amounted to "reckless indifference". This argument seemed to flow from the reference in Brown v Rezitis by Barwick CJ (127 CLR at p 168) and in Ashfield Brokers and Consultants; re Witek by Sugerman P (at p 3) for the person concerned to be in some way "culpably associated" with the making or operation of the contract or arrangement. We would not so describe or limit the necessary association of a person with an impugned transaction which has more the connotation of the criminal law or as at the level of fraud; in context, we think that comment by Barwick CJ and by Sugerman P was but an exemplar of what relevant conduct could be to justify an order. In any event, to be "culpable" means to be "blameworthy". If an agent in dealings with a principal's customer was blameworthy in some respect, such as here by making unsupported representations the truth of which was not ascertained thereby inducing that person to make a contract found to be unfair, then, we would have thought, the necessary connection or association with the contract had been established. Indeed, in dealing with the true measure of the extent of the restitution which an agent may be required to make, Asprey JA in Ashfield Brokers and Consultants; re Witek (at p 7) expressed it in terms as being "the nature and the degree or depth of his association with the acts which brought the innocent party into the transaction subsequently invalidated". We respectfully agree. 49 Here, as we have earlier intimated, the relevant findings made by Schmidt J were reasonably open on the evidence and were not significantly challenged. The objection put by the appellants was that they were insufficient to meet the test. We think they did. If "reckless" means, as we think it does, "lacking caution, regardless of consequences, rash" then the conduct of the appellants as found by her Honour, in our view, certainly falls into that category. 50 Although it is true that the representations made by the agent appellants were aided by representations made by the franchisor, Local Home Services, and its sales manager, Mr Godfrey, it is difficult in viewing the negotiation process which eventually led the respondents to make the franchise agreement to conclude other than that the appellants had as real and as close a connection with the loss incurred by the respondents as that of the franchisor. In other words, in our view, the appellants on the facts found had as direct a connection with the respondents making the contract as did the franchisor by them merely relying upon what the franchisor had set out in the disclosure document and, without more, representing that to the respondents as the prospective franchisee. The failure to observe the admitted appropriate standard of behaviour under the Code of Ethics of the Australian Institute of Business Brokers surely, it must be the case, involved sufficient reckless or blameworthy conduct on the appellants' part to connect them with the contract found to be unfair. 51 The fact Schmidt J gave attention to the test of sufficient connection with the actual making of the impugned contract was evident from her Honour's reasoning in distinguishing the losses incurred by the respondents in their earnings make-up claim as to the operation of the franchise from the loss of the franchise fee itself. On the basis that the respondents had difficulty in converting leads into customers, likely lack of effort by them and discrepancies in their evidence as to the hours worked in the business, it was well open, as her Honour concluded, for no monetary order to be made against the appellants as to the earnings make-up claim referable to the operation of the franchise. We see no reason to disturb such finding which, in any case, the respondents did not challenge. 52 We are satisfied in the circumstances of this case on the undisputed facts or those as found by Schmidt J that the discretion exercised by her Honour did not miscarry and was not in conflict with the relevant principles. No appellable error has been disclosed nor would we ourselves have decided other than her Honour did. 53 Although leave to appeal is granted, the appeal must be dismissed with the appellants to pay the respondents' costs. We so order. _________________

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