AFMEPKIU, New South Wales Branch v David & Ors

Industrial Relations Commission (NSW)|2006-06-23|Before: Wright J, Walton J, Staff J, Marks J

CITATION: AFMEPKIU, New South Wales Branch v David & Ors [2006] NSWIRComm 206

APPELLANT Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, New South Wales Branch

FIRST RESPONDENT Alan Thomas David PARTIES: SECOND RESPONDENT John Lawrence Coates

CORAM: Wright J President; Walton J Vice-President; Staff J

Appeal - Application for leave to appeal - Section 106 proceedings - Interlocutory application to strike out respondent - Application for joinder of additional respondent - Application of Brown v Rezitis principle - Sale by first respondent to third respondent proposed to be joined. CATCHWORDS: Held, leave to appeal refused and appeal dismissed in respect of application removing the second respondent - Leave to appeal granted and appeal upheld in respect of joinder of additional respondent, Digital Graphics - Costs.

LEGISLATION CITED: Industrial Relations Act 1996 s 106

Ace Business Brokers Pty Ltd v Phillips-Treby (2000) 100 IR 420 Brown v Rezitis (1970) 127 CLR 157 CASES CITED: Caltex Petroleum Pty Ltd v Harmer (1999) 92 IR 264 National Australia Bank Ltd v Cassino (2002) 137 IR 1 Petitt v Dunkley [1971] 1 NSWLR 376 Unitedglobalcom Inc. & Ors. v The Industrial Relations Commission of NSW in Court Session & Anor (2005) 142 IR 204

APPELLANT Mr B Hodgkinson SC with Mr I Latham of counsel Solicitor: Mr S Penning Turner Freeman

FIRST RESPONDENT No appearance

LEGAL REPRESENTATIVES: SECOND RESPONDENT Mr R Moore of counsel Solicitor: Mr S McDougall Bray Jackson & Co

THIRD RESPONDENT Mr R Parsons of counsel Solicitor: S Ferrier Ferrier & Associates

CORAM: WRIGHT J, President WALTON J, Vice-President STAFF J

AUTOMOTIVE, FOOD, METALS, ENGINEERING, PRINTING AND KINDRED INDUSTRIES UNION, NEW SOUTH WALES BRANCH v ALAN THOMAS DAVID AND ORS

Application by Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, New South Wales Branch for leave to appeal and appeal against a decision of Justice Marks given on 30 November 2005 in Matter No IRC 2950 of 2004

1 These proceedings concern an application for leave to appeal and, if leave is granted, an appeal against an interlocutory judgment of Marks J, delivered on 30 November 2005: Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, New South Wales Branch v Alan Thomas David and others [2005] NSWIRComm 428. 2 His Honour, in that judgment, dismissed with costs an application to amend the summons filed in proceedings brought by the appellant pursuant to s 106 of the Industrial Relations Act 1996 ("the Act") so as to include Digital Graphics Communications Pty Ltd ("Digital Graphics") as an additional respondent. His Honour, in addition, granted an application with costs that so much of the proceedings brought by the appellant against a respondent, John Lawrence Coates, be struck out. Background 3 His Honour summarised the background to the matter, noting the appellant commenced proceedings under s 106 of the Act against two-named respondents, Alan Thomas David and John Lawrence Coates, who are respectively the first and second respondents to the appeal. Digital Graphics is the third respondent to the appeal. 4 There was previously a further respondent, John Morony, who had been dismissed from the proceedings consequent upon his bankruptcy. 5 The claim was brought on behalf of a number of former employees of David Graphics Ltd ("David Graphics"). His Honour proceeded on the basis that Mr David was a director and substantial shareholder in David Graphics. That company went into liquidation and at about the time the contracts of employment of each of the employees were terminated, save for one employee whose contract had been terminated some four months previously on the basis of redundancy. That employee had been told at the time that David Graphics did not have sufficient money to pay him his termination and severance payments and arrangements were made for these payments to be made by way of instalments. Some two years prior to the liquidation, David Graphics had ceased making payments of compulsory and voluntary superannuation payments on behalf of its employees to relevant funds and had ceased making payments of other moneys due and owing to the employees. The employees concerned had become aware of this failure and Mr David and Mr Coates had advised the employees that those contributions would be made in due course. 6 It was on this basis that the employees continued in employment until David Graphics was liquidated. Upon liquidation, they received insufficient, or no payment of moneys due and owing to them. 7 Upon liquidation of David Graphics, a sale of the stock and work in progress was made to Digital Graphics. The directors and shareholders of that company were two of Mr David's children, and a person with whom he had a long time personal relationship. Mr David was employed as a consultant to Digital Graphics and Mr Coates was employed as the manager of that company. It was alleged, on behalf of the appellant, that Digital Graphics had purchased the stock and work in progress of David Graphics at an undervalue. Digital Graphics continued to operate the business formerly conducted by David Graphics from the same premises. Judgment at First Instance 8 In considering whether Mr Coates was properly joined as a respondent to the proceedings, his Honour applied the well-known principles established by the High Court of Australia in Brown v Rezitis (1970) 127 CLR 157. In respect of the motion to strike out Mr Coates as a respondent, his Honour said at [10] - [12]: [10] The factual circumstances which applied in Brown v Rezitis are significantly different from those which apply to these proceedings. There is no question of a "subterfuge" which would take employees out of the employer-employee relationship (see Barwick CJ at 164). However, by analogy, there may be parties involved in the unfairness "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" (see Barwick CJ at 164). It is this matter which is the focus of attention in these proceedings.

[11] The unfairness which is at the heart of these proceedings arises out of the contracts of employment of each of the employees of David Graphics who continued in employment on the assurances given that their outstanding entitlements and contributions would be paid, and whose contracts of employment were eventually terminated without payment of those monies or, indeed, other monies then due and owing. Whilst it is clear that Mr Coates communicated information and made representations to the employees, it is equally clear, in my opinion, based on the evidence before the Court, that he did so as a conduit for the persons with ultimate authority and control of David Graphics. There is no suggestion that Mr Coates derived any benefit of a personal nature from the representations that were made. As I have indicated, he was neither a shareholder nor director of David Graphics. It is true that he may have derived some benefit from the fact that he was ultimately employed by Digital Graphics, but there is no evidence of any kind that Mr Coates had any involvement in any arrangement or had any knowledge of any arrangement whereby Digital Graphics was incorporated and acquired the work-in-progress and other assets of David Graphics from the liquidator.

[12] Accordingly, there can be no basis for concluding that in some way that Mr Coates "received the proceeds of the contract or arrangement or (was) in some way culpably associated with its making or operation" (per Barwick CJ at [168]). Nor can there be any suggestion that Mr Coates received any monies of any kind by reference to the part that he played in communicating information to the employees of David Graphics (see Barwick CJ at [168]). He was not "in reality an actor deriving benefit from the making or execution of any contract of the requisite kind which might be found to be unfair (per Barwick at [164]). 9 His Honour then considered the observations of Menzies J in Brown v Rezitis and the judgment of a Full Bench of this Court in Ace Business Brokers Pty Ltd v Phillips-Treby (2000) 100 IR 420, concluding, on the basis of these authorities, the applicant's case against Mr Coates was so obviously untenable that it could possibly succeed. Accordingly, his Honour dismissed so much of the amended summons as was brought against Mr Coates. 10 Turning to the appellant's application to have Digital Graphics joined as a further respondent, his Honour observed that, in essence, the case put by the applicant on behalf of the employees concerned against Digital Graphics was that because David Graphics had gone into liquidation, any orders made against it would be futile. It was asserted that Digital Graphics had "received the benefit of the contract with David Graphics". It bought the assets at a price less than the market, or even realisable value. The way in which David Graphics and Digital Graphics arranged their affairs could only be described, the appellant submitted, as subterfuge and it meant that it could gain the benefit built up by David Graphics in terms of work and stock under the contract without having to suffer any of its debts. 11 The applicant based its case for joinder of Digital Graphics solely on a Brown v Rezitis argument. 12 It was submitted on behalf of David Graphics that there was insufficient, or no evidence, that there had been a sale by the liquidator of David Graphics to Digital Graphics at an undervalue and that Digital Graphics played no part in any contract which might be held to be unfair. It was contended that the unfairness upon which the applicant relied, was the failure by David Graphics to afford certain benefits to its employees. Digital Graphics was not a participant in any way in that activity, nor were any of its shareholders or directors associated with David Graphics. In reality, the allegation levelled against Digital Graphics was that its contract for the purchase of the business of David Graphics was unfair. Assuming that it were possible to go beyond the sale transaction, in terms of some culpable or blameworthy conduct of the kind referred to in Brown v Rezitis, that would be the conduct of Mr David who was, obviously, a participant in the conduct which the applicant alleged was unfair. 13 His Honour concluded at [22] - [23]: [22] On this basis, to use the words of Menzies J in Brown v Rezitis , Digital Graphics is a "stranger to any of the matters for which the section provides a remedy arising out of a contract or arrangement by a company". Whilst the vendor of the assets of Digital Graphics might arguably be involved in culpability of the kind described in Brown v Rezitis on the part of a person who in some way participated in the unfairness associated with the impugned contract, the same cannot be said for the purchaser of the assets, albeit that the purchaser may have been willing to participate in a purchase at undervalue. Digital Graphics, not having been involved in any way in the unfair contract, falls outside any relief which might be granted utilising the principles discussed in Brown v Rezitis .

[23] Accordingly, even assuming that the applicant could make out its case as asserted against Digital Graphics on a factual basis, and assuming all of the factual material at its highest in favour of the applicant, it is my opinion that the claim by the applicant intended to be brought against Digital Graphics is so obviously untenable that it cannot possibly succeed and under no possibility could there be a good cause of action within s 106 of the Act in the manner in which the claim was framed for the purpose of these interlocutory proceedings. The Principles to be Applied with Appeals from Interlocutory Applications 14 It is appropriate to set out the principles in respect of the availability of appeals to the Full Bench of this Court in respect of interlocutory applications. In Caltex Petroleum Pty Ltd v Harmer (1999) 92 IR 264 at 265, 266, the following statement of principle was set out: So far as we are aware, these proceedings are the first occasion on which this Court has had an opportunity to consider the principles applicable to appeals from interlocutory procedural decisions since the Industrial Relations Act 1996 (NSW) (the Act) came into force some three years ago. It is therefore appropriate for this Full Bench to state shortly the appropriate approach which should be adopted in relation to such appeals. The predecessors of this Court and Commission, in line with the approach of the ordinary courts, have generally deprecated and discouraged such interlocutory appeals: see, for example Re Social & Community Welfare Services (State) Award and Other Awards (1984) 9 IR 305; Parramatta City Council v Health and Building Surveyors Association (NSW) (1988) 26 IR 398 at 401-402; Re Laundry Employees (State) Award (No 2) (1993) 49 IR 91 at 103; Chamber of Manufactures (NSW) v Australian Chamber of Manufactures NSW Branch (1994) 56 IR 307 at 310-311. The approach in this jurisdiction has paralleled that of the ordinary courts which is set out in, for example, Re the Will of F B Gilbert (1946) 46 SR (NSW) 318 at 323; Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177; Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 399-400; Partnership Pacific Ltd v Killen (unreported, Court of Appeal, but noted in Ritchie's Supreme Court Procedure NSW, Vol 2, at paragraph 13013); Wentworth v Rogers (No 3) (1986) 6 NSWLR 642 at 644; Raybos Australia Pty Ltd v Tectran Corporation Pty Ltd (No 4) (1986) 6 NSWLR 674 at 685; Bank of New Zealand v Spedley Securities Ltd (In Liq) (1992) 27 NSWLR 91 at 95. The classic statement of the rationale for the approach adopted by the courts is the statement of Sir Frederick Jordan CJ in Re the Will of F B Gilbert where his Honour said (at 323): "... I am of the opinion that ... there is a material difference between an exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights. In the former class of case, if a tight rein were not kept upon interference with the orders of Judges of first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal."

15 In National Australia Bank Ltd v Cassino (2002) 137 IR 1 at 8, the Full Bench stated after setting out the above principles: The approach in principle is indeed further emphasised in this jurisdiction by the Legislature including, in the 1996 legislation, s 191(3) which obliges the Full Bench to "follow the principles applying to appeals from discretionary decisions". The significance of this situation has been recently considered and, in the course of that consideration, emphasised in a number of recent Full Bench decisions. See, for example, Western Sydney Area Health Service v Gibson and Pacific Healthcare (Australia) Ltd v AHI Healthcare Systems Pty Limited [2001] NSWIRComm 297 and the references in these cases to the judgment of the Court of Appeal in Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274. The significance of s 191(3) and those authorities is that interlocutory procedural motions invariably involve the exercise of judicial discretion and often depend essentially upon exercises of discretion. That is certainly the situation here. In addition, Peterson J's judgment was consistent with the longstanding approach of this Court and its predecessors which has always been to deal with procedural issues in accordance with "modern judicial practice", on a essentially pragmatic basis: see, for example, Hyde v Energy Australia (1999) 92 IR 409 at 423, Western Sydney Area Health Service v Gibson at [24] and the cases cited therein, and Hitchcock v CSR Limited [2002] NSWIRComm 170 at [7] to [8].

The Submissions of the Appellant 16 The appellant submitted that his Honour had, in referring to "the need to prove culpable or blameworthy conduct" applied a test which was inconsistent with the decision of Brown v Resitis which established that the appropriate test is for there to be a real connection with the contract. It was submitted in this case there was sufficient evidence at the interlocutory stage of the proceedings of a real connection between Mr Coates and the contract both in terms of culpability and the receipt of a benefit to have prevented striking out. There was also sufficient evidence at an interlocutory stage of a "real connection" between Digital Graphics and the contract in the form of the receipt of a benefit to have satisfied the test of joinder. 17 It was further submitted that the appeal raises substantial issues of policy as to the regulation of phoenix companies; that is to say, companies who are the beneficiary of other companies whose businesses are liquidated and whose assets are stripped in favour of the "phoenix". In such situations, the phoenix company carries on the business of the first; with the assets of the first, but without its debts. In policy terms, the unfair contracts jurisdiction is designed in part to deal with subterfuge. It was submitted phoenix companies are a modern corporate subterfuge and a decision as to the proper application s 106 to phoenix companies will be of widespread practical application. 18 It was further submitted that his Honour had failed to state the findings and reasons for his decision adequately for the purpose of enabling a proper understanding of the basis upon which the verdict had been entered: Petitt v Dunkley [1971] 1 NSWLR 376 at 382, which amounted to an error amenable on appeal. 19 It was contended that his Honour had failed to have regard to the following relevant matters: (a) Digital required David to terminate all of its employees prior to the sale. (b) The directors of Digital were Amanda Dale and Rita Lizak. Amanda Dale is the daughter of Alan David and Rita Lizak has had a long term personal relationship with Alan David. (c) The purchase price was less than the market value or realisable value of the stock. (d) Digital benefited directly and substantially from the evasion of the debts of David. (e) Alan David has continued to hold a major position as representative and spokesperson for Digital even to the extent of writing to the solicitors for the appellant in the current proceedings on the basis that he is the principal office holder of Digital. 20 It was also contended that the circumstances of this case were similar to those considered by the Supreme Court of New South Wales, Court of Appeal in Unitedglobalcom Inc. & Ors. v The Industrial Relations Commission of NSW in Court Session & Anor (2005) 142 IR 204. Reliance was placed on this decision. 21 It followed, it was contended, that had his Honour applied the proper legal test, he would have found there was available, on the evidence at this stage, a finding that Digital Graphics derived a clear benefit from the making of the contract or arrangement and that it was necessary for Digital Graphics to be joined for restitution to occur. 22 In respect of Mr Coates, it was contended that his Honour was in error in deciding that joinder required both the receipt of the benefit and moral culpability. It was submitted that as Mr Coates was the general manager of David Graphics, he was given the responsibility for redundancy and knew that staff of David Graphics were being retrenched. From this it was contended he derived a benefit from the unfairness in that he was then employed by Digital Graphics. Submissions on behalf of Digital Graphics 23 Mr R Parsons of counsel, who appeared for Digital Graphics, opposed leave to appeal being granted on the following basis: The scope of Brown v Rezitis.

His Honour's judgment is but an application of long-established principles to the facts of the case. The applicant's reliance on the regulation of phoenix companies as justifying leave is misplaced. This case is a poor example of a vehicle to explore phoenix schemes. Digital paid for the assets it acquired. 24 In response to the contention by the appellant that his Honour had failed to have regard to certain matters, Mr Parsons submitted as follows: (a) Counsel for the Applicant conceded that this was not an unusual provision in the contract for sale of business assets. He also stipulated that he accepted that Digital was not responsible for the operative unfairness. (b) The personal associations relied upon by the Applicant do not amount to the close and real connexion required by Brown v Rezitis. (c) The proposition that the purchase price was less than realisable value of the "stock" is simply wrong on the basis of evidence tendered by the Applicant. Notwithstanding this, it is evident that his Honour did not ignore the Applicant's position on this issue. (d) David never evaded its debts. Its debts became rights to prove in its liquidation. Digital, as purchaser of the assets which it purchased thorough the administrator, was a substantial contributor to the funds available for the distribution in David's liquidation. (e) Mr David is employed by Digital. This does not amount to the requisite close and real connexion. 25 It was submitted that the applicant's application depends upon Brown v Rezitis but seeks to extend the ambit of the orders against non-parties authorised by that case. The issue of the requisite close and real connection discussed in Brown v Rezitis is a jurisdictional issue. It was contended that the evidence before his Honour Justice Marks pointed incontrovertibly to a conclusion that no sensible criticism could be made of the sale price, which was in any event a sale by the administrator of assets of the company in administration. 26 It was further submitted that his Honour had correctly applied the principles to be found in Brown v Rezitis and correctly concluded that there was not a close connection of the type required by Brown v Rezitis in this case. 27 It was further submitted that an application under s 106 against Digital Graphics is barred by s 108B of the Act and that no excuse or justification for the applicant's delay had been evidenced. 28 In this regard, it was contended that it is clear that persons whose interests are represented by the applicant have been aware since 2003 of the salient facts upon which the applicant relies in seeking an order for joinder of Digital Graphics. 29 His Honour Justice Marks declined to deal with the s 108B argument at the hearing before him. The Full Bench determined during the hearing of the appeal that it was not feasible to determine this point in the absence of an amended summons being filed. Submissions on behalf of the Second Respondent (Mr Coates) 30 It was submitted that other than his performance of work as an employee, Mr Coates held no other interest in David Graphics as either a shareholder or director. 31 It was submitted that his Honour's comments that, "in my opinion, based on the evidence before the court that he (Mr Coates) did so as a conduit for the persons with ultimate authority and control of David Graphics" did not evince any error. Furthermore, his Honour's finding that there is no suggestion that Mr Coates derived any benefit of a personal nature from the representations that were made makes it perfectly clear that his Honour considered all the evidence, made findings that were open on the evidence and therefore properly applied the law as set out in Brown v Rezitis. 32 It was submitted that there was no issue as would warrant the granting of leave to appeal. Consideration 33 We have concluded that this is a matter in which leave to appeal should be refused in relation to the decision of Marks J as to the joinder of Mr Coates. 34 We consider that his Honour's analysis of the principles in Brown v Rezitis was correct in respect of Mr Coates. The passage referred to in Brown v Rezitis by his Honour concerned persons culpably associated with the making or operation of a contract or arrangement though acting by proxies. The language used in Brown v Rezitis requires a close connection of a kind which is lacking in the present case in respect of Mr Coates. 35 His Honour's conclusion that no relief could be granted against Mr Coates was correct. Mr Coates was at all material times the general manager of David Graphics and, as such, an employee. His Honour was correct in emphasising the need for there to be "a real connection to be established before moral culpability (or responsibility) arises". It is necessary for there to be some advantage or benefit of a financial, or similar, kind involved in order to establish a real connection of the relevant kind. What the evidence establishes is that Mr Coates was acting as a "conduit" and there was nothing to show that he was acting beyond the course of his employment. Put simply, the nexus of the requisite kind was not found to exist. Leave to appeal is refused and the appeal in this respect is dismissed. 36 The situation is different in relation to the application to join Digital Graphics. The question for determination in respect of the application for joinder of Digital Graphics as an additional respondent is whether it can be established that there was a real or close connection between Digital Graphics and David Graphics and if the transfer of the business of one company to another was undertaken as a subterfuge to defeat, or possibly, have the effect of defeating the appellant's claims. 37 His Honour incorrectly, in our view, found that Digital Graphics could not be a participant in any unfairness, nor were any of its shareholders or directors associated with David Graphics. In reaching these conclusions, it appears that his Honour was not taken to an analysis of the transaction between the respective companies which we shall discuss shortly. His Honour was also in error in concluding that the Business Asset Sale Agreement only involved the sale of stock and work in progress being made to Digital Graphics. 38 Clearly, the sale was in respect of the business of David Graphics. "Business" in the Business Asset Sale Agreement was defined as "business assets, equipment and goodwill". It also included the sale of intellectual property held by David Graphics, the transfer of actual telephone numbers, business records and an agreement by Digital Graphics to assign, on a weekly basis, debtors in the sum of $30,000 to David Graphics. The parties to the transaction contemplated that, immediately upon the transfer of the business, Digital Graphics would generate the $30,000 per week from carrying on the former business of David Graphics. This meant, in effect, that a company which was registered on 24 November 2003 (a few weeks after David Graphics was placed in administration), would have extinguished the purchase price for the business known as David Graphics in 10 weeks. It appears that the company had only been established for three or four days before it entered into the transaction to purchase David Graphics. On 27 November 2003, Mr David was employed by Digital Graphics as a consultant. It was a condition of the sale that the vendor, David Graphics, terminate the employment of its employees at least one day before the date of completion of the sale. It appears that what was occurring here was the transfer of the business from one corporate entity to another. 39 Although none of the directors of David Graphics became directors of Digital Graphics, two of the secured creditors of David Graphics were relatives of Mr David and a third secured creditor had been in a long term personal relationship with Mr David. These persons who became directors of Digital Graphics, in the space of six minutes, on 31 October 2003, became secured creditors of David Graphics, a company that was to go into administration within a couple of weeks. As such they were subsequently in a position to approve the sale of David Graphics. 40 There was available a conclusion (taking the evidence at its highest) that there existed a clear linkage between the two companies. The whole of the business of David Graphics was apparently transferred to Digital Graphics, which appears, at one level, to have a personal connection with the Managing Director of David Graphics, a company that could not comply with its statutory obligations to make superannuation payments on behalf of its employees but whose business was sufficient to generate $30,000 per week to pay the vendor. The approval of the arrangement rested in the hands of secured creditors, who, only some weeks before, happened to be the same persons who later became directors of Digital Graphics. 41 As such, the situation may arguably come within the description in the judgment of Barwick CJ in Brown v Rezitis (at 164) of there being power in the Court to apply a broad concept of restitution and "to make remedial provision for what has taken place or been done under the contract … [such that] … 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." 42 A not dissimilar situation was considered by the Court of Appeal in Unitedglobalcom, Inc. & Ors. v. The Industrial Relations Commission of NSW in Court Session & Anor where Hodgson JA, with whom Handley JA and Brownie AJA agreed, held at [24] - [28]: [24] In my opinion, if an applicant obtains an order under s.106 against a respondent for whom the applicant worked in an industry, and it is shown that the assets of that respondent have since passed, by reason of some corporate reorganisation within a group of companies, to another company in that group, there may be jurisdiction under s.106(2) to make an order against the entity to which those assets have passed. If it be the case that the assets that have so passed have been augmented by the work done by the applicant, and if it be the case that the re-structuring has left the original entity for which work was done without sufficient funds to make an appropriate payment, it may be that such a payment is properly regarded as a payment of money in connection with a contract declared wholly or partly void or varied, as those expressions are used in s.106(5). I think that is supported by what Barwick CJ says in Brown , particularly his reference to persons who have received money indirectly from one of the parties to the contract. It is also consistent with the reference in his judgment to subterfuges: the re-structuring of a group of companies so as to transfer the business of one company in the group to another company in the group may not be undertaken as a subterfuge to defeat an applicant, but it could possibly have that effect, and in my opinion it may not be beyond the power of the IRC to make orders under s.106(5) to avoid that effect.

[25] In the present case, it is alleged that New UGC is the formal successor to Old UGC, that New UGC assumed rights and benefits in respect of the share option plans and incentive schemes in which Mr. Hagans was promised participation, and that New UGC effectively assumed the interests of the employees of Old UGC in such plans and schemes. Particularly in circumstances where it appears that this may have been consequent on re-structuring of a group of companies, associated with court proceedings in the USA, these allegations could possibly support an order for payment against New UGC. There is some evidence to suggest that these allegations are not without foundation, and any contention to the contrary is not made out to the extent that would justify the dismissal of proceedings under the General Steel test; and in my opinion at least that degree of certainty must be established before this Court would issue an order in the nature of prohibition against the IRC, in advance of the hearing of a case.

[26] Similarly, the allegation that Austar acquired the businesses of CTV and STV for which Mr. Hagans did work (and accordingly, may be taken to have benefited then from the work that he did pursuant to allegedly unfair contracts) could if proved possibly ground an order against Austar on a similar basis.

[ 27] It may also be that under American law New UGC is liable for the obligations of Old UGC. However, there is little evidence as to the nature and effect of the corporate restructuring under American law, and the claimants have not excluded this possible basis for orders against New UGC.

[28] We were referred to the decision of the Court of Appeal in QSR Limited v. Industrial Relations Commission of NSW [2004] NSWCA 199, 208 ALR 367, in which a majority of the Court of Appeal held that the IRC did not have jurisdiction to make an order against a company in respect of work performed by an applicant prior to its formation. However, it is to be noted that the claim in that case was only against the company, and not against any person with whom the applicant made a contract or arrangement prior to its formation. In my opinion, if the applicant had alleged performance of work in an industry pursuant to a contract or arrangement made with some other person prior to the formation of the respondent company, claimed that the IRC should declare void or vary that contract or arrangement, and alleged that the company when formed took the benefit of assets created or improved by the work done prior to its formation, the result could have been different. If the company had thus taken advantage of work performed pursuant to a contract found to be unfair, an order for the payment of money by that company could possibly be in connection with that contract, so as to support an order under s.106(5). 43 Applying the principle that emerges from Unitedglobalcom, regardless of the intention of the parties to the transaction, provided it has the effect of defeating the applicant's claim, it may not be beyond the power of this Court to make orders under s 106(5) to avoid that effect, despite the transaction being a legitimate business arrangement. 44 The foundation for the alleged subterfuge emerges from an analysis of the components of the sale agreement, the decision of the secured creditors and the relationship of the secured creditors to the directors of the vendor company, David Graphics. It may be arguable that the unfairness arises through the sale of the goodwill of David Graphics which, in part, had been built up and established as a consequence of the contractual arrangements said to be unfair in respect of the employees. Digital Graphics also received the benefit of the business it purchased, absent any liability that had been created by the unfairness alleged as to the employees. 45 It follows that by reason of the connection between David Graphics and Digital Graphics, there may be jurisdiction under s 106(2) to make an order against Digital Graphics. There is thus sufficient connection warranting the joining of Digital Graphics to these proceedings and no reason to exclude that respondent on the basis of jurisdiction. 46 Costs should follow the event as to the respective respondents to the appeal. The appellant shall pay the second respondent's costs of the appeal and Digital Graphics shall pay 70 per cent of the appellant's costs of the appeal since that aspect of the appeal raised the major issues in the appeal, both quantitatively and qualitatively.

ORDERS 47 The Court makes the following orders in these proceedings: 1. With respect to the application to remove the second respondent, leave to appeal is refused and the appeal is dismissed. 2. With respect to the application to join Digital Graphics Communications Pty Ltd, leave to appeal is granted. 3. The appeal is upheld in respect of the joinder of Digital Graphics Communications Pty Ltd. The order of Marks J in this respect is set aside and an order is made that Digital Graphics Communications Pty Ltd be joined as a respondent in the proceedings in Matter No IRC 2950 of 2004. 4. The appellant is to pay the second respondent's costs of the appeal in a sum as agreed or, in default of agreement, as assessed. 5. Digital Graphics Communications Pty Ltd shall pay 70 per cent of the appellant's costs of the appeal in a sum as agreed or, in default of agreement, as assessed. 6. These proceedings are remitted to a judge for hearing and determination of the summons as amended.

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