All-Fect Distributors Limited & Ors v Stewart

Industrial Relations Commission (NSW)|2007-07-01|Before: Walton J, Staff J, Kavanagh J, Mr J, Boland J

CITATION: All-Fect Distributors Limited & Ors v Stewart [2007] NSWIRComm 24

FIRST APPELLANT All-Fect Distributors Limited

SECOND APPELLANT Fred Joseph Essey

FOURTH APPELLANT Paul Fred Essey

RESPONDENT George Stewart

CORAM: Walton J Vice-President at 1; Staff J at 1; Kavanagh J at 66

CATCHWORDS: Unfair contract - Application under s 106 of the Industrial Relations Act 1996 - Applicant engaged to sell confectionary to retail outlets - Applicant found to be independent contractor at first instance - Contract varied at first instance to provide an entitlement to payments under the provisions of the Commercial Travellers, &c (State) Award - Whether the court can interfere in free bargains entered into between parties to find unfairness - Test to be applied under s 106 of the Act - Whether respondent under "no restraint or inequality" - Whether "labour was not being oppressively exploited" - Held despite finding of freely made bargain open to court to exercise its discretion to interfere with bargain upon determining that it was unfair - No error of law or principle at first instance - Judge entitled to apply award in respect of compensation upon a finding of unfairness - Court has discretion to make wide-ranging orders which it considers to be "just in the circumstances of the case" - Liability assigned in accordance with the culpability of various appellants - Discretionary determination open on the evidence - Leave to appeal granted - Appeal dismissed - Costs reserved.

Industrial Arbitration Act 1940 LEGISLATION CITED: Industrial Relations Act 1991 Industrial Relations Act 1996 (NSW) s 105(a),(b),(c) and (d) and s 106

Autobake v Budd Pty Ltd & Anor (1986) 19 IR 18 Baker v National Distribution Services Limited (1993) 50 IR 254 Brown v Rezitis (1970) 127 CLR 157 Davies & Anor v General Transport Development Pty Ltd & Ors [1967] AR (NSW) 371 George Stewart v All-Fect Distributors Limited and others [2006] NSWIRComm 195 Green v Brown (2002) 116 IR 21 Gregory Robert Cave v Two Lands Services Pty Ltd and Anor [2001] NSWIRComm 35 Hodges v Streets Ice Cream Pty Ltd (1985) 11 IR 60 Huskisson RSL Sub-Branch Club Ltd v Sullivan (1990) 20 NSWLR 332 Incitec Ltd v Industrial Court of NSW (1992) 29 NSWLR 83, 45 IR 155 CASES CITED: Julia Thornthwaite v Australian National Credit Union Ltd [2002] NSWIRComm 240 Knowles v Anglican Property Church Trust (No 2) (1999) 95 IR 380 Leggett and Anor v Aardvark Security Services Pty Ltd [2000] NSWIRComm 188 Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274 Mozzoni v Dean [1970] AR (NSW) 1 Port Macquarie Golf Club Limited v Stead and Another (1996) 64 IR 53 The Federated Miscellaneous Workers' Union of Australia, New South Wales Branch v Wilson Parking (NSW) Pty Ltd and others [1980] AR (NSW) 352 Stevenson v Barham (1977) 136 CLR 190 Swann & Anor v. Ultratune Aust. Pty Ltd & Anor (1983) 5 IR 284 Western Sydney Area Health Service v Gibson (2001) 109 IR 359 Westfield v Adams (2001) 114 IR 241 Wheatley v Armstrong (unreported decision, CT1155 & 1163 of 1992; CT1026 of 1993, 3 February 1995)

APPELLANTS Solicitor: Mr J Hassett Hassett Dixon LEGAL REPRESENTATIVES: RESPONDENT Mr D Shoebridge of counsel Solicitor: Mr J Sefton Employment Lawyers

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

ALL-FECT DISTRIBUTORS LIMITED & ORS v GEORGE STEWART

Application by All-Fect Distributors Limited for leave to appeal and appeal against a judgment of Justice Boland given on 19 June 2006 in matter No IRC 4435 of 2003

1 This is an application for leave to appeal and, subject to leave being granted, appeal from the judgment of Boland J (George Stewart v All-Fect Distributors Limited and others [2006] NSWIRComm 195) in proceedings brought pursuant to s 106 of the Industrial Relations Act 1996 ("the Act"). 2 All-Fect Distributors Limited ("the first appellant") is a corporation carrying on a business of manufacturing, distributing and supplying confectionary in Australia and New Zealand. Joseph Fred Essey ("the third appellant") and Paul Fred Essey ("the fourth appellant") are the sons of Fred Joseph Essey ("the second appellant"). The appellants were, at all material times, the directors and shareholders of the first appellant.

3 George Stewart ("the respondent") has worked in the wholesale confectionary business for many years. The respondent initially entered into an agreement with the first appellant on or about 1994 to sell the first appellant's confectionary products in the Eastern Suburbs and accepted, as part of the arrangement, to be paid an agent's commission. The respondent already had his own wholesale confectionary business. As part of the arrangement, the respondent canvassed his wholesale clients to install the appellants' confectionary stands as well as seeking out new customers for the appellants. The second appellant, on behalf of the first appellant, terminated this initial agreement in June 1996. 4 In August 1996, the respondent was re-engaged by the second appellant to undertake sales of the same product but in the Western Suburbs and Sutherland areas of Sydney. That contract was also terminated. 5 The respondent asserted the contract of employment offended against s 105 of the Act and claimed a variation of the terms of the contract and orders of just compensation under s 106 of the Act. Relevantly, s 105 and s 106 state: 105 Definitions In this Part: contract means any contract or arrangement, or any related condition or collateral arrangement, but does not include an industrial instrument. unfair contract means a contract: (a) that is unfair, harsh or unconscionable, or (b) that is against the public interest, or (c) that provides a total remuneration that is less than a person performing the work would receive as an employee performing the work, or (d) that is designed to, or does, avoid the provisions of an industrial instrument. Note. The jurisdiction of the Commission under this Part is exercisable only by the Commission in Court Session. 106 Power of Commission to declare contracts void or varied (1) The Commission may 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. (2) The Commission may find that it was an unfair contract 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. (2A) A contract that is a related condition or collateral arrangement may be declared void or varied even though it does not relate to the performance by a person of work in an industry, so long as: (a) the contract to which it is related or collateral is a contract whereby the person performs work in an industry, and (b) the performance of work is a significant purpose of the contractual arrangements made by the person. (3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time. (4) In considering whether a contract is unfair because it is against the public interest, the matters to which the Commission is to have regard must include the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force. (5) In making an order under this section, the Commission may make such order 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. (6) In making an order under this section, the Commission must take into account whether or not the applicant (or person on behalf of whom the application is made) took any action to mitigate loss. The Judgment 6 Boland J determined the respondent entered into two arrangements during the entirety of the relationship between the parties. Upon examination of its terms and in its performance, his Honour determined that the respondent was an independent contractor, not an employee. His Honour held at [115] and [117]: [115] Whilst indicia exist to suggest the applicant was an employee, I have concluded, on balance, that the applicant was an independent contractor. The considerations that have most influenced me in arriving at that conclusion are as follows: (1) The evidence supports a conclusion that whilst the applicant had sought employment with the first respondent he understood that what was offered to him was a commission agent's position, something he knew was not considered by the respondents to be an employee. He accepted this offer and continued in the role for nine years without questioning his status. (2) Whilst the respondents maintained a degree of control over the applicant it was not of the same character as that exercised over the bicycle couriers in Hollis and apart from the system of work relating to ordering and supplying confectionery to customers, how the applicant went about the task of selling was a matter for him. (3) That the applicant was assigned a territory in which to sell the respondent's products and represented an exercise of control over the applicant by the respondents, it did not negate a conclusion that the applicant was an independent contractor. (4) The applicant did not have a fixed quota or target to meet. (5) The respondents did not exercise close, day-to-day supervision of the applicant. (6) The applicant was entitled to sell products not in competition with those of the respondents. (7) The applicant had no fixed hours of work. (8) The applicant provided his own vehicle and paid for all of the costs associated with running the vehicle. (9) The applicant was not required to wear or display the respondents' livery. (10) The applicant invoiced the first respondent for the commission he made on sales and was not paid a wage or salary. The applicant did not pay PAYE tax but portrayed himself as being in the business of a confectionery wholesaler and claimed deductions for business expenses. (11) The applicant did not receive annual leave, long service leave or sick leave. … [117] In weighing up whether the applicant was an employee or independent contractor I have taken a step back from assessing each of the indicia and asked whether, despite those indicia, and considering the matter from a global perspective, it could be said the applicant was running his own business or had independence in the conduct of the operation: See Hollis at [47]. Such an inquiry cannot be made on the assumption that in order to find the applicant was an independent contractor he had to be absolutely free of any degree of supervision or control by the respondents: See ReadyMix at 526 per MacKenna J. In my opinion the applicant was running his business subject only to a degree of supervision and control by the respondents necessary for the business to run efficiently and to maximise the applicant's income from sales. Accordingly, on balance, I consider it may be concluded the applicant was not an employee. 7 The appellants did not challenge this finding. 8 His Honour then examined the effect of the first appellant's termination of the respondent and the effect of the new arrangement entered into between the respondent and the second appellant, finding at [125] - [128]: [125] In 1996, Fred Essey terminated the contract with the applicant. The effect of this was that that applicant was left with nothing from his two years with the first respondent or from his previous wholesale confectionery business. The applicant had, in effect, lost his previous clientele from his Eastern suburbs territory because it had been subsumed into the respondents' business. The respondents thereby benefited, not only from the addition to their business of the applicant's former customers, or at least some of them, but this was achieved at minimal cost to the respondents, that cost being only the commission on sales paid to the applicant. [126] I have the impression from the evidence that in approaching Fred Essey the second time for work there was a hint of desperation on the part of the applicant that was never fully explained. That is to say, for some reason (perhaps impecuniosity) the applicant was desperate to be re-engaged by the first respondent and accepted sales territory in the Western suburbs and Sutherland Shire, basically on the same conditions as the previous arrangement. [127] It may have been that Fred Essey was sympathetic to the applicant's personal plight, as he stated in his evidence, and that was the reason why he offered the applicant the Western suburbs and Sutherland Shire. But when one considers the whole of the relationship over the nine-year period that it existed, despite the fact that Mr Stewart freely entered into the contracts with the first respondent on two occasions and never complained about its terms for the whole of that period, and unavoidable conclusion is that it was a very one sided bargain; the first respondent expanded and serviced its customer base in the areas assigned to Mr Stewart at minimal cost to the first respondent. The respondents accepted the benefits of the applicant working up to 44 hours each week on occasions selling their products and it would have been obvious to them that the applicant would have not time left to engage in a business of his own. For his part, Mr Stewart received commission on sales that represented an income, but well below that he would have received if he had been an employed sales representative. At the end of nine years with the first respondent the applicant was left with less than what he started with. [128] I consider that pursuant to s 105(a), on balance, the contract between the applicant and the first respondent was unfair. 9 His Honour then considered public interest as follows: [129] In The Federated Miscellaneous Workers' Union of Australia, New South Wales Branch v Wilson Parking (NSW) Pty Ltd and others [1980] AR (NSW) 352, Dey J considered whether a contract between a company that operated parking stations and a car-parking attendant was against the public interest pursuant to s 88F(1)(c) of the Industrial Arbitration Act 1940. … [130] … Marks J in Wheatley v Armstrong [1995] NSWIRComm 3 (3 February 1995)) made the following observation: It is a trite observation that the system of industrial awards established by industrial tribunals in New South Wales and elsewhere is designed to reflect industrial justice between employers and employees. The rates of pay and working conditions are intended to establish a fair and equitable regime in circumstances where there are competing economic, social and policy considerations. In my opinion it is not only unfair but also harsh, unconscionable and against the public interest for an employer to enter into a contract of employment which contains terms and conditions which are less advantageous to the employee than are available under an applicable industrial award. It seems to me that such a proposition is so obvious that it does not require further elaboration or examination. [131] I respectfully agree with the sentiments expressed in those two decisions. I consider the contract between the respondents and the applicant was against the public interest and, consequently, unfair pursuant to s 105(b) of the Act. 10 Having found unfairness in accordance with s 105(a) and (b) of the Act, his Honour then examined the earnings of the respondent under the contract concluding: [138] Did the contracts between the applicant and the first respondent provide a total remuneration that was less than a person performing the work would receive as an employee performing the work under the Commercial Travellers, &c (State) Award? The evidence shows that the applicant received less than what was provided for performing such work under the Award. [139] A comparison of the applicant's pre-tax earnings before deductions (I consider this is the appropriate comparison, not after deductions) as disclosed in his taxation returns as against the minimum annual remuneration, including vehicle allowances, under the Award showed a shortfall in the period from 1 July 1995 to 25 April 2003 of some $103,990. [140] I find that pursuant to s 105(c) of the Act the contract between the applicant and the first respondent was unfair in that provided a total remuneration that was less than a person performing the work would receive as an employee performing the work. 11 In determining the remuneration was less than an employee would earn under s 105(c) of the Act, his Honour then considered whether the contract was designed to or did avoid the provision of the relevant industrial instrument: [141] I do not consider there is sufficient evidence for me to find that the contracts between the applicant and the first respondent were designed to avoid the Award. It was certainly the case that the first respondent employed sales representatives under the Award and had a number of commission agents who it regarded as award free. However, the reference in s 105(d) to the contract being "designed" to avoid the Award infers that what is required is an intent on the part of the respondent to avoid or evade the Award. I am not able to find on the balance of probabilities that the respondents, or any one of them, formed the intent and designed a means to avoid the Award in engaging the applicant as a commission agent. [142] Did the contract avoid the Award in any event? It is not easy to understand the purpose of the alternative basis for finding the contract unfair in s 105(d). It seems to suggest, though, that even absent intent, if the contract avoids the Award it will be an unfair contract. As a matter of objective fact the contracts between the applicant and the respondents avoided the Award; the contracts did not incorporate into them the terms of the Award and the parties to the contracts proceeded on the tacit understanding that the contract would apply and the Award would not apply. This is not to say the respondents intended to design an arrangement that avoided the Award; there is no evidence that award avoidance entered the mind of Fred Essey when he offered the applicant a position as commission agent. Nevertheless, in making the contract the application of the terms of the Award to the applicant was, in an objective sense, avoided. [143] I find that pursuant to s 105(d) of the Act the contract between the applicant and the first respondent was unfair in that it avoided the provision of an industrial instrument, namely, the Commercial Travellers &c, (State) Award. 12 Having determined the total remuneration under the contract was less than that received by an employee under a relevant comparator award (s 105(c) of the Act) and that the contract did avoid a provision of the relevant industrial instrument but was not designed to so do (s 105(d) of the Act), and the appellants having gained the respondent's clientele in the first termination and the respondent having left with less than he started with, his Honour determined the bargain was one sided and unfair (s 105(a) and (b) of the Act). His Honour in his consideration as to whether to order variation of the contract or arrangement, then observed at [149]: [149] … however, as I earlier observed, the contract was a one sided agreement, with the first respondent achieving a significant benefit from the arrangement whilst the applicant worked for nearly nine years at significantly less than the relevant award rate of pay with no paid annual leave, no superannuation, no long service leave, no sick leave and no severance pay - benefits he would have received if he had been an employee performing work under the Commercial Travellers, &c., (State) Award. As I noted earlier, the applicant was left with less than what he started with. The applicant, nevertheless, must carry a level of responsibility for what occurred and the respondents cannot be required to shoulder the full burden of his claim. He did not strike me as an unintelligent person and he knew that the first respondent employed sales representatives performing much of the same work as himself. Yet he accepted the arrangement with the first respondent without complaint and now claims the contract is unfair. Nevertheless, as Haylen J observes in James Stanley Morre t/as Hasting Couriers v TNT Australia Pty Ltd [2006] NSWIRComm 181 at [111], awareness of the nature of the contract is not a bar to granting relief (see A & M Thompson v Total Aust. Ltd 1980 2 NSWLR 1 at 13-14); nor has the foolish or unbusinesslike action of the applicant provided a reason to deny a remedy (see Williams v Calmex Products Pty Ltd [1971] AR (NSW) 264; Spicer v Clifford [1969] AR (NSW) 273). 13 In determining whether to exercise his discretion and order compensation, his Honour then determined:

[151] … I have decided though, in order to remedy the unfairness but having regard to the applicant's unquestioning acceptance of the two contracts offered to him, is that the applicant should receive compensation based on half of the difference between the applicant's gross earnings from the first respondent for the years 1995 to 2003 and the minimum annual remuneration under the Award, including the appropriate locomotion allowance (based on greater than two-litre engine capacity without air conditioning) calculated on the basis of 1,000 kilometres travelled per week. The amount of this difference has been calculated at approximately $104,000, plus interest. I propose to order that the respondents pay half of this amount plus interest to the applicant. Given the applicant's status as an independent contractor and his acceptance of that arrangement, I do not propose to provide any compensation in respect of annual leave, long service leave, payment in lieu of notice or severance pay. 14 At [166] his Honour made the following orders: [166] The Court makes the following orders: (1) The contract entered into between the applicant, George Burns Stewart and the first respondent, All-Fect Distributors Limited in or about early 1994 and the contract entered into between the applicant and the first respondent in or about 1996 are declared to be unfair contracts on the following grounds, namely that the contracts: (a) were unfair, harsh and unconscionable; (b) were against the public interest; (c) provided a total remuneration that was less than a person performing the work would receive as an employee performing the work; (d) avoided the provisions of an industrial instrument, namely, the Commercial Travellers, &c., (State) Award. (2) The contracts are varied by inserting a provision to the following effect: All-Fect Distributors Limited is required to remunerate the George Burns Stewart at a rate commensurate with half of the Minimum Award Rate that would be payable to the applicant if he were a Local Employee under the provision of the Commercial Travellers, &c., (State) Award together with the locomotion allowance payable to a Local Employee in respect of a motor vehicle up to and including 2,000 cc during the life of the contracts. (3) The respondents shall pay to George Burns Stewart an amount of $52,000 on the basis that first respondent shall pay one-half, the second respondent shall pay one-quarter and the fourth and fifth respondents shall jointly and severally pay one-quarter. In the absence of any agreement as to the calculation of this amount the parties, or any of them, have liberty to have the matter re-listed before the Court. (4) The respondents shall pay interest on the amount specified in Order (3) hereof in accordance with Schedule 5 of the Uniform Civil Procedure Rules 2005. The interest shall be payable from the date of filing of the original summons for relief to the date of this judgment. (5) The respondents shall pay the applicant's costs of the proceedings in an amount as agreed or assessed. If the parties are unable to agree, they have liberty to approach. Grounds of Appeal 15 The grounds of appeal are: 1. Justice Boland erred in applying the Award in any respect given his finding that the Respondent was an independent contractor. The Award applies to employees. It was not open to His Honour to apply a 50/50, or any approach, by which the Award calculates remuneration. Any computations pursuant to the Award were inapplicable since the Award is based on a premise absent here, namely an employment relationship. 2. It was a finding of fact and common ground that the First Appellant did not control the activities of the Respondent and indeed did not even know what the Respondent was doing for large parts of the week. It was unjust and an error of law to visit upon the Appellants a requirement to make payments to the Respondent as if he were an employee when the Appellant did not have the corresponding rights of an employer, namely the right to control and direct the activity of the Respondent. 3. His Honour erred in finding unfairness in any degree, or that the contract was "a very one sided bargain" (paragraph 127). The Respondent was paid an agreed commission on sales. It was up to him how much he sold, how many hours he spent attempting to sell, and otherwise how he conducted his business. The First Appellant did nothing more than extend to the Respondent an opportunity to sell confectionery. 4. His Honour erred in finding the contract was against the public interest. The passages quoted at 129 - 130 have no application to the facts of the current case because the cases cited involved actual control by an employer over an employee. Here, the First Appellant had no or little control, a matter going to the heart of the employee/employer relationship, yet is now required to pay as if control existed. It may be reasonably inferred that the First Appellant would have conducted itself very differently, and directed the Respondent very differently, had it known that it was effectively responsible for the Respondent's business in the way now held. Hence it is now unjust to treat the First Appellant according to the Orders made. 5. His Honour erred in finding the Award was "objectively" avoided (paragraph 142). The Award was inapplicable. The parties freely established an independent contractor relationship, not once, but twice (paragraph 148). 6. His Honour erred in applying Brown v Retitis (sic) (at 159) to the Second - Fourth Appellants. That case involved, inter alia, "subterfuge" and nothing of that kind existed in the present case. Regardless of the findings made in respect of the First Appellant, no liability exists in respect of the Second - Fourth Appellants. Submissions 16 The appellants submitted his Honour, having found there was no sham or malice in the arrangements, could not then find simply, because of a monetary loss, there was unfairness in the whole of the employment arrangement under s 105(d) of the Act. 17 Further, the appellants challenged the finding of his Honour that this was a "one-sided" bargain asserting, on the evidence, the first arrangement was not inherently unfair and his Honour erred in looking at the second arrangement and its financial loss and then declaring the whole contract or arrangement unfair. 18 Whilst the appellants did not concede the relevant Award was the Commercial Travellers, &c., (State) Award ("the Award"), the appellants did acknowledge that if the respondent were an employee, this would be the applicable Award. The appellants further submitted his Honour had to go further and examine all elements of the bargain entered into and his Honour did not entertain this necessary discretionary determination in his assessment under s 105(d) of the Act. 19 The appellants submitted both conclusions drawn by Boland J were errors of law. The appellants asserted "more" than "financial loss" is necessary to establish unfairness under the second discretion required in the application of s 105(d) of the Act. 20 It was further submitted his Honour did not correctly apply the principle enunciated in Autobake v Budd Pty Ltd & Anor (1986) 19 IR 18 and therefore fell into error. 21 The appellants further challenged the terms of his Honour's Order No. 3 contending that his Honour had erred in applying Brown v Rezitis (1970) 127 CLR 157 as that case involved subterfuge and nothing of that kind existed in the present case. It is argued that irrespective of the findings made in respect of the first appellant, no liability exists in respect of the second to the fourth respondents. 22 The respondent submitted that although a mere finding that a party was a shareholder and a director is insufficient to find liability for money orders under s 106 of the Act, his Honour at first instance went further and found that the second, third and fourth appellants had benefited from the contract the first appellant had with the respondent. 23 The respondent, in submissions, contended that Boland J correctly applied the two elements in s 105(d) of the Act which are whether the contract was designed to avoid the provisions of an applicable industrial instrument, namely, the Commercial Travellers, &c., (State) Award, or, whether the contract avoided the provisions of the Award with the intent of parties. The respondent contended that it was open to his Honour to make a finding of unfairness on this ground. 24 Subsequently, the respondent submitted that his Honour had properly exercised his discretion by concluding that the appropriate orders for the relevant statutory unfairness should be an amendment to the contract. This discretionary determination was again consistent with authority: Hodges v Streets Ice Cream Pty Ltd (1985) 11 IR 60 and Autobake Pty Ltd v Budd. 25 Reliance was placed on his Honour's reasons for judgment at [141] - [143] as to the application of the elements in s 105(d) with the respondent's counsel submitting as follows: SHOEBRIDGE: As I understood his Honour in this case, he was raising the issue of the two prongs of what is now 105(d) and saying (sic) that simply saying an award does not apply does not end it. There must be evidence as to the operation and coverage of the award. There has been evidence as to the nature of the duties and direct findings by the trial judge that the work performed by the respondent, had it been work in an employment relationship, would have been work covered by the industry and callings and the operation of the Commercial Travellers Award. So there was evidence as to the nature of the work, and there was a direct finding …, that had the work been work of employment, within the scope of an employment contract, indeed the award would have applied, and therefore, in those circumstances, the contract characterising on balance the relationship not as employment, did avoid the operation of the award. WALTON VP: I think it is common ground, at least hearing the submissions this morning, that his Honour was entitled to find as a matter of law that the award would have applied to the respondent if he had been engaged in employment. The issue is whether that conclusion alone - if it demonstrates a relevant shortfall - would be enough to ground the conclusion of unfairness under section 105, or for the purposes of section 105. SHOEBRIDGE: Section 105(d) sets out the objective and subjective basis for a finding of unfairness. There is little, if any, other way of reading the section. Having concluded below that the work would be covered by an award, there is a finding as to an unfair contract, and--- WALTON VP: Is there authority on the point which makes good that proposition that you have just referred to? SHOEBRIDGE: The closest I could get was the consideration by Justice Marks, but there is some consideration in Autobake, which probably addresses more the 105(c) point. … This is a clear narrow objective application of a statutory interpretation. Had there been work done by an employee he would have received greater remuneration and, although it was a modest difference … that was enough to establish the first step. It is a very clear objective approach, only a first step in the Court's required statutory task in an unfair contract case and if that was all his Honour did below and simply had said, had it been work of an employment nature the applicant would have received more, but he received less, therefore I find unfairness and will award compensation; then I would have great difficulty defending that approach. But his Honour went well beyond that and in making that first finding under section 105(d) the finding his Honour made of the employment nature, the award would have applied and therefore in making it of a subcontract nature, the award did not apply and the contract was avoided. That is the gateway and that is all his Honour found in respect of that. … … his Honour of course did not leave it there and his Honour in determining the essential unfairness on a discretionary basis went through the considerations at paragraphs 124 to 128 of the decision below. … His Honour essentially concludes the contract as initially struck in 1994 involved no misrepresentations and then did not operate in an unfair manner and wasn't an unfair contract at that time, but that what occurred in 1996 was the unfairness, and at paragraph 125 indicated that in 1996 (read) that was at paragraph 125 and then goes on about the air of desperation covering the negotiations in 1996 and the resumption of the contract and thereafter in the western suburbs and the Sutherland Shire which provided the applicant with significantly less income, and this is at 126 to 127. … Then the final conclusion at 127 about what makes the original fair contract unfair is what occurred in 1996, the termination of the original arrangement and the rearrangement where the applicant lost his eastern suburbs clientele which was lost to the respondent and he then worked in dribs and drabs in the new territory where the records show he was able to earn far less remuneration. … What was pleaded below was the contract in broad terms from 1994 to its termination, with the arrangements effectively in the two contracts read together, there was no jurisdictional point taken below in relation to the avoiding of that arrangement, the two contracts taken together, that in 1994 with the one in 1996, there was not jurisdictional point taken. The Principles Can the Court Interfere in a Free Bargain to Find Unfairness? 26 The question therefore raised in this appeal is whether an agreement of the kind entered into between the parties here which provided remuneration which is substantially below that which would be payable under an applicable award is unfair, harsh or unconscionable or against the public interest. In other words, can the Court interfere in the free bargains entered into between parties to find unfairness? The answer to this question requires a consideration as to the proper application of s 105(a),(b),(c) and (d) of the Act. 27 In Port Macquarie Golf Club Limited v Stead and Another (1996) 64 IR 53 a Full Bench of the Court summarised twelve tests to be applied to determine whether a finding of unfairness, or otherwise, under the section (then s 275) had been established. Their Honours set out the tests as follows (at 59 - 60): 1. The initial question which arises, once it be established that the impugned contract or arrangement meets the necessary jurisdictional test of being one under which a person performs work in any industry, is whether the contract or arrangement offends one or more of the grounds in pars (a),(b),(c),(d),(e) or (f) of s 275(1) ; that process involves a mixed question of fact and of law: Hodges at 63; and Autobake at 20. 2. In determining whether a finding of unfairness or otherwise under the section has been established, the general principle is that an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge; in deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusions of the trial judge, but, once having reached its own conclusion, will not shrink from giving effect to it: Warren v Coombes (1978) 142 CLR 531 at 551. 3. An appeal is the right to invoke a superior court's aid and interposition to redress the error of the court below: Attorney-General v Sillem (1864) 10 HLC 704 at 724. 4. In addressing error, an appellate court should not interfere with the trial judge's conclusions on facts unless it is of the opinion that they were not reasonably open (or were clearly wrong) on the evidence: Victorian Stevedoring and General Contracting Co Pty Ltd v Dignan (1931) 46 CLR 73 at 107; Clarke & Walker Pty Ltd v Secretary of the Department of Industrial Relations (1985) 3 NSWLR 685 at 690-692; 14 IR 269 at 273-274: Abalos v Australian Postal Commission (1990) 171 CLR 167 at 178ff; Hussmann Australia Pty Ltd v Walker (1993) 48 IR 396 at 406; Walker v Industrial Court of New South Wales (1994) 53 IR 121 at 129; and Haynes at 154. 5. The nature and degree of the unfairness within the purview of s 275 , as a matter of law, relates to ordinary standards of fairness by directing attention to the particular circumstances of the individual contract or arrangement concerned; whether or not a contract or arrangement is unfair is a matter to be decided upon examination of the facts of each particular case: Incitec Ltd v Barry (1992) 45 IR 148 at 154; and Baker at 270. 6. Unfairness may arise either from the terms of the contract or arrangement itself, the surrounding circumstances and/or from the manner of performance or operation of the contract or arrangement: Barry v Incitec Ltd (1991) 45 IR 143 at 146; Incitec Ltd v Industrial Court of New South Wales (1992) 45 IR 155 at 157-158; and Baker at 270-271. 7. The test of unfairness involves the commonsense approach characteristic of the ordinary juryman by applying standards providing a proper balance or division of advantage and disadvantage between the parties who have made the contract or arrangement, bearing in mind the conduct of the parties, their capability to appreciate the bargain they had made and their comparative bargaining positions when entering into the contract or arrangement: Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371 at 374; A & M Thompson Pty Ltd v Total Australia Ltd [1980] 2 NSWLR 1 at 13; and Baker at 271-272. 8. If a contract or arrangement be found to relevantly offend one or more of the grounds, such as it being unfair, contained in s 275(1) then the next question involves the exercise of a discretion, to be performed judicially, as to whether the contract or arrangement should be avoided or varied: Hodges at 63; Autobake at 20; and Baker at 267. 9. If it be decided to avoid or vary the contract or arrangement under s 275(1) then a further discretion arises as to whether an order should be made under s 275(3) for the payment of money in connection with the contract or arrangement declared void or varied: Hodges at 63; Autobake at 20; and Baker at 267. 10. The proper approach as to the discretionary aspects requires an appellate court not to reverse a decision of the trial judge on a matter involving the exercise of discretion unless it reaches a clear conclusion that the members of the appellate court would have taken a view different from that of the trial judge if they had been in his place and that the trial judge had failed properly to exercise the discretion committed to him: House v The King (1936) 55 CLR 499 at 504-505; Mace v Murray (1955) 92 CLR 370 at 378; Wilson v Gozney [1978] AR (NSW) 134 at 150; Baker at 267; and Haynes at 154. 11. The discretions allowed by s 275 to the Court are extensive and the Court should not interfere with bargains freely made by a person who was under no restraint or inequality, or whose labour was not being oppressively exploited: Stevenson v Barham (1977) 136 CLR 190 at 192; and Baker at 276. 12. The nature of the orders which may be made under s 275(3) for the payment of money cover a wide field; underlying the subsection is 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: Brown v Rezitis (1970) 127 CLR 157 at 164; and Baker at 277. 28 We note that their Honours cautioned against the exercise of the wide discretion in an applicant's favour where an applicant has entered into what may be described as "a bad bargain" unaffected by inequality, duress, misrepresentation or similar factors. See also the decision of Watson J in Swann & Anor v. Ultratune Aust. Pty Ltd & Anor (1983) 5 IR 284 at 296. 29 Fisher CJ and Hungerford J examined these discretions in the Full Bench decision of Baker v National Distribution Services Limited (1993) 50 IR 254. Their Honours observed at 276 - 277: … The discretions allowed by s 275 to the Court are very wide, and so much was recognised by Barwick CJ when making the following comment in Stevenson v Barham (1977) 136 CLR 190 at 192: "The legislature has apparently left it to the good sense of the Industrial Commission not to use its extensive discretion to interfere with bargains freely made by a person who was under no restraint or inequality, or whose labour was not being oppressively exploited." We might immediately observe that the Chief Justice's comment referred to "bargains freely made" and to a person not under any "restraint or inequality". On our findings in the present case, those circumstances clearly did not apply to the appellant; indeed, we would go further, again using the Chief Justice's words, in finding that the appellant's labour in ensuring the orderly closure of the Coffs Harbour Branch when retrenchments became necessary was, in the circumstances which occurred, "oppressively exploited". Plainly stated, the respondent took advantage of the appellant's position as a monthly employee by unilaterally imposing a far less generous redundancy package than that negotiated for commercial reasons with its weekly employees. … In that situation, it is our view the proper exercise of discretion requires an order be made remedying the unfairness.

30 At first instance, Boland J found that the respondent had entered into the contract freely. The respondent on appeal did not oppose this finding. The question to be answered, therefore, is whether the respondent had been under "no restraint or inequality", his "labour was not being oppressively exploited" or operating under no other circumstance as would have rendered the bargain unfair for the purposes of the Act. 31 Boland J determined that there was unfairness when the relationship between the parties was considered as a whole over the nine-year period. His Honour stated at [127]: ... But when one considers the whole of the relationship over the nine-year period that it existed, despite the fact that Mr Stewart freely entered into the contracts with the first respondent on two occasions and never complained about its terms for the whole of that period, an unavoidable conclusion is that it was a very one sided bargain; the first respondent expanded and serviced its customer base in the areas assigned to Mr Stewart at minimal cost to the first respondent. The respondents accepted the benefit of the applicant working up to 44 hours each week on occasions selling their products and it would have been obvious to them that the applicant would have no time left to engage in a business of his own. For his part, Mr Stewart received commission on sales that represented an income, but well below that he would have received if he had been an employed sales representative. At the end of nine years with the first respondent the applicant was left with less than what he started with. 32 In our view, his Honour's finding lead to the conclusion that the respondent's labour was "oppressively exploited". The appellants received the respondent's customer base in the Eastern Suburbs at a minimal cost. The hours worked by the respondent meant that he did not have time to undertake business outside of those worked for the appellants. In addition, the respondent received less remuneration than he would have received had he been employed as a sales representative and less than what he would have received as an employee under the Award. Hence, despite a finding of a freely made bargain between the parties, it was open to the Court in this case to exercise its discretion to interfere with this bargain upon determining that it was unfair. 33 We have therefore found no error of law or principle in the judgment, at first instance, in this respect. Further, we consider that, upon review of the evidence, it was open to his Honour to reach the conclusion he did as to the inequality of the bargaining relationship and the bargain and the exploitation suffered by the respondent. Application of an Award in Respect of Compensation upon a Finding of Unfairness 34 A further ground of appeal relied upon by the appellants was that Boland J had erred in making the Orders under s 106(5) of the Act by applying the Award in circumstances where his Honour found that the respondent was an independent contractor. The appellants contended that awards applied only to employees and any amount awarded to the respondent with reference to an award is inapplicable as awards are based on an employment relationship. 35 His Honour stated that the work which the respondent had been undertaking fell within the description of a person within the Award as the respondent had been engaged to spend the majority of his time away from the appellants' warehouse soliciting orders for the sale of the first appellant's confectionery products. Further, His Honour found that the respondent had received less than what is stipulated under the Award which lead to his Honour's finding pursuant to s 105(c) of the Act. 36 The appellants in support of their contentions relied upon a Full Bench decision in Autobake Pty Ltd v Budd & Anor and a decision of Schmidt J in Gregory Robert Cave v Two Lands Services Pty Ltd and Anor [2001] NSWIRComm 35. In our view, these two decisions are distinguishable from the present matter. 37 Importantly, in Autobake the Full Bench upheld an appeal on the basis that there had been no finding, at first instance, of unfairness, harshness or unconscionability under s 88F(1)(a) and (b) (now s 105(a) and (b) of the Act). Despite a finding of unfairness in respect of s 88F(1)(d) (the predecessor to s 105(c) of the Act), the court refused to exercise its discretion as "the discretions which then arise under the section require for their exercise more than a mere comparison between award rates and actual remuneration and the circumstance that a calculated business risk, advisedly taken, has proved unsuccessful." This stands in contradiction to the findings of Boland J in this matter. The contract or arrangement here under consideration between the respondent and the appellants has been found to be unfair on each of the grounds under s 105 of the Act (a finding upheld by us in the previous section of this decision). His Honour's findings as to the Award was not determinative of the question of unfairness, but those findings influenced the exercise of his discretion in that respect. Furthermore Autobake involved a dispute between a franchisee and a franchisor, not one between principal and contractor, as is the case here. 38 The second authority relied upon, Gregory Robert Cave, is distinguishable on several bases. In this matter Schmidt J found that s 105(d) of the Act did not apply, as there was no award relied upon as regulating the employment relationship between the parties. Another fundamental difference is that her Honour did not find that there was any unfairness. Her Honour stated at [98]- [99]: [98] The evidence can only lead to the conclusion that the employment came to an end as a result of Mr Cave's conduct and that the respondents did not in fact deprive him of anything. To the contrary, he sought to deprive the respondents of information and other material which affected their long term earnings and necessitated their approach to the Supreme Court for relief. [99] That the respondents, as a result, have been successful in restraining Mr Cave from further damaging their business and might yet seek an amount of profits or other damages from him does not assist his case. To my mind, those circumstances provide a singularly inappropriate basis upon which any relief in favour of Mr Cave pursuant to s106 of the Act could be based. 39 The extensive nature of the power for this Court to make orders under s 106(5) of the Act and its predecessors after a finding of unfairness has been well established through decisions of the High Court in Brown v Rezitis and Stevenson v Barham (1977) 136 CLR 190. 40 Section 106(5) provides: In making an order under this section, the Commission may make such order 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. 41 In respect of the proper approach in the assessment of monies awarded under s 88F(2) of the Industrial Arbitration Act 1940 (the predecessor to s 106(5) of the Act), Barwick CJ (with whom McTiernan, Menzies, Windeyer and Owen JJ agreed) stated in Brown v Rezitis at 164: … Consequently the nature of the orders which may be made under subs (2) will of necessity cover a wide field. But underlying subs (2) is I think a broad concept of 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. 42 Further, Barwick CJ stated in Stevenson v Barham at 192:

... the language of s 88F of the Act is intractable and must be given effect according to its width and generality. 43 The above authorities reveal that the Court has the discretion to make wide-ranging orders under s 106(5) which it considers to be "just in the circumstances of the case". It follows that the question to be determined is whether Boland J's decision to apply the award is "just in the circumstances of the case". 44 Menzies J examined the statutory intention of the predecessor to s 106 in Brown v Rezitis at 169. Boland J cited his Honour's observation as set out in The Federated Miscellaneous Workers' Union of Australia, New South Wales Branch v Wilson Parking (NSW) Pty Ltd and others [1980] AR (NSW) 352 at 369: The section is clearly intended to confer a comprehensive power upon the Commission to go to the substance of an arrangement made for a person to perform work in an industry - and to do so in disregard of the legal dress in which the arrangement has been clothed - in order to put such a worker in no worse position than if he had been working under a contract or employment protected by award conditions. 45 It is apparent from above passage that Menzies J envisaged that the predecessor to s 106 of the Act would apply in matters where the worker was not found to be an employee in the traditional sense and that a successful applicant under s 106 of the Act would receive monies under s 106(5) of the Act with reference to a contract or an appropriate award. 46 The Court must disregard the "legal dress" that the respondent is an independent contractor, as there is a finding of unfairness in the arrangement between the parties, and in addition, there is an award, which is appropriate to consider in assessing remedies which might be available to the respondent. 47 The issue here is whether an order under s 106(5) of the Act can include recognition of what an independent contractor might have earned as an employee. This Court has expressed, in authoritative decisions, an acceptance of this proposition; that approach is amply supported by the terms of s 105(c), which contrast a "person" with an "employee" and more generally, with the "avoidance" of industrial instruments in s 105(d), where it may be assumed that an employee would have otherwise had a legal right to an award. The Full Bench, in considering both s 105 and s 106 of the Act, reviewed a number of authorities in Westfield v Adams (2001) 114 IR 241. At [137] their Honours observed: … To take a clear example, where it is proposed to make an order by reason of the unfairness referred to in s 105(c) of the Act because the contract provided a total remuneration that is less than a person performing work as an employee would have received, the appropriate payment may represent a liquidated sum due to the applicant under the contract (once varied) or under an award. 48 The Full Bench then went on to express the principles applicable under s 106(5) as follows at [161]: ... 9) In assessing whether unfairness has occurred and in making money orders under s 106(5) it would be appropriate to have regard to the following principles regarding the relevance of general industrial standards. In doing so, however, the individual contract or arrangement concerned remains the primary consideration: a) Whether or not a contract or arrangement is unfair within the meaning of ss 105 and 106 is a matter to be decided upon examination of the facts of each particular case; section 106 deals largely with private rights inter partes ; the focus of attention is the contractual relationship between a particular employer and employee. b) Subject to the primary focus being the particular circumstances of the individual contract or arrangement concerned, in assessing whether unfairness has occurred general standards or levels of what is considered to be fair, …will be factors to be considered. Application of Principles 49 Having considered the relevant indicia, Boland J was persuaded that the respondent was an independent contractor. His Honour then determined, based on the respondent's duties, the comparator award was the Commercial Travellers, &c., (State) Award. His Honour then examined the respondent's cost of running his business and objectively determined that, even in a circumstance where there was no intent by the contractor to avoid the Award, the contract did avoid, the conditions contained in the relevant industrial award. 50 We find his Honour did not misuse the discretion held by his Honour in these considerations. To determine if s 105(c) of the Act applied, his Honour selected the relevant comparative award weighing up the duties as described in the evidence and examined the respondent's income under the contract to reach his objective conclusion that there was a financial loss suffered by the respondent.

51 His Honour then determined that although there was no intent to avoid the award, the arrangement did avoid the award provisions (s 105(d) of the Act). However, his Honour then went further and determined the absorption of the respondent's client base on termination of the first arrangement along with the economic loss suffered under the second arrangement when viewed as a whole, created a contract or arrangement which was a one-sided bargain (s 105(a) of the Act). His Honour's reasoning addressed the principles necessary for a finding under s 105(a) of the Act. His Honour's reasoning therefore addressed "the special characteristics" revealed in the particular contract or arrangement, which justified a finding of unfairness. 52 His Honour determined such a contract or arrangement offended under s 105(a) of the Act as to unfairness and s 105(b) in respect of the public interest. Whilst his Honour under s 105 could have found unfairness or that the contract was against the public interest he found it offended against both sections. His Honour also determined the particular contract offended against s 105(c) and (d) of the Act. Given the construction of s 105, his Honour did not necessarily have to make a determination under both s 105(c) and s 105(d) of the Act but it was open to his Honour to so do and we find no error of law in this reasoning. 53 Boland J then concluded, in the exercise of his discretion, that given the relevant statutory unfairness and taking into account the whole of the contractual relationship between the parties the unfairness would best be remedied by varying the contract and granting the respondent less than half of what he was seeking ([149] - [151]). This discretionary determination was again consistent with authority (see Hodges v Streets Ice Cream Pty Ltd and Autobake Pty Ltd v Budd). 54 The terms of his Honour's Order No 3 was challenged. It will be recalled Order 3 provided: (1) … (2) … (3) The respondents shall pay to George Burns Stewart an amount of $52,000 on the basis that first respondent shall pay one-half, the second respondent shall pay one-quarter and the fourth and fifth respondents shall jointly and severally pay one-quarter. In the absence of any agreement as to the calculation of this amount the parties, or any of them, have liberty to have the matter re-listed before the Court. 55 Prior to setting out this order at first instance, Boland J found that the second, third and fourth appellants had benefited from the first appellant's contract with the respondent. They were found to be liable by his Honour as a consequence of their association with the contract. His Honour stated at [160] - [161]: The first respondent is a business owned and controlled by the Essey family. Fred, Paul and Joseph Essey are shareholders and directors of the company. Fred Essey was clearly culpably associated with the making and operation of the contract and benefited from the contract with the applicant in that the inadequate remuneration paid to the applicant allowed him to receive the benefit of higher profits. In his role as managing director and general manager it may also be said that Paul Essey was culpably associated with the operation of the contract and received the benefits from the contract. In relation to Joseph Essey the applicant's evidence was that Joseph was the person with whom he had most contact and who issued instructions to him from time to time during the contract's operation. As I noted earlier Joseph Essey was not called to give evidence. I consider Joseph Essey was culpably associated with the operation of the contract and derived benefit from the contract. An order for the payment of a sum of money by a manager or person culpably associated with the "making or execution" of the contract should be limited to an amount that represents their association with the making or operation of the contract: Brown v Rezitis. The first, second, fourth and fifth respondents shall be liable to pay any money ordered to be paid to the applicant under s 106(5) on the basis that the first respondent pays one-half, the second respondent pays one-quarter and the fourth and fifth respondents shall jointly and severally pay one-quarter. 56 We find that his Honour correctly exercised his discretion in making the money orders. His Honour's orders are consistent with the principles set out by the Barwick CJ in Brown v Rezitis, where his Honour said at 164: ... 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. 57 Ultimately his Honour assigned liability in accordance with the culpability of the various appellants on the basis that the first appellant pays one-half, the second appellant pays one-quarter and the third and fourth appellants should jointly and severally pay one-quarter of the money orders. This discretionary determination was open on the evidence as set out in [55] of this judgment. 58 It follows that Order No 3 reflects the different part played by the appellants in the arrangements and we find that his Honour's order was within his discretion. Leave to Appeal 59 Section 188(1) of the Act provides that an appeal may only be made with leave of the Full Bench. Section 188(2) of the Act provides that leave will be granted if the Full Bench is of the opinion that the matter is of such importance that, in the public interest, leave should be granted. 60 We adopt the approach laid down in Knowles v Anglican Property Church Trust (No 2) (1999) 95 IR 380 both as to leave to appeal and as to the nature of an appeal under the Act. 61 We consider that this matter raises sufficiently important issues as to the operation of s 105(a), (c) and (d) and s 106(5) of the Act as to attract the grant of leave to appeal. Merits of the Appeal 62 We, for the reasons given, do not consider the appellants have demonstrated errors warranting appellate intervention as to a finding of unfairness at first instance. As to the exercise of discretion, we note that in Western Sydney Area Health Service v Gibson (2001) 109 IR 359 at [12], the Full Bench adopted the principles applicable on appeal from discretionary decisions as enunciated by Heydon JA (with Sheller JA and Studdert AJA concurring) in Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274 at [45]: … Any attack on decisions of that character (discretionary) must fail unless it can be demonstrated that the decision-maker: (a) made an error of legal principle, (b) made a material error of fact, (c) took into account some irrelevant matter, (d) failed to take into account, or gave insufficient weight to, some relevant matter, or (e) arrived at a result so unreasonable or unjust as to suggest that one of the foregoing categories of error had occurred, even though the error in question did not explicitly appear on the face of the reasoning. Even though this Court might conclude that it would have exercised the discretion differently if the discretion had been conferred on it in the first instance … any such conclusion would be immaterial. The law committed the exercise of the discretion to [the Judge at first instance]. The law permits interference with his exercise of the discretion in only the limited circumstances just described: see House v The Queen (1936) 55 CLR 499 at 504-505; Lovell v Lovell (1950) 81 CLR 513 at 518-519 and 532-533; Australian Coal and Shale Employees' Federation v The Commonwealth (1953) 94 CLR 621 at 627. These principles are applied to a wide range of discretionary judgments … 63 We find his Honour made no error of law or principle; took no irrelevant matter into account; nor arrived at a result so unreasonable as to require intervention. We consider his factual findings were reasonably open to him. 64 As to costs, our finding would ordinarily suggest that the appellants would pay the costs of the appeal, as agreed, or, in default, as assessed. If that position is accepted, then the appellants should indicate same to the chambers of the Vice-President within seven days and we shall make orders in chambers accordingly. If there is a contest as to costs, then the respondent shall file and serve a submission setting out its application for costs and the grounds in support thereof within seven days and the appellants shall reply within seven days. Absent any application for a hearing, any dispute as to costs will be resolved on the papers. ORDERS 65 We propose the following orders:

We reserve the question of costs of the appeal. JUDGMENT OF KAVANAGH J 66 I concur with the majority, but find it necessary to add the following reasoning as to the effect of a determination of unfairness under s105 based principally on s105(c) or (d) of the section. Boland J found that the particular contracts offended under both s105(c) and (d) of the Act and held they were unfair, harsh or unconscionable under s105(a) and against the public interest s105(b). 67 The question which arises most directly in this appeal is: can it be said that an agreement, which is found to have been entered into without duress and without an intent to exploit, but which produces a differential remuneration which is substantially below that which would be payable under an applicable award can be found to be unfair, harsh and unconscionable or against the public interest? The question requires a consideration as to the proper application of s105(1)(c) and (d) of the Act, in the context of establishing a contract was unfair. 68 In predecessor legislation, the provisions of s105(c) and (d) were similarly recited in the Industrial Arbitration Act 1940 through s88F(1)(d) and (e) and the Industrial Relations Act 1991 through s275(1)(d) and (e). 69 Speaking generally about the application of the unfair contract provisions through s88F of the Industrial Arbitration Act (1940), Gleeson CJ with whom Kirby P and Priestley JA agreed, stated in Incitec v Industrial Court of NSW ((1992) 29 NSWLR 83, 45 IR 155 at 157): . . . Section 88F is concerned with alleged unfairness or harshness or unconscionability of individual contracts of employment. The focus of attention is the contractual relationship between a particular employer and employee. 70 In Davies & Anor v General Transport Development Pty Ltd & Ors [1967] AR 371. Sheldon J commented (at 373) on the section generally saying the provision was directed to: Those who directly avoid . . . regulation by chicanery but also some of those who get their work done for them in a way which gives them a business advantage over competitors so bound (by an award regulating wages).

Sheldon J also commented on the particular sub-sections under s88F(1) saying: . . . the fact that the Commission has been given such massive power makes it imperative that it should be exercised with proper restraint. In particular, when issues arise under (a) or (b), it should not permit itself to become a refuge for those who are merely disgruntled with a bargain entered into on even terms. In my opinion, the discretion should be exercised to protect victims of wrong dealing not to prescribe anodynes. Of course under (d) or (e), action may be required even when there is not moral distinctions between the parties because there the Commission is enforcing more directly an explicit policy. (emphasis added) 71 In Mozzoni v Dean, 1970 AILR Rep 24, McKeon J avoided a contract under s88F(1)(d) saying as to the earnings loss, when the comparison with the award was established and where there was no allegation of fraud by either party, that the intention of the section was: "whether there be moral transgression on the part of one or both of the parties or only 'award shyness', this type of agreement be, generally speaking, not sanctioned."

72 In Hodges v Streets Ice Cream Pty Ltd [1985] 11 IR 60, the Commission in Court Session commented generally about the distinct issues that arise in consideration of applications under s88F(1), stating (at 63): The initial question which arises, provided the contract or arrangement falls within the opening words of the of the section, is whether or not the contract or arrangement offends against s88F(1)(a)(b)(c)(d) or (e). That issue raises a mixed question of fact and law. (Emphasis added.)

73 In Autobake v Budd ((1986) 19 IR 18), the Full Bench of the Commission examining the effect of s88F(1)(d) held (at 28-29): That provision, (which refers to a work-related situation providing a total remuneration less than a person performing the work would have received as an employee engaged on such work), involves a less subjective test than other paragraphs in the section. Whether or not the net difference was only $181.94 or some greater amount, there was a discrepancy which provided the basis for finding under s88F(1)(d). His honour was justified, therefore, in making such a finding. The further discretions exercised by his Honour under the section accordingly arise for consideration. They must be approached, applying the principles concerning appeals from discretionary judgments. . . . It is necessary to consider, therefore, whether, as a matter of discretion, it is proper to avoid the contract and to make orders for payment solely on the bases of the finding relating to s88F(1)(d), and without the overtones arising from finding under other headings. Section 88F was enacted to deal with "work" contracts not only in cases of unfair, harsh or unconscionable dealing, but also in cases where actual remuneration falls short, in practice, of the relevant award rates of pay. Moral considerations need not, therefore, be taken into account when considering whether a contract offends against s88F(1)(d). Does it follow that, where earnings are unexpectedly lower than actual employment would have provided, that of itself is a situation which would justify an order under s88F(1) for avoidance or variation of the contract or, under s88F(2), for payment of moneys? Clearly, the section, as framed, contemplates the exercise of discretion at each stage, not automatic orders, if a shortfall is established, for avoidance, or variation and to provide restitution. We have already referred to the very wide discretions under the section. As was said by Barwick CJ in Stevenson v Barham (1977) 136 CLR 190 at 192:

"The Legislature has apparently left it to the good sense of the Industrial Commission not to use its extensive discretion to interfere with bargains freely made by a person who was under not restraint or inequality or whose labour is not being oppressively exploited." What occurred between the parties in this case was an entrepreneurial exercise. The franchisor stood to make a profit from the "up-front" franchise payment, the rental payments for the Auto-Baker machine and the sale of the raw materials for the manufacture of biscuits, In a general sense, the success of the cross appellants' venture would be to its advantage. For their part, the cross appellants looked forward to operating a profitable business and also perhaps, to its profitable sale to a purchaser in the future, as other franchisees had succeeded in doing. However, neither of these expectation materialised. Whereas no moral distinctions between the parties need be drawn when dealing with the initial question arising, namely, whether or not the contract offended against s88F(1)(d) the discretions which then arise under the section require for their exercise more than a mere comparison between award rates and actual remuneration and the circumstance that a calculated business risk, advisedly taken, has proved unsuccessful . Where such a calculated risk is taken it is not intended by s88F that the other party should become a guarantor, as it were, the business will be successful, or that the party performing the work will receive at least the rates of pay he would have received had he been an employee. Each case has to be considered on its own merits and the discretion of the Commission exercised accordingly. (Emphasis added)

This Honours therefore determined "more than a mere comparison" between remuneration and award rates is required and the particular contract must be considered in order for a finding of unfairness under s105. 74 In Huskisson RSL Sub-Branch Club Ltd v Sullivan (1990) 20 NSWLR 332, the Commission in Court Session considered an application brought under s88F(1)(e) and where the issue raised was that another provision of the Industrial Relations Act (1940), section 92, gave a right to recover Award wages (within a time limit). The Commission held (at 348): In our view, an application based on the general proposition referred to earlier that the contract of employment was unfair because it provided lower (and therefore unjust) rates than those prescribed by the award, does not, prima facie, lie under s 88F. That would be to use s 88F as simply providing alternative or substitute rights and remedies to those prescribed by s 92. . . . . . . A statute should be construed, if the construction is reasonably open, so as to give effect to all of its terms and ensure the attainment of its obvious purpose: see Nokes v Doncaster Amalgamated Collieries, Ltd [1940] AC 1014 at 1022. Accordingly, s 88F should be construed so as to give effect to par (e) with the result that it applies to the present case notwithstanding that s 92 also applies. We conclude on this aspect by observing that where a claim is nothing more nor less than an application for recovery of wages due under an applicable award and has no special characteristic, such as the present case has, which fits it quite unequivocally into the terms of s 88F(1)(e), then the claimant is confined to the right and mode of recovery specified by s 92 (or s 93). Section 88F does not apply to such a case. It cannot be used to circumvent the time bar and other limitations prescribed by s 92. (Emphasis added.)

Their Honours therefore expressed the view that a contract for which it was established there were wages lost brought under s88F(1)(e) needed to reveal a "special characteristic" to bring it within power. 75 The Industrial Relations Commission has applied these principles. Marks J in Wheatley v Armstrong (unreported decision, CT1155 & 1163 of 1992; CT1026 of 1993, 2 February 1995) stating: It is convenient to consider first the provisions of s275(1)(e). In my opinion it cannot be said that the agreement between the respondent and Mr Wheatley was designed to avoid the provisions of the award. Certainly there was no evidence that either of them was aware of the existence of the award or had its provisions in mind at any stage. As I previously indicated both intended that the relationship should be characterised as a share farmer and neither contemplated that an employment relationship would exist.

However this is not determinative as to whether s275(1)(e) applies. It is also necessary to consider whether the agreement does avoid the provisions of the award, presumably even though not designed to do so. In this context it seems to me that "avoid" means "evade" one of the permissible meanings referred to in the 2nd Ed. of the Macquarie Dictionary. There are, of course, cases in which it has been demonstrated that arrangements have been made to avoid the provisions of an industrial award. These include cases such as Davies v General Transport Development Pty Ltd (1967) AR (NSW) 371 and Federated Miscellaneous Workers Union v Wilson Parking (NSW) Pty Ltd (1980) AR (NSW) 352. . . . There is no evidence to indicate that this agreement has the effect of avoiding the provisions of the relevant award and in my opinion the provisions of s275(1)(e) do not apply. To assert that this paragraph applies merely because the provisions of an award do not apply without more (emphasis added) would in my opinion give the paragraph an operation beyond that which it was designed to have and beyond any mischief which it was designed to deal with.

Marks J therefore found no need to apply the provision, but adopted the reasoning in the above authorities and determined "more" than an avoidance of an industrial provision is required to establish an unfairness in a contract (See also Green v Brown [2002] 116 IR 21, Julia Thornthwaite v Australian National Credit Union Ltd [2002] NSWIRComm 240 and Leggett and Anor v Aardvark Security Services Pty Ltd [2000] NSWIRComm 188). 76 Schmidt J in Gregory Robert Cave v Two Lands Services Pty Ltd and Anor [2001] NSWIRComm 35 rejected an application under s105(d) saying at [64]: This was not a case where paragraph (d) of the definition of unfair contract appearing in s105 of the Act applied, because there was no award relied upon as regulating this employment.

Her Honour also referred to the principles enunciated in Autobake and Hodges . 77 On consideration of the above authorities, for the court to determine if a contract offends against s105(1)(c) or (d) requires a determination as to what the relevant award is. Then there is required a simple objective assessment as to whether there was a financial loss under the comparator award provision (s105(c)). Having determined there was a loss, under section 105(d) consideration is required as to whether the contract was "designed" to avoid an industrial instrument. If so "designed" that would give the extra element necessary for it to "unequivocally" fit into s105(d) and would be sufficient to establish an unfairness. However, if the contract was not intended to avoid an industrial instrument, that is, where both the parties are in pari delicto (equally at fault), but in fact "does" avoid the award, then there needs to be a "special characteristic" (Huskisson) to the particular contract or "more than a mere comparison" establishing loss (Autobake), for the contract to be found unfair under s105. The focus must be on the "particular" employment contract being examined. 78 The court then holds discretion to vary the contract and to order compensation reflecting that variation, which compensation is "just in the circumstances" (s106). 79 Boland J found under s105(c) and (d) the contracts, while not designed to avoid the provisions of the award, did in fact avoid the relevant award. His Honour reasoned at [127] of the judgment that the particular contracts in their performance demonstrated "more than a mere loss" (in comparison with the award), or as could be said in the alternative, in the performance of the particular contracts there were "special circumstances" as outlined [at 127] sufficient to establish a finding under s105 of unfairness. 80 I therefore also concur with the orders as proposed. VICE-PRESIDENT 81 The orders of the Court are those proposed by Staff J and myself.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

Industrial Relations Act 1996(NSW)s 105(a),(b),(c)

At a glance

Court

Decision date

Before

Source

Judgment (31 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (33)

Cited By (4)