Alto Artarmon Pty Ltd and anor v BMW Australia Limited

CATCHWORDS: Unfair contract s106 proceedings - motor vehicle dealer contracts - respondent seeks by motion to have proceedings struck out for want of jurisdiction and power - interlocutory strike out application should not be entertained until the appropriate stage in the proceedings - facts have been sufficiently established to consider interlocutory application - work performed by employees or directors of the applicant was not performed in accordance with the dealer agreements - intention and effect of dealer agreements was to create motor vehicle distributorships - dealer agreements do not fall within s106 - court lacks jurisdiction to deal with proceedings - relief sought by applicants is not directed to any provision of dealer agreements whereby work is performed in an industry - relief sought is not within the power of this Court to grant - motion to have proceedings dismissed upheld - summons struck out

LEGISLATION CITED: Industrial Relations Act 1996 ss105, 106

Agar v Hyde (2000) 201 CLR 552 Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27 Batterham v QSR Limited (2006) 226 CLR 237 Caltex Oil (Australia) Pty Ltd v Feenan (1981) 1 NSWLR 168 Fish v Solution 6 Holdings Limited (2006) 225 CLR 180 CASES CITED: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Majik Markets v Brake and Service Centre (1991) 28 NSWLR 443 McDonald's Australia Holdings Limited and anor v Industrial Relations Commission of New South Wales and 2 ors [2005] NSWCA 286 Old UGC v Industrial Relations Commission of New South Wales (2006) 225 CLR 274 Sin Yong Yim and Tai Sik Kim v Industrial Relations Commission of New South Wales and anor [2007] NSWCA 77 Wirraway (NSW) Pty Ltd and anor v Ultratune Australia Pty Ltd [2006] NSWIRComm 300

FIRST AND SECOND APPLICANTS: Mr D Pritchard of counsel Ms R Rana of counsel Solicitor: Mr M Webeck Home Wilkinson Lowry, Lawyers LEGAL REPRESENTATIVES: RESPONDENT: Mr R Goot SC Mr D Villa of counsel Solicitor: Mr P Sweney Minter Ellison

Alto Artarmon Pty Limited and anor v BMW Australia Limited

Application under s 106 of the Industrial Relations Act 1996

1 These are proceedings brought under s 106 of the Industrial Relations Act 1996 ("the Act"), which are constituted by an amended summons for relief. The applicants are Alto Artarmon Pty Ltd and Alto Prestige Pty Ltd and the respondent is BMW Australia Limited. The applicants seek to have found unfair three contracts by which they operate a BMW motor vehicle franchise at Artarmon, a BMW motor vehicle franchise initially at Gordon but now at Pennant Hills and a Mini motor vehicle dealership at Artarmon. The amended summons asserts that each of these contracts are contracts which attract the jurisdiction and power of this Court under s 106 in that they require "by express terms and by necessary intendment, that work be performed in an industry in New South Wales, namely the Automotive Retail Industry." 2 The amended summons states that the respondent has served termination notices of each of the three contracts. Consequent upon the findings of unfairness which are sought in the amended summons, the applicants seek orders by way of primary relief varying the contracts to preclude the respondent from appointing any other dealer or itself in the marketing area covered by the contracts except on account of fundamental breach of contract or in the alternative, varying each of the contracts by providing in effect for a notice period for the exercise of the right to terminate of five years rather than a period of 12 months. Further orders for consequential relief are sought dealing with compensation and other monies payable upon termination of each of the contracts. 3 The respondent has sought by motion to have the proceedings struck out for want of jurisdiction and power. The jurisdictional basis is that the contracts are not within s 106 because they are not contracts whereby a person performs work in any industry. The basis with respect to power is that this Court can only grant relief with respect to any contract or part of a contract that is one whereby a person performs work in any industry. The respondent says the relief sought by the applicants has no relevant nexus with the performance of work by a person in any industry, and is directed to those provisions of the contracts that deal with the circumstances in which each of them may be terminated. 4 Relevantly, ss 105 and 106 of the Act are in the following terms: s 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. s 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.

Factual background 5 Each of the contracts became evidence in the interlocutory proceedings together with other documents that effected variations to each of them. Furthermore, there was admitted into evidence an affidavit of Anthony George Altomonte, the managing director of each of the applicants. Consistent with well accepted practice, I shall accept all of the evidence at its highest in favour of the applicants and the provisions of the contracts will be dealt with in the same way. I shall assume that in due course the amended summons will be appropriately verified and on this basis also the assertions of fact contained within it will be accepted at their highest in favour of the applicants. 6 The parties agreed that the Artarmon dealership agreement was sufficiently representative of the three agreements. Accordingly, it is only necessary that I refer to its provisions. 7 In resisting the motion, the applicants relied on recitals to the agreement that referred to the desire and expectation that "the business endeavours of the Dealer and the Dealer organisation as a whole and the activities of BMW AU will result in the greatest success possible." Furthermore, the recitals continued; "BMW AU and the Dealer will endeavour through their co-operation in the distribution and maintenance of Contract Goods to satisfy in every way the expectations of Customers." 8 "Contract Goods" is defined to mean BMW vehicles and BMW parts. "Customers" is defined, in effect, to mean people acquiring contract goods. 9 By clause 1 entitled "Basis of the agreement", the Dealer is appointed by BMW AU as a Dealer in contract goods and undertakes to use its best endeavours to maximise sales of BMW vehicles and BMW parts in a Territory being an area defined in the agreement. 10 Significantly, clause 1.4 provides that the Dealer "operates its business in its own name, on its own account and at its own risk…." 11 The Dealer is precluded from becoming involved in the sale or distribution of competitive products without the prior written consent of BMW AU. 12 In carrying out its obligations under the agreement, the Dealer is exhorted to continually use its best endeavours to "strengthen the BMW dealer organisation in its entirety", to conduct effective sales promotion and advertising, to comply with the requirements of BMW AU with respect to sales of vehicles and parts and customer service, to endeavour to meet an Annual Dealer Target set by BMW AU, to maintain an adequate inventory of display stock and demonstration vehicles, and to service vehicles in accordance with BMW AU specifications. 13 There are detailed provisions with respect to the premises and offices from which the Dealer's business is to be conducted. These include showrooms and space for new and used cars, presentation sales and storage facilities for BMW parts and the capacity and equipment of service facilities. All of these facilities must meet standards set by BMW AU referred to in schedules to the agreement. 14 The Dealer is required to provide service for all new BMW vehicles in accordance with specifications and requirements set by BMW AU from time to time. The Dealer is also required to store vehicles acquired from BMW AU and to deliver them to its customers. The Dealer is required to participate in product recall campaigns and to handle warranty and goodwill claims for customers even though the customer acquired a vehicle from another BMW dealer. 15 It is the intention of the agreement that vehicles acquired by the Dealer for sale to its customers will actually be purchased so that title passes to the Dealer upon payment of purchase monies to BMW AU. 16 In terms of the "organisational requirements" imposed upon the Dealer, there is a requirement to use data processing wherever possible giving preference to a system recommended by BMW AU and in any event to ensure that its data processing system is compatible with that of BMW AU, there is a requirement to install an accounting system specified by BMW AU and to produce a specified monthly operating report. There are also obligations imposed on the Dealer to advertise and promote BMW products. 17 The applicants emphasised the provisions of the agreement dealing with "personnel requirements". By clause 7.2.1, Key Personnel who are specified in the first schedule are required to ensure that the obligations of the Dealer under the agreement are properly fulfilled. The Key Personnel who are named cover general sales manager, sales manager, service manager, parts manager and group company secretary. There is also a reference in the schedule to the "dealer principal" by name. No change may be made to the persons nominated as key personnel without the prior written consent of BMW AU which consent may be withheld "if BMW AU considers that the change or its effect might impair the performance of this Agreement or other important interests of BMW AU." 18 There is a requirement that the Dealer "employ in all aspects of his business covered by this Agreement sufficiently trained business and technical personnel and ensure their ongoing and further training…." There are also provisions requiring the Dealer to ensure that its personnel "shall, at all times, maintain the image of BMW, have an adequate knowledge of the Vehicles and be polite, helpful and efficient when dealing with customers and members of the public." 19 A dispute arose between the applicants and the respondent in 2001 that was resolved on terms that the parties to these proceedings agreed formed part of the contracts, which are the subject of these proceedings. They concerned the dealerships known as Alto Gordon and Alto Artarmon. Under that agreement a new general manager was to be appointed for Alto Gordon to be approved by BMW AU. A named person was to have no further operational involvement in the BMW franchise, Mr Anthony Altomonte was to have full responsibility for Alto Gordon and Alto Artarmon and another named person was not to be appointed as either the Dealer principal or general manager for Alto Gordon. It was agreed that Alto Gordon would relocate to temporary sales facilities at Pennant Hills with two dedicated service bays and with other conditions pertaining to the Pennant Hills operation. Furthermore, Alto Gordon was required to design, develop and construct a new BMW sales and service facility at a named address at Pennant Hills which would comply with BMW requirements. There are other provisions that are not of significance for these proceedings. 20 The affidavit of Mr Anthony Altomonte explained the manner in which he and others were required to conduct themselves pursuant to the detailed requirements and the extensive measure of control by BMW as contained in the contract. 21 Mr Altomonte said that his family had been associated with BMW dealerships since 1984 and the current contracts have their genesis in documents entered into in 1989. 22 There are approximately 128 persons employed in the three businesses covered by the three contracts. The businesses hold approximately $1.3 million worth of BMW parts stock and the applicants sell about $1.1 million of BMW parts each month. 23 Mr Anthony Altomonte is the Dealer Principal of each of the businesses conducted pursuant to each of the contracts. It is his duty to ensure that the obligations of the applicants pursuant to each of the contracts are complied with whether by himself personally or by other employees. 24 In addition to the principal obligations imposed in connection with the sale of vehicles and parts and the servicing of vehicles and in complying with BMW requirements imposed from time to time, Mr Altomonte has overall responsibility within the applicant organisations for the monitoring of sales of vehicles and parts, the stocking of parts and ensuring that annual sales targets set by BMW are reached. There are matters of detail including the establishment, maintenance, use, signage and hours of business and the like. There are also matters of significance with respect to facilities upgrades, which involves the retention of architects, project managers and builders, and the involvement of BMW in this process. 25 An advertising agency is engaged to produce advertisements in a range of media. The applicants are involved in sponsorship of nine teams in the Gordon Rugby Club Juniors' competition, of Alto BMW annual golf days and Alto BMW horse racing events. There are also functions such as car launches, cocktail functions and drive events, which are organised by Mr Altomonte on behalf of the applicants.

The basis for determination of the strike-out motion 26 There is a well-known line of authority which deals with interlocutory strike-out applications and the circumstances in which they should be dealt with. 27 A convenient starting point is the judgment of Barwick CJ in the High Court of Australia in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125. In a judgment which is often cited, Barwick CJ said: "8. The plaintiff rightly points out that the jurisdiction summarily to terminate an action is to be sparingly employed and is not to be used except in a clear case where the Court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion. I have examined the case law on the subject, to some of which I was referred in argument and to which I append a list of references. There is no need for me to discuss in any detail the various decisions, some of which were given in cases in which the inherent jurisdiction of a court was invoked and others in cases in which counterpart rules to Order 26, r. 18, were the suggested source of authority to deal summarily with the claim in question. It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action - if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; "so obviously untenable that it cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "discloses a case which the Court is satisfied cannot succeed"; "under no possibility can there be a good cause of action"; "be manifest that to allow them" (the pleadings) "to stand would involve useless expense".

9. At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or "so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument"; "so to speak apparent at a glance".

10. As I have said, some of these expressions occur in cases in which the inherent jurisdiction was invoked and others in cases founded on statutory rules of court but although the material available to the court in either type of case may be different the need for exceptional caution in exercising the power whether it be inherent or under statutory rules is the same. Dixon J. (as he then was) sums up a number of authorities in Dey v. Victorian Railways Commissioners (1949) 78 CLR 62 VOL CXII-9 where he says (1949) 78 CLR, at p 91: 'A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process.' Although I can agree with Latham C.J. in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings (1949) 78 CLR, at p 84, in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed." (At pp 128 - 130) 28 More recently, in Agar v Hyde (2000) 201 CLR 552, Gaudron, McHugh, Gummow and Hayne JJ in the High Court of Australia said: "57. It is, of course, well accepted that a court whose jurisdiction is regularly invoked in respect of a local defendant (most often by service of process on that defendant within the geographic limitations of the court's jurisdiction) should not decide the issues raised in those proceedings in a summary way except in the clearest of cases. Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways ( Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91, per Dixon J; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 130, per Barwick CJ), but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way." 29 In Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27, Gleeson CJ, Gummow, Hayne and Crennan JJ in a joint judgment observed that "The statements in General Steel should not be given canonical force." Their Honours then cited [57] from Agar v Hyde, previously set out. 30 As the authorities make clear, an interlocutory strike-out application should not be entertained by a court until the "appropriate stage" has been reached in the proceedings, namely where "the facts, either established by evidence or plainly agreed in terms, enable the Court to determine what the contract or arrangement is or, at least, the parameters of the contract or arrangement. In other words, it seems to us, unless the facts are sufficiently established to enable the Court to be satisfied it has the necessary material to reach a clear and final decision on the question then the appropriate stage has not been reached for such determination to be made." per Fisher CJ, Hungerford and Peterson JJ in the Full Court of the Industrial Court of New South Wales in Nagle v Tilburg (1993) 51 IR 8 (at 11-12). 31 During the course of oral submissions, counsel for the applicants said that they wished to avail themselves of interlocutory processes such as discovery and inspection and the issue of summonses for production. However, during the course of dialogue, Mr Pritchard clarified the applicants' position. That was, that those processes would be utilised during the preparation of the substantive proceedings for hearing. In terms of the interlocutory application currently before the Court, the applicants were content to proceed on the basis of the material that had been admitted into evidence during the interlocutory hearing. I shall proceed on this basis. I shall also proceed on the basis that all of the facts have been sufficiently established to enable the Court to be satisfied that it has the necessary material to reach a clear and final decision on this matter. This is because the amended summons is directed only to each of the written contracts, as amended in writing, all of which material is before the Court. The applicants do not rely on any contracts other than those to which I have referred. Accordingly, there is no further evidence that needs to be established for the purpose of considering this interlocutory application and therefore this is an "appropriate" stage of the proceedings to consider this matter. 32 Before dealing with the relevant principles and their application to the factual circumstances of these proceedings I observe that, in accordance with well established authority, the respondent bears a heavy onus in convincing the Court that there is "a high degree of certainty about the ultimate outcome of the proceedings if it were allowed to go to trial in the ordinary way."

A contract whereby a person performs work in an industry - relevant principles 33 The jurisdiction of this Court under s 106 can only be exercised with respect to either a contract whereby a person performs work in any industry (s 106(1)) or a contract that is related to such a contract and the performance of work is a significant purpose of the arrangements (s 106(2A)). 34 The amended summons, being confined to the three contracts which I have described and which I shall henceforth refer to as "dealer agreements" (the name chosen by the parties by which they are referred to), it is only necessary to consider whether each of these dealer agreements is one falling within s 106(1). There is no reference in the amended summons to any contract related to such a contract as referred to in s 106(2A). 35 The proper approach to construction of the provisions of s 106 has been the subject of much attention in recent years in the High Court of Australia and in the New South Wales Court of Appeal. In Sin Yong Yim and Tae Sik Kim v Industrial Relations Commission of New South Wales and anor [2007] NSWCA 77, Spigelman CJ observed that: "55 Prior authority, both in this Court, in the High Court and in the Privy Council, on the interpretation of s106 has now been superseded by the joint judgments of the High Court in Solution 6 , Batterham and Old UGC supra."

Both Mason P and Handley AJA agreed with his Honour's judgment. The reference by the Chief Justice to the High Court judgments is respectively a reference to Fish v Solution 6 Holdings Limited (2006) 225 CLR 180, Batterham v QSR Limited (2006) 225 CLR 237 and Old UGC v Industrial Relations Commission of New South Wales (2006) 225 CLR 274. 36 In each of these judgments, the High Court by majority described the basis for the exercise of jurisdiction as being a contract (as defined) "according to which a person performs the work (or in consequence of which or in fulfilment of which a person performs that work)". In each case, the performance of work must be performance of work in an industry. (See Solution 6 at [41], Batterham at [13] and Old UGC at [25].) 37 Spigelman CJ observed in Sin Yong Yim that this test "differs from the test found in earlier High Court authority, which focussed on whether the transaction 'leads directly to the performance of work'". At [69]. 38 Sin Yong Yim concerned an agreement described as an "incorporated joint venture". In the agreement, persons named Yim and Kim agreed to join in a business already established by a person known as Choi. They invested funds for the purpose of importing product from Korea. The business was conducted by a company. The agreement anticipated that Mr Choi would perform all the work necessary to conduct the business, the monies to be invested would fund a wage payable to him and for another employee and there was to be a provision of office space where he could perform work. 39 The proceedings initiated by Mr Choi in this Court claimed relief under s 106 of the Act against Messrs Yim and Kim under the provisions of the agreement. No relief was sought against the company that actually conducted the business. 40 On review in the New South Wales Court of Appeal, Spigelman CJ (Mason P and Handley AJA agreeing) said: "58 It is, in my opinion, consistent with the High Court's reformulation of the approach to s106, to conclude that a contract by a proprietor of a business with fellow investors, such as the alleged "Business Agreement", is not a contract "according to which ... in consequence of which or in fulfilment of which" that proprietor performs work. Plainly work is envisaged to be performed, but that is not enough.

59 The Agreement did specify what was called a "wage", but which was payable only "until the ginseng business was self-supporting". This indicates clearly that the Second Respondent's involvement was as a joint venturer rather than as a person performing work. This is reinforced by the fact that the so-called wage was half that provided to the only other envisaged employee. The Business Agreement did not deal in any other way with the performance of work.

60 The contract said to be unfair in the present case is pleaded as a single oral agreement. It is an arrangement amongst investors, two of whom would invest additional funds and the other would retain his shareholding in the business, albeit reduced to one third of the total shares. The joint venture vehicle was to be the company, KGAC. That company would employ, or rather continue to employ, the Second Respondent. The "Business Agreement" as pleaded merely envisaged, but did not establish, the work relationship. It was not, to use the words of s106(1), a contract "whereby a person performs work in (an) industry".

61 In his second judgment, Marks J sought to distinguish the facts of Solution 6 as analysed in this Court. (The High Court judgment had not been delivered.) I am, with respect, unable to agree.

62 The position is, in my opinion, the same as with the Share Sale Agreement considered in Solution 6 . That agreement contained a precondition to completion to the effect that the pre-existing employment contract of the senior executive would be renewed with the new company. Even such a precondition was not enough to characterise the Share Sale Agreement as an agreement "whereby" a person performed work in an industry.

63 In this case, as in Solution 6 , the agreement amongst investors envisaged but did not establish, the required relationship. The work to be performed by the Second Respondent was to be performed in consequence of or in fulfilment of the contract between him and KGAC. The Business Agreement pleaded is the means by which KGAC was to be put in funds for, inter alia, that purpose and identified, in a manner relevant to investors in a joint venture, the anticipated outgoings.

64 Accordingly, the Business Agreement relied upon in these proceedings is not a contract within s106(1) of the Act for much the same reasons as the High Court determined that the contract in Solution 6 did not satisfy the test it propounded in that case. The Business Agreement envisaged an employment contract between the Second Respondent and KGAC, but was not itself a contract "whereby a person performs work".

65 To characterise the Business Agreement as an agreement "whereby a person performs work" is to "understate its nature to the point of misdescription" to apply Kitto J's apt phrase from Ready Mixed Concrete (Victoria) Pty Limited v Federal Commissioner of Taxatio n (1969) 118 CLR 117 at 185, as did Handley JA in McDonald's Australia Holdings Limited v Industrial Relations Commission (NSW) (2005) 144 IR 219; [2005] NSWCCA 286 at [98]." 41 It will be observed that the approach of the New South Wales Court of Appeal in Sin Yong Yim was to identify the contract pursuant to which the actual work was performed, in that case the contract of employment between the company and Mr Choi. Furthermore, the approach involved the characterisation of the agreement as a whole with specific reference to what was envisaged would be the contractual vehicle by which work was performed. Again, this led to the identification of the contract of employment between the company and Mr Choi. 42 Guided by this approach, it is then necessary to have regard to the performance of work in connection with the dealer agreements as relied upon by the applicants to resist the strike-out motion. 43 In my opinion, the strongest case that may be mounted in favour of characterising the dealer agreements as falling within s 106 applies to the work of Mr Anthony Altomonte, to which he deposed in his affidavit and which I have earlier described. It was work said to be performed by him pursuant to his role of Dealer Principal. As I have previously observed, there is a named person as Dealer Principal in the first schedule to the agreement. Relevantly, clause 7.2.1 provides that "BMW AU enters into this Agreement in reliance upon the fact that the Key Personnel specified in the first schedule shall ensure that the obligations of the Dealer under this Agreement are properly fulfilled." 44 It is not necessary for the determination of these proceedings to construe closely the provisions of 7.2.1 as to whether or not "ensure" is intended to mean guarantee or warrant or whether it is intended to apply on a "best endeavours" basis. I observe that in the context of the Dealer Principal, of whom I cannot find any other mention in the agreements, there is an obligation to see that the Dealer carries out all its duties and responsibilities under the agreement in a proper manner. There is no suggestion of the manner in which the Dealer Principal is to carry out these obligations and in what circumstances. Neither the Dealer Principal nor the other persons specified in the first schedule are made parties to the dealer agreements. Indeed, one may speculate whether, as a matter of fact or law, the Dealer Principal is under any contractual obligation to BMW Australia Limited by reason of the provisions of clause 7.2.1 of the Dealer Agreement. Any contractual obligation would appear to be created only between the Dealer and each of the Key Personnel as specified in the first schedule. In the case of Mr Anthony Altomonte, the work which he performs is, in my opinion, taking the evidence at its highest in favour of the applicants, undertaken in his capacity as managing director of the applicants, rather than according to or in consequence of or in fulfilment of the Dealer Agreement. 45 The applicants' submissions, in addition to focusing on the work carried out by Mr Altomonte as Dealer Principal, referred to the incorporated status of the applicants and the fact that work must be performed by a natural person. The submissions said in part: "Clearly, Alto as an incorporated entity cannot undertake the work that is to be performed under the contract and so Alto, as the party to the dealer agreements, must employ people to perform the work in the motor trade industry in New South Wales. There are a number of relevant clauses in the dealer agreements which point to work being performed in accordance with the terms of the agreement, that is, the work being performed can be directly linked to the dealer agreements and is not an indirect consequence of the terms of the contract." 46 Of course, almost every business relationship will envisage the performance of work in order to discharge the obligations that are created. However, it does not follow that the performance of work as envisaged comes within the approach to construction of s 106 as formulated by the High Court of Australia in Solution 6 and the other cases to which I have referred. In circumstances where there is no specification of the actual work to be performed by any particular individual or group of persons and where there is no attendant specification of the conditions under which such work is to be performed, it cannot be said, in my opinion, that the work undertaken by employees or directors of the applicants was done according to, in fulfilment of or in consequence of the dealer agreements. The work was done according to, in fulfilment of, or in consequence of individual contracts of employment between the persons carrying out the work and the applicants. The applicants were compelled to cause the work to be carried out by reason of their obligations created by the dealer agreements. 47 This leads to a consideration of the second aspect of the approach developed by the New South Wales Court of Appeal in Sin Yong Yim. The dealer agreements by name reflect the manner in which they should be characterised. Looked at objectively, they are agreements by which the applicants as dealers acquire motor vehicles from BMW for resale to their customers. They are also obliged to sell BMW parts and to provide servicing of vehicles manufactured by BMW. It is an essential feature of the dealer agreements that the applicants as dealers make available and provide suitable premises for the display and storage and to facilitate the sale of vehicles and parts and to enable vehicles to be serviced. I am conscious that in attempting to characterise in some way the relationship between the parties I may describe that relationship erroneously or deflect attention from the matters requiring consideration for the purpose of resolving these proceedings. It is nevertheless useful to characterise the dealer agreements as creating motor vehicle distributorships as that expression is commonly understood in the community. That is clearly the purpose, intention and effect of the dealer agreements. The applicants complained that BMW Australia Limited exercised a great deal of control over every facet of the dealers' operations and their organisations. This is so, no doubt for good commercial reasons. However, the high degree of control, which I accept, does not necessarily result in any of the work being undertaken by individuals in fulfilment of the applicants' obligations under the agreements as being work which satisfies s 106 for the reasons earlier given. It is work that is necessary to be carried out so that the applicants may satisfy their obligations as distributors of BMW products and as entities authorised to service motor vehicles. The work necessarily performed by individuals which I have described must stand beside and be considered along with the provision of premises and the acquisition of vehicles and parts in the context of the conduct by the dealers of their own businesses, in their own names, on their own account and at their own risk as specifically referred to in clause 1.4 of the dealer agreement. 48 During the course of submissions, I was referred to a number of decided cases that dealt with franchise operations. A consideration of these cases must be undertaken with some caution since the High Court decisions in Solution 6, Batterham and Old UGC (handed down on 18 May 2006) in that cases decided prior to that date may have applied a different approach to construction from that now espoused by the High Court of Australia. I again refer to the judgment of Spigelman CJ in Sin Yong Yim at [55]. Nevertheless, there are some features of these cases that confirm the manner in which I have determined to apply the relevant principles to the circumstances of these proceedings. 49 The principles formulated by the High Court of Australia had previously been utilised by the Privy Council in Caltex Oil (Australia) Pty Ltd v Feenan (1981) 1 NSWLR 168. Those proceedings involved a licence given by Caltex Oil to Mr and Mrs Feenan to operate a service station business conducted on premises owned by Caltex. Caltex granted a non-exclusive licence to use the premises and a lease of the goodwill of the business, which it had previously operated itself. Lord Diplock, whose speech constituted the decision of the Privy Council, described the obligations imposed on the operators of the business in these terms: "The Feenans undertook to conduct the business on the premises during all lawful hours and to use their best endeavours to secure any necessary authority or permission to secure that those lawful hours should be as long as possible. If they should fail to carry it on for any period during lawful trading hours, Caltex could terminate the licence immediately without notice. In fact while the Feenans were running it, the service station was open from 7am to 10.30pm each day and from 8am to 10.30pm on Sundays, or one hundred and seven and a half hours a week. Needless to say, the Feenans were required to purchase all petroleum products sold at the service station from Caltex only although no price was specified. They also undertook not to be concerned in the sale of petroleum products from any other place within a 5 mile radius of the service station." (At 172) 50 The Privy Council held that the work performed by Mr and Mrs Feenan was work in an industry and that "….The remaining question of construction is whether the Solus Contract was a contract 'whereby' they did so. In their Lordships' view this provision in the context of contract or arrangement bears its ordinary meaning of 'in consequence of which' or 'in fulfilment of which'. Either meaning is sufficient to bring the Solus Contract within the description of contracts to which s 88F applies. The Feenans were required to carry on the task of supplying petroleum products to motorists throughout all lawful working hours. In doing so they were fulfilling their contractual obligations to Caltex…." In that Mr and Mrs Feenan had "bound themselves" to perform work which paid employees would otherwise be doing "the Solus Contract falls fairly and squarely within the ambit of s 88F." (At 173 - 4) (s 88F is a predecessor to s 106). 51 Majik Markets v Brake and Service Centre (1991) 28 NSWLR 443 is a decision of the New South Wales Court of Appeal dealing with a franchise arrangement between Majik Markets Pty Ltd and a number of franchisees which allowed them to conduct and operate, at premises leased by Majik, a convenience store which sold among other things Caltex brand motor fuel and other petroleum products. In these proceedings, the franchisee was a corporation. A provision of the franchise agreement was to the effect that a person or persons named in the schedule "shall devote his or their full-time personal attention and effort to the conduct, operation and management of the Business and at all times whilst the premises are open for business, he will maintain adequate personnel to facilitate the checking-out and handling of orders, including the dispensing of motor fuel, and other needs of customers so as to avoid any unnecessary delay to and on the part of customers." There was a requirement also that the franchisee would staff premises with uniformed competent and adequately trained personnel. 52 It was held by Handley JA (Kirby P agreeing) that the franchise contract was a contract whereby work was performed in an industry and that the facts were indistinguishable from those in Caltex Oil v Feenan. Mahoney JA came to the same conclusion. His Honour said: "I am conscious that the franchise agreements contemplate and intend that the franchisees will become the proprietors of businesses, that they may acquire assets, and that they will, as proprietors or otherwise, be involved with the operation of those businesses. But the work to be done in the industry in which the business is to operate was, in my opinion, to be done not merely as a means of carrying out another purpose, viz, the setting up and conduct of a business by the franchisees but was, in the relevant sense, the purpose which the agreement sought to achieve: it was, in my opinion, the purpose of Majik that that work should be done and accordingly the petroleum and other products should be sold and it was the purpose of the franchisee that they would do or cause to be done such things." (At 459) 53 McDonald's Australia Holdings Limited and anor v Industrial Relations Commission of New South Wales and 2 ors [2005] NSWCA 286 is a decision of the New South Wales Court of Appeal. It concerned applications brought under s 106 of the Act on behalf of a licensee/lessee of four McDonalds outlets. The licensee/lessee was a company of which Mr McLaughlin was the sole director and shareholder. Handley JA, with whose reasons for judgment Mason P agreed, concluded that the four lease and licence agreements either collectively or separately were not contracts for the purpose of s 106. His Honour's reasons for judgment were put succinctly and it is appropriate, in the circumstances, to set them out in full: "93 However I am unable to agree that these four transactions, comprising leases and licence agreements, collectively or separately are contracts, agreements or arrangements (contract) whereby Mr McLaughlin performs work in an industry within the meaning of s 106(1). In his affidavit of 4 April 2005 filed in this Court Mr McLaughlin said (para 98) that his company "currently employs in excess of 350 employees of which about 20 to 25 employees are full time".

94 Franchise agreements with a working proprietor or proprietors were held to be within the jurisdiction of the Commission under the predecessor of s 106 in Caltex Oil (Australia) Pty Ltd v Feenan [1981] 1 NSWLR 169 (PC) and Majik Markets Pty Ltd v Brake and Service Centre Drummoyne Pty Ltd (1992) 28 NSWLR 443. The Chief Justice holds that these cases cannot be distinguished and since the subject contracts require Mr McLaughlin to work fulltime in the business they are contracts whereby he performs work in an industry.

95 It seems to me, with respect, that this view involves an over literal construction and application of the section. The earlier franchise cases in the superior courts did not involve contracts with a working proprietor who employed a workforce of this magnitude.

96 The Court decided in Production Spray Painting and Panel Beating Pty Ltd v Newnham (1991) 27 NSWLR 644 that the outright sale of a business to a working proprietor is not a contract whereby the purchaser performs work in an industry. In that case Priestley JA and myself gave examples of other contracts of sale which indirectly led to the performance of work in an industry which are not within the section including (at 656) the sale of a hotel, a grazing property or a city building.

97 A building or engineering contract for a major project will create a lot of employment but such a contract does not lead directly to the performance of work in an industry and does not have a recognisable and direct impact on the conditions of employment of those working on the job: compare Spigelman CJ [para 34].

98 In my judgment the result in such a case would not be different if, in the contract, the proprietor required the contractor to employ identified persons on the project as site manager, architect, or engineer. One could not characterise the contract as a whole as one whereby the named persons performed work in an industry. It could only properly be characterised as a construction contract. To adopt the language of Sir Frank Kitto in Ready Mixed Concrete (Victoria) Pty Ltd v FCT (1969) 118 CLR 177, 184 its characterisation would be "understated to the point of misdescription" if it was described as one whereby those individuals worked in an industry.

99 I have no difficulty in characterising the franchise agreements in Feenan and Majik Markets as contracts within the section although they contemplated the employment of additional staff by the franchisees. The Court could also find, without difficulty, that the terms of the contract had a recognisable and direct impact on the working conditions and remuneration of the proprietors.

100 No such conclusion is open on the facts of the present case. The impact of particular clauses in the leases and licenses on Mr McLaughlin's remuneration and profits would be anything but recognisable and direct. In Brown v Rezitis (1970) 127 CLR 157 Barwick CJ said at 164: '... one of the purposes of the section is to deal with 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, among other things, for the protection of workers in industry.'

101 Barwick CJ recognised that the section is not confined to contracts of that character but nevertheless it seems to me that its basic purpose was to provide a safety net for workers or persons in the position of workers. In my judgment the present application to the Commission attempts to turn the section on its head.

102 Characterisation of a contract to determine whether it is within the jurisdiction of the Commission under s 106 will raise questions of fact and degree in franchise cases near the borderline and the decision may not be an easy one. However there is no difficulty in the present case where the working proprietor's company employs some 350 staff. The distinction is one of substance, not form, and the Commission, in the words of Barwick CJ in Brown v Rezitis at 164, can uncover the real transaction between the parties. The real transaction here does not have to be uncovered, and it is not a contract whereby Mr McLaughlin works in an industry." 54 Spigelman CJ dissented being unable to distinguish the facts in that case from the franchise arrangements in Majik Markets and Caltex Oil v Feenan. 55 I note that Handley JA emphasised, in a characterisation sense, the fact that franchise agreements, which fell within s 106, were those with a working proprietor or proprietors. It follows that franchise agreements, which could not be so characterised, might or would fall outside the reach of s 106. 56 Wirraway (NSW) Pty Ltd and anor v Ultratune Australia Pty Ltd [2006] NSWIRComm 300 is a decision of the Full Bench of this Court. It concerned an interlocutory application to strike out a summons brought under s 106 for want of jurisdiction on the basis that a franchise agreement was not one falling within s 106. The Full Bench determined that the application was premature because not all of the available evidence was before it. Nevertheless, there are observations made by the Full Bench that assist in identifying provisions of a franchise agreement which may result in it being characterised as one falling within s 106. In particular, there was only one outlet being operated with the employment of "a modest number of people, approximately eight in total together with the working proprietor." Furthermore, the franchise agreement required that, in the case of a corporate franchisee, there be nominated a person to operate, manage and conduct the franchise, namely to "run the franchise business." (At [36]). There were specific provisions of the franchise agreement which required the operation of the business to be undertaken in a specified manner, and provisions compelling the undertaking of training programs and the like. 57 As is obvious, each case involving a determination about whether s 106 applies must be decided by reference to its own facts and circumstances. However, by analogy, the approach taken by appellate courts to a variety of different circumstances and factual situations may provide some guidance as to the appropriate approach to a consideration of the issues in a given case. A review of the decisions referred to above and the reasons for judgment reinforce the conclusion that I have earlier expressed in terms of these proceedings. Any work performed under the dealer agreements by the Dealer Principal, or indeed, anyone else, was not performed according to, in fulfilment of or in consequence of the provisions of the dealership agreement as was intended to be conveyed by the use of those words by the High Court in the decisions earlier referred to. Although the dealer agreements envisaged, and indeed compelled, that certain work would necessarily have to be undertaken by the Dealer, there is no specification of the persons who must perform the work (other than by general reference to competence and expertise), there is no requirement imposed on any person to perform work at any particular times or in any particular manner. The particularisation seen in the Caltex v Feenan, Majik Markets and Wirraway contracts is not present in the Dealer Agreements. 58 Furthermore, the decisions of the New South Wales Court of Appeal in McDonalds and in Sin Yong Yim permit of a characterisation of the contract sought to be impugned in s 106 proceedings to determine whether it is a contract of the requisite kind falling within s 106. The dealer agreements, the subject of these proceedings, differ markedly from a contract of the requisite kind. Both Handley JA in McDonalds and Spigelman CJ in Sin Yong Yim refer to a phrase used by Kitto J, which I would adopt for the purpose of these proceedings. That is, to characterise the dealer agreement as an agreement "whereby a person performs work" is to "understate its nature to the point of misdescription." 59 The conclusion which I have reached is based, as I have said, on all of the evidence that is necessary to determine the matter, taking such evidence at its highest in favour of the applicants. In my opinion, it is beyond doubt that the dealer agreements do not fall within s 106 of the Act and this Court lacks jurisdiction to deal with the proceedings. This conclusion will result in the respondent's motion to have the proceedings dismissed being upheld.

The relief sought in relation to the performance of work 60 The respondent submitted that any relief sought by the applicants in the s 106 proceedings can only be directed to those parts of the dealer agreements which fall within s 106, that is those "whereby" a person performs work in an industry. This submission is based on observations of the High Court in Solution 6. Relevantly, I set out [19] and [41] of the joint judgment of Gleeson CJ, Gummow, Hayne, Callinan and Crennan JJ: "19 Because 'contract' is given the extended definition that has been noted earlier, it must be understood as extending to any arrangement or related condition or collateral arrangement of the requisite kind, namely, a contract or arrangement whereby a person performs work in any industry. But what must be identified is the set of arrangements (leaving aside, for the moment, whether those arrangements are or may be contractual or otherwise) according to which (that is, 'whereby') a person performs the relevant work [The Oxford English Dictionary, 2nd ed (1989), vol 20 at 214, gives, as meaning II, 2 of 'whereby': '[b]y means of or by the agency of which; from which (as a source of information); according to which, in the matter of which, etc' (emphasis added)]. What may be declared void or varied is any part of those arrangements: the arrangements in accordance with which a person performs work. ….

41 The second consideration was mentioned earlier in these reasons and is not unrelated to the first. Performance of work in an industry is the hinge about which s 106 turns. It is the arrangements (contractual and non-contractual) whereby a person performs work in an industry that the Commission may avoid or vary. That is, it is the arrangements (contractual and non-contractual) according to which a person performs the work (or in consequence of which or in fulfilment of which a person performs that work) which may be avoided or varied. And although the notion of 'avoiding' an arrangement that is not enforceable may be awkward, determining that some new arrangement will obtain for the future (thus 'varying' the arrangement) presents no such awkward juxtaposition of ideas. Further, to focus attention upon the arrangements whereby a person performs work in an industry, no matter whether the arrangement is found in the contract the parties have made or only in some related condition or collateral arrangement, sufficiently meets the need, identified by Barwick CJ in Brown v Rezitis , to recognise that these provisions of the Act have, as one important purpose, dealing with subterfuges which take workers outside the operation of industrial instruments intended to protect workers in an industry. At the same time, to read s 106 as hinged about performance of work in any industry and empowering the Commission to deal only with such of the arrangements between parties as can be described as a contract whereby a person performs work in any industry confines the jurisdiction of the Commission to declare a contract void or to vary it within bounds that leave intact the jurisdiction of the Supreme Court over other kinds of contractual obligations." (Case reference omitted) 61 Assuming, for the moment, that the conclusion which I have already reached is incorrect, and that there are parts of the dealer agreements which are ones whereby work is performed in an industry, as referred to for example in clause 7.2, it is only those parts of the dealer agreement which may be the subject of relief given under s 106. I have previously referred briefly to the orders sought in the amended summons. In addition to seeking findings of unfairness with respect to the dealer agreements including the variations thereto, the amended summons seeks, in effect, variation of each of the dealer agreements to provide for a period of five years' written notice of termination in lieu of the current provision of 12 months. Furthermore, either in addition to or in the alternative, the amended summons seeks orders that the dealer agreements be varied to provide that upon termination a mechanism is created to enable payment to the dealer by BMW AU of an amount "which represents just and reasonable compensation for the loss caused by such termination." There are further orders sought but they are limited to the amount of notice upon termination and the provision for compensation for loss caused by termination. Finally, orders are sought for the payment of just compensation under s 106 and for indemnification for any income tax or other tax levied by the Australian Commissioner of Taxation consequent upon the payment of compensation. 62 None of the relief sought by the applicants in the proceedings is directed in any way to any part of the dealer agreements that deal with or are related to the performance of work. The focus of attention is on termination and the consequences of termination of the overall dealerships created by the agreements. That is, a termination of the right to sell motor vehicles and parts and to service these vehicles. 63 In these circumstances, in my opinion, it cannot be argued that the relief sought is within the power of this Court to grant. For this reason also I would uphold the respondent's motion.

Costs 64 The question of costs was not argued. Although costs would normally follow the event, I shall reserve costs.

Orders 65 I make the following orders 1) The amended summons is struck out. 2) Costs are reserved. 3) Liberty to apply with respect to costs which should be exercised within one month of this date

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