Brown v Rezitis

High Court of Australia|1970-07-01|Before: Owen JJ

High Court of Australia Barwick C.J. McTiernan, Menzies, Windeyer and Owen JJ. Brown v Rezitis [1970] HCA 56

ORDER Appeal allowed with costs. Order of the Supreme Court of New South Wales set aside and in lieu thereof order that the rule nisi for a writ of certiorari be made absolute, that a writ of certiorari issue to remove into the Supreme Court so much of the order of the Industrial Commission of New South Wales made on 4th July 1969 as ordered the appellants and Brian Joyce jointly and severally to pay to the respondent the sum of $7,579.19 and that upon such removal the same be quashed and that the respondents pay the appellant's costs of the application for the writ of certiorari.

The respondents to this appeal successfully sought from the Industrial Commission of New South Wales orders under s. 88F of the Industrial Arbitration Act, 1940-1967 NSW (the Act) in respect of certain contractual arrangements made by them with Imisons Metal Sand Filling Suppliers Pty Ltd (the company).

88f. (1) The commission may make an order or award declaring void in whole or in part or varying in whole or in part and either ab initio or from some other time any contract or arrangement or any condition or collateral arrangement relating thereto whereby a person performs work in any industry on the grounds that the contract or arrangement or any condition or collateral arrangement relating thereto -

(c) is against the public interest. Without limiting the generality of the words "public interest" regard shall be had in considering the question of public interest to the effect such a 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, or

(d) provides or has provided a total remuneration less than a person performing the work would have received as an employee performing such work, or

(e) was designed to or does avoid the provisions of an award or agreement.

(2) The commission, in making an order or award pursuant to subsection one of this section, may make such order as to the payment of money in connection with any contract, arrangement, condition or collateral arrangement declared void, in whole or in part, or varied in whole or in part, as may appear to the commission to be just in the circumstances of the case.

(3) The commission may make such order as to the payment of costs in any proceedings under this section, as may appear to it to be just and may assess the amount of such costs.

The Industrial Commission of New South Wales (the Commission) found that the contract between the respondents and the company was (a) unfair, (b) harsh and unconscionable, (c) provided a total remuneration less than that a person performing the work would have received as an employee performing such work and (d) was designed to avoid the provisions in the award made under the Act.

The orders which the Commission made were, first, an order that the contract between that company and the respondents made in writing on 12th November 1968 be declared wholly void as from its making except in so far as it gave a right to remuneration which had been received by the respondents for work actually performed by them under the contract: second, that the company, a Mr. Joyce, not a party to this appeal, and the appellants do jointly and severally forthwith pay to the respondents the sum of $7,579.19: third, that the company, the said Mr. Joyce and the appellants do jointly and severally pay the respondents' assessed costs of the proceedings.

The appellants sought of the Supreme Court of New South Wales a writ of prohibition or in the alternative a writ of certiorari to prohibit or quash as the case may be so much of these orders as were directed to them on the ground that the Commission had no jurisdiction under s. 88F to make any such order against any person not a party to the contract or arrangement which the Commission had varied or declared to be void. The Supreme Court refused the appellants' application [1] . This Court is now asked to reverse that decision and to order the issue of one or other of those prerogative writs.

It is unnecessary to go into the facts of the matter in order to resolve the principal question which arises on the appeal, which is as to the proper construction of s. 88F as it presently stands. However, as something does turn in relation to the particular orders made in this case on the relationship of the parties to each other, it should be observed that by the agreement, the subject of the declaration by the Commission, the company, in consideration of the sum of $2,000 paid to it by the respondents, promised to engage the respondents "for the cartage of goods with payments for work performed in accordance with a schedule of rates", though in fact no such schedule appears to have existed. The company agreed to provide the respondents with sufficient cartage work to enable them to earn a minimum average amount of $200 per week gross, the respondents for their part agreeing to provide a suitable vehicle which they would keep in good order and comprehensively insured. The respondents were to be paid on a week to week basis or no later than at intervals of thirty days, the company agreeing to advance to them from their earnings $100 per week.

The company had a paid-up capital of $4. The appellant, S. W. Logan held three shares in the company and the appellant, Keith W. Logan, one share: but it would appear that these shares were held in trust for the appellant, Brown, who is the manager of the company. S. W. Logan is the accountant/secretary of the company. S. W. Logan received from the company the sum of $1,400 though no such sum was due to him for accountancy fees or, so far as appeared, on any other account.

John Royce and Associates Pty Ltd, an appellant, was a business agent which acted on behalf of the company in arranging the contract with the respondents. This appellant is a limited company with a paid-up capital of $2. The appellants, F. E. v Hardie and A. P. Hardie, are the only shareholders of that company; F. E. v Hardie is its managing director and A. P. Hardie its secretary. The other person against whom an order for payment of money was made was a salesman named Joyce employed as such by John Royce and Associates Pty Ltd That company received $1,000 from the company as its commission for arranging the contract with the respondents: of this sum the salesman Joyce received $300.

The respondents were given some cartage work by the company and were paid certain sums of money. However, the representations which had been made both by the company and by the agents and the contractual promises of the company as to the amount of available work and the amount of money to be earned by the respondents were not made good. Over a period of eighteen weeks during which the respondents carried on under the contract they received the total sum of $2,135.99. They had purchased a vehicle in order to perform their part of the contract and in respect to this vehicle they paid outgoings and suffered depreciation. Had the respondents been employed as carters and had worked the hours they actually worked in performance of the contract they would have been paid under the appropriate award the sum of $1,192.47.

The sum of $7,579.19 ordered to be paid jointly and severally by the company, Mr. Joyce and the appellants, was made up as follows:

Return of $2,000 paid for contract $2,000.00 Loss on truck - cash price of truck $10,030 less present value $5,000 5,030.00 Registration 246.15 Insurance 411.69 Repairs and service 640.03 Road Taxes 194.84 Wages as per award - 6 weeks at $48.85 per week 293.10 12 weeks at $52.35 per week 628.20 Overtime 271.17 9,715.18 Less Total Receipts 2,135.99 $7,579.19

The principal submission made by the appellants is that the only persons who can be made parties to a proceeding under s. 88F are the persons who are the contracting parties to the contract, arrangement, condition or collateral arrangement (contract or arrangement) which the Commission is asked to vary or to declare void and that therefore sub-s. (2), being a provision to enable the Commission to make orders consequential upon the variation or avoidance of the contract or arrangement must be limited in its operation to those same parties. Hence it is submitted that the power to make an order for the payment of money is limited to the making of an order for payment of money by one of the parties to the contract or arrangement which has been varied or declared to be void.

An alternative submission was that the same conclusion could be reached by applying the expression in the sub-section "in connection with any contract, arrangement, condition or collateral arrangement". It was said that these words require that the money the subject of an order for payment must be money which had been paid or was payable in connexion with the contract or arrangement varied or avoided. Therefore, so it was said, the order under sub-s. (2) must be confined to money which had been paid or was payable by one of the parties to the other party or parties to the contract or arrangement.

In my opinion, even if the proceedings for the variation or avoidance of the contract or arrangement must be initiated by one of the parties to the contract or arrangement, the parties to the proceedings are not necessarily limited to those parties. It must be borne in mind that one of the purposes of the section is to deal with subterfuges, subterfuges which will take the worker out of the relationship of master and servant and therefore out of the operation of an industrial award designed, amongst other things, for the protection of workers in industry. There may be persons involved in the subterfuge who are not parties to the contract or arrangement but who are in reality the actors deriving benefit from the making or the execution of the contract or arrangement.

Also the power given to the Commission includes a power to declare the contractual arrangements void as from their making, not merely void as between the parties, but absolutely void. If there are other persons whose rights are known to depend on the continuance of the contract as a valid instrument according to its terms, then natural justice may in the circumstances require the Commission to afford such persons an opportunity to be heard. Again the avoidance of the contract or arrangement may be a step in uncovering the real transaction benefiting at the expense of the worker parties other than those in whose name the contract or arrangement was apparently made.

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

But though there is a generality in the language employed in the sub-section the power to make an order for the payment of money is not, in my opinion, unlimited particularly as to the persons against whom such an order may be made. The problem is to ascertain the limitation by construction of the section. It seems to me that the expression "in connection with" the contract or arrangement varied or avoided provides the necessary limitation as to the nature of the orders for payment of money which can be made and as to the person against whom they may be made. The draftsmanship of the section is inadequate: but I think the expressed intention as to this limitation can be derived from the sub-section read as a whole. Whilst it can be said that the expression "in connection with" is of wide import, it does emphasize the need for a close connexion between the order made and the contract or arrangement varied or avoided. In my opinion, the power to make an order for the payment of money is at best no more than a power to make such an order as can reasonably be thought to have a real connexion with the making, variation or avoidance of the contract or arrangement which has been varied or avoided. It may in truth be limited to a power to make an order for payment of money which has in fact a real connexion with the making, variation or avoidance of the contract or arrangement. However, in either case it will, of course, include power to make an order for payment of money which has been paid or which was payable under the contract arrangements themselves. But, in my opinion, the power will not be limited to the making of such orders. It will extend to ordering the payment of money where the order on the larger view of the jurisdiction given by the sub-section could be considered to be appropriate to effect wholly or partially the restitution of the parties to their former position upon the variation or avoidance of the contract or arrangement. In my opinion, the limitation of the power to order the payment of money to such orders either as are or as may be considered in the circumstances to be connected with the making, performance, variation or avoidance of the contract or arrangement sufficiently limits the power and leaves room for supervision of the Commission by a Court having power to issue prerogative writs so as to confine the Commission within the granted power. Consequently I am unable to accept the submission made by the appellants that an order made by the Commission for the payment of money by any person other than a party to the contract or arrangement varied or avoided is necessarily beyond the power of the Commission. Whether or not it is so depends upon all the circumstances and the terms of the order itself.

There remain, however, several matters to be decided in connexion with the orders made by the Commission. The propriety as distinct from the validity of the order made by the Commission cannot be examined in these proceedings nor can an order which is in excess of jurisdiction be reduced to confine it within jurisdiction. The motion is for a prerogative writ. But an order which is of a kind which at best could not conceivably be thought to be in connexion with the contractual arrangement varied or avoided is not merely erroneous: it would, in my opinion, be invalid. Being beyond what could conceivably be thought to be within the range of permissible orders it is in excess of any power which the section purports to give to the Commission. If the lesser view of the Commission's relevant jurisdiction be accepted, such orders would plainly be in excess of power. But I will examine the orders made in this case on the footing of the larger view of the Commission's jurisdiction, that is to say, on the footing that it has power to make orders which can reasonably be thought to have the necessary connexion with the contract or arrangement.

The first question which presents itself is whether any order against the two Logans who are appellants could in the circumstances of the case conceivably be thought to be appropriate to the adjustment of the rights of the parties consequent on the avoidance of the contractual arrangements. The second is whether the order made against the company, Mr. Joyce and all the appellants jointly and severally to pay a total sum could conceivably be so regarded.

An order avoiding the contractual arrangements between the company and the respondents was, in my opinion, within the jurisdiction of the Commission. Orders placing the respondents in the position they were in before the contract was made could therefore be made by the Commission, the orders not being limited to orders against the parties to the contract or arrangement.

When a contract is set aside as from its making so that it is as if it never were, a party to it may be seen to have performed at the request of the other party work for which a rate of wages is fixed by an award of the Commission. Where such work is done at the request express or implied of a person s. 92 (1) of the Act makes that person liable to pay in full the appropriate amount of wages according to the award and s. 92 (2) gives the worker a right of recovery of the amount before an industrial magistrate provided application therefore is made within twelve months of the date of the termination of the "employment". That date, in circumstances such as the present, would be the date of the last day on which one party worked for the other. Where such a remedy is open to the worker, it may be sufficient when making orders under s. 88F to leave the worker to pursue his remedy under s. 92 (2) and there may be no need to include in any orders made under s. 88F for payment of money any sum to compensate the worker for the loss of wages.

In fact, in the present case, the Commission included in its calculation of the total sum it ordered to be paid a sum for "wages as per award". Such wages would, as such, only be payable by the person on whom s. 92 laid the obligation to pay. But I think the item in the Commission's calculation ought to be treated as a sum by way of compensation for not having received wages for the work actually performed. Apparently the Commission took the view that the company had no means to pay any such sum and that others of the appellants because of their association with the making of the contract ought to share the company's liability to make good the loss of wages. I have come to the conclusion that a sum by way of compensation for wages unpaid, particularly if irrecoverable from the persons on whom the Act would otherwise place an obligation to pay, can properly be included in an order made under s. 88F for payment of money.

But I cannot conceive of any reason in the circumstances of this case why Mr. Joyce the salesman should be ordered to pay an amount by way of compensation for non-receipt of such wages under an order made "in connection with the contract or arrangement" which the Commission had avoided.

I have already indicated the relationship of the appellants Logan to the company. Assuming that the Commission was entitled to go behind the incorporation of the company and to include its managers and shareholders in the orders for payment of money made in the case - and, as at present advised, I see no reason why under a section such as s. 88F the Commission should not do so - it seems to me that persons who were not beneficial shareholders could not be included in an order for the payment of money made in connexion with the varied or avoided contract or arrangement merely because they held shares in the company on trust for some known person, even if that person had been connected with the making or operation of the contract or arrangement.

The only other basis for an order for payment of money against these appellants in this case could be that they had received the proceeds of the contract or arrangement or were in some way culpably associated with its making or operation. But, though one of them received money from the company apparently without giving any consideration therefor, I can see no evidence of any connexion between that payment and the formation or execution of the contract. Further, in any case, in my opinion, an order for the payment by these appellants of a sum of money which was not limited in amount to represent their association with the making or execution of the contract could not be thought in the circumstances of the case to be an order for the payment of money in connexion with the contract or arrangement. This reasoning if applied to the case of the salesman Joyce necessarily leads to the conclusion that an order for the payment by him of the total sum of $7,579.19 could not possibly be regarded as an order within the jurisdiction of the Commission.

For these various reasons, any one of which would suffice to support the conclusion, I am of opinion that an order for payment of $7,579.19 jointly and severally by the appellants and Mr. Joyce was beyond the jurisdiction of the Commission. Orders for some amount could have been made in the circumstances of this case against the appellants severally with the possible exception of the appellants Logan, and probably some sum could be ordered to be paid jointly and severally by some of the appellants. But the joint and several nature of the obligation to pay the total sum ordered to be paid provides sufficient reason that the order of the Commission is in excess of the jurisdiction conferred on it by s. 88F.

In conclusion, I should point out that in expressing myself so far I have treated the Commission as having jurisdiction under s. 88F to make orders for the payment of money which it considers are orders in connexion with the contract or arrangement. I have not regarded the Commission's jurisdiction as limited to the making of orders which in fact, i.e. in the opinion of a supervisory court, are orders for payment of money in connexion with the varied or avoided contract or arrangement. Taking the view I have as to the lack of conceivable connexion of the order of the Commission with the avoided contract, I have found no need to resolve the precise basis in the relevant respects of the Commission's jurisdiction under s. 88F to make orders for the payment of money.

In my opinion, the appeal should be allowed and a writ of certiorari issued to quash the orders made by the Commission for the payment of money. The Commission's declaration and order for costs stand. The power to make proper orders for payment of money remains unexercised.

The late Mr. Justice Richards, a member of the Industrial Commission of New South Wales, was named as a respondent party to this application. His Honour appeared by counsel in the Supreme Court to submit to such orders as the Court might make. He died after the judgment of the Supreme Court and before the hearing of the appeal in this Court. An application was made by the appellants to substitute the Industrial Commission of New South Wales as a respondent party in lieu of Mr. Justice Richards. Counsel appeared for the Industrial Commission to consent to such a course.

In my opinion, the order sought should be made on the footing that the nomination of Mr. Justice Richards as a respondent party was from the outset erroneous as the orders under attack were orders of the Industrial Commission which ought to have been named as a respondent. The substitution should now be made as the correction of a false description of a party and not as the substitution of one party for another.

The Chief Justice has, in a judgment which I have had the advantage of reading, set out the circumstances in which this Court is called upon to consider the meaning and application of s. 88F of the Industrial Arbitration Act, 1940-1967 NSW.

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 a position than if he had been working under a contract of employment protected by award conditions. The central power conferred is to avoid or vary the contract or arrangement for work actually made, upon proof of one of the grounds stated. These have in common the element that advantage has been taken of a worker to obtain cheap labour. This power is accompanied by an ancillary power to -

make such order as to the payment of money in connection with any contract, arrangement, condition or collateral arrangement declared void, in whole or in part, or varied in whole or in part, as may appear to the commission to be just in the circumstances of the case.

It is to be noticed that the limitation upon this ancillary power is that the payment ordered must be "of money in connection with" the contract or arrangement avoided or varied. This requirement is readily enough applicable if the contract or arrangement be but varied, for, in such a case, there remains a contract or arrangement which can, as varied, be enforced. It is, however, more difficult to apply the words used in a case where the contract or arrangement has been altogether avoided. In such a case, what is a payment of money "in connection with" the avoided contract or arrangement? It seems to me, without exhausting the meaning of the phrase, that a payment of money in respect of (1) work done, or (2) money spent, or (3) obligations incurred, under the avoided contract or arrangement, is properly to be regarded as a payment in connexion therewith so long as the person who is ordered to make the payment is a person who was connected in some way with the making of the contract, or the work done, or the expenditure made, or the obligation incurred thereunder. Such persons could, I think, be ordered as it were to recompense the worker for what he has lost. Thus, if, under a harsh and unconscionable arrangement between an insolvent company and two workers, a swimming pool had been installed at the home of a director of the company, it would be within the power of the Court, in setting aside the arrangement and after giving him an opportunity to be heard, to order the director to make a payment which would put the workers in the same position as if, in doing the work, they had been his employees. I think it would be a like case if work were to have been done for a shareholder of a company which made such an arrangement. I would not think, however, that work done for the advantage of a director could be the basis of an order against a shareholder who had nothing to do with the matter, even if he held his shares beneficially. Unless something more were to appear - such as, for instance, that the company was a one-man company - a mere shareholder would be a stranger to any of the matters for which the section provides a remedy arising out of a contract or arrangement by a company.

I do not doubt that the Commission has a wide discretion in determining not only what money should be paid but by whom it should be paid. It is not for a Court, from which a writ of prohibition or certiorari is sought in relation to an order of the Commission, to exercise for itself the discretion given by the statute to the Commission. A Court can supervise the Commission by means of prerogative writs only when it is satisfied that the payment which has been ordered is one outside the power conferred upon the Commission by the section. Thus, for instance, the making of an order to pay remuneration for work done against a complete stranger to the offending contract or arrangement, or what was done thereunder, would obviously afford a fit occasion for control of the Commission by prerogative writ.

There being limits to the power of the Commission, what is to be said of the order against the diverse group of persons described in the judgment of the Chief Justice and made against them jointly and severally to pay $7,579.19 made up as follows:

In my opinion the order as made was outside the power conferred by s. 88F. I would not be prepared to say that any one of the items set out could not have been the subject of some limited order but to order that each and all the appellants pay the whole sum of $7,579.19 does seem to me to be in excess of power.

Thus, what is the justification for an order against Keith W. Logan, for instance, to pay the respondents $7,579.19 when, so far as appears, he had no connexion with the making of the avoided contract, or with any sum paid or lost by the respondents, or in work done by the respondents as provided by the contract, and the only basis for the order against him could be that he was a bare trustee of one of the shares in Imisons Metal Sand Filling Suppliers Pty Ltd, the company which made the contract with the respondents that has been avoided.

Moreover, the section does not, so it seems to me, authorize adding together a number of different payments to be made, and the making of an order for the total against persons who may have had some connexion with one of the payments included in the addition, but not with the whole amount ordered to be paid. Thus, although I would not exclude the sums of $293.10, $628.20 and $271.17 ordered to be paid as so-called wages from a payment that could be ordered under the section - whether or not payment of these sums could be ordered under s. 92 of the Act - I do not read the section as authorizing an order that payment of these sums as compensation for work done should be made by, for instance, a mere shareholder in John Royce and Associates Pty Ltd, the business agents who negotiated the arrangement between Imisons Metal Sand Filling Suppliers Pty Ltd and the respondents. Of course, upon my reading of the section, the business agent itself could be ordered to repay any moneys paid to it by the respondents for the contract, but to treat a person as liable for the whole $7,579.19, including wages at award rates, because he held a share in the business agent who negotiated the offending contract, seems to me to transgress the limits of the section.

While, therefore, being satisfied that any of the items forming part of the sum of $7,579.19 ordered to be paid to the respondents could, in the circumstances, be the subject of an appropriate order under s. 88F, I am also satisfied that a blanket order that the whole sum should be paid by each of the appellants - among others - was in excess of power.

While, therefore, agreeing with the decision [1] of the Court of Appeal of the Supreme Court that an order under s. 88F may, in appropriate circumstances, be made against a person who is not a party to the avoided contract, I rest my decision that certiorari should go upon a ground which, it seems, that Court did not consider.

A point was taken on behalf of the respondents that s. 84 of the Act protects the Commission from the prerogative writs sought, but it seems to me that s. 84, while denying prohibition or certiorari "in respect of any award relating to any industrial matter or any other matter which, on the face of the proceedings, appears to be or to relate to an industrial matter" does not extend this protection to orders of the Commission which are not of that description. Section 88F confers upon the Commission the power to make orders which cannot be comprehended within the description of orders relating to or appearing to relate to industrial matters. It follows that, in respect of orders made under s. 88F, prohibition or certiorari will lie notwithstanding s. 84.

Accordingly, I agree with the Chief Justice that the order as made went beyond the jurisdiction of the Industrial Commission, that certiorari should go to it to quash its order, but, of course, without prejudice to the Commission making such further order or orders as are within its jurisdiction in connexion with the contract that has been set aside.

I agree in the order that the Chief Justice proposes. For the reasons he gives I think that the orders made by the Commission for the payment of moneys were not authorized by s. 88F of the Industrial Arbitration Act, 1940-1967 NSW. As I see the case, they were not reasonably capable of being considered to be in connexion, in the statutory sense, with the contract declared void. Saying that does not deny the continuing existence of a power to make proper orders for the payment of money.

I agree with the orders proposed by the Chief Justice and with his reasons.

At a glance

Court

Decision date

Before

Source

Judgment (53 paragraphs)

Parties