Choi v Yim and anor

Industrial Relations Commission (NSW)|2004-12-02|Before: Marks J, Mr J

Industrial Relations Commission of New South Wales in Court Session

CITATION : Choi v Yim and anor [2004] NSWIRComm 347 APPLICANT Hyun Sung (Marco) Choi

PARTIES : FIRST RESPONDENT Sin Yong Yim

APPLICANT Mr I Latham of counsel Solicitor: Mr H Macken Beston Macken McManis LEGAL REPRESENTATIVES: RESPONDENTS Mr J Miller of counsel Solicitor: Ms B McIntyre Dibbs Barker Gosling

JUDGMENT: - 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: MARKS J Thursday 2 December 2004

Matter No IRC 7002 of 2001 HYUN SUNG (MARCO) CHOI v SIN YONG YIM AND ANOR No 2 Application under s 106 of the Industrial Relations Act 1996

1 The applicant in these proceedings, Hyun Sung (Marco) Choi, commenced proceedings against the respondents, Sin Yong Yim and Tae Sik Kim, seeking certain relief under s 106 of the Industrial Relations Act 1996 ("the Act"). The respondents sought by motion to have the proceedings struck out for lack of jurisdiction. In interlocutory judgment delivered on 11 December 2003 [(2003) NSWIRComm 425] I declined to strike out the proceedings and determine the question of jurisdiction because I had formed the view that this was not the appropriate time in which to consider that matter. The respondents appealed against this interlocutory decision, which was upheld by a Full Bench of this Court. The matter was remitted to me to determine the respondents' notice of motion. I do so on the basis that I am required to do so by reference to the state of the proceedings and such factual material as is currently available to the Court for this purpose.

2 It was agreed at the further hearing of this matter that the material before the Court upon which the determination of the strike-out application would be made consisted of the summons, a Reply and Response document and an affidavit of the applicant. At the hearing it was agreed by counsel appearing for both the respondent and the applicant that the only material to which I need have reference in determining this matter was such material as described the contract sought to be impugned in the proceedings as set out in the summons. Relevantly, paragraph [23] of the summons contains such particulars of the contract the subject of these proceedings as are available to the Court and as are relevant to the determination of this interlocutory application. Paragraph [23] is in the following terms: "In early March 2000 the Applicant and the Respondents reached an agreement ("the Business Agreement") by which: (a) Yim and Kim would join the Applicant's business and would become directors of and equal shareholders in KGAC. (b) Yim and Kim would invest funds equally and progressively to a joint total of $300,000 during the 2000 calender (sic) year to fund the importation of fresh supplies of ginseng product from Korea, the marketing of that product in Australia and the running expenses of the business. (c) Consistent with a business plan previously developed by the Applicant, two new companies would be created with the names "Korea Insam Australia Centre" and "Ginseng World" with the function of the various companies being as follows: (i) KGAC would continue to import ginseng products (drinks and medicines) from Korea (ii) Korea Insam Australia Centre would import ginseng powder and juice extract and use those raw materials to manufacture ginseng products in Australia; (iii) Ginseng World would handle sales in Australia of products imported into Australia by KGAC and products manufactured in Australia by Korea Insam Australia Centre. (d) The Applicant would do all the work necessary to conduct business including: (i) developing new products (including products for manufacture in Australia); (ii) arranging for the proposed importation of ginseng products; and (iii) marketing of ginseng products, including pursuing the marketing of products to Coles and Woolworths supermarkets (through the a (sic) broker of supermarket stock, NBN) and to other supermarkets directly) (sic). (e) The operating expenses of the business, to be funded by Yim and Kim, would include: (i) a wage of $2,000 per month to the Applicant, until the ginseng business was self-supporting; (ii) a wage of $4,000 per month for an employee to assist in the running of the business together with other office expenses such as phone, facsimile etc estimated at about $1,000 per month. (f) Yim and Kim would provide office space in the premises of Woozoo out of which KGAC could trade and the Applicant could work. (g) Yim and Kim would not work in the business of KGAC but would instead continue to remain engaged full time on their own business activities. (h) All profits earned by KGAC from the import and sale of ginseng products would be shared equally between the Applicant, Yim and Kim. (i) All profits earned by KGAC from the import and sale of Ginseng products would be ploughed back into the business to fund further imports until KGAC was once again self-sufficient."

3 The reference in paragraph [23] to "the business" is a reference to a business described in an earlier paragraph of the summons as being "a business of importing ginseng products into Australia". This business was eventually conducted under the name of Korea Ginseng Australia Centre Pty Ltd ("KGAC").

4 For completeness there is contained at the end of paragraph [23] in the summons a notation "Particulars of Agreement". This states: "The agreement was wholly oral and was conducted in discussion between the Applicant, Yim and Kim at the premises of Woozoo (although the Applicant made notes of the business plan and likely costs)". I observe that the applicant's affidavit sworn in these proceedings was taken through the services of an interpreter. It may be assumed, therefore, that when negotiating the oral agreement the applicant did not speak English. The summons states that the applicant met and became friends with both Yim and Kim through their membership of a Korean veterans' association. Accordingly, the provisions of the contract which form the basis of the determination to be made in these interlocutory proceedings would appear to be a summary of an oral contract negotiated in a language other than English, no doubt drafted by a legal representative acting for the applicant who may, or may not, be familiar with the language in which the oral contract was negotiated.

5 The respondents conceded that for the purpose of considering this application the Court should assume that all of the facts, matters and circumstances contended for in the summons would be proved at final hearing and that these matters should be considered at their highest against the respondents.

6 In summary terms the respondents sought to characterise the contract as being a contract by way of commercial investment made by the respondents into an ongoing business operated by the applicant. The respondents contended that this was not a contract "whereby work is performed as required before jurisdiction and power can be exercised under s 106 of the Act".

7 The meaning of the words "any contract whereby a person performs work in any industry" as contained in s 106(1) and as contained in the predecessors to that section has been the subject of many decisions both at appellate and single judge level. In particular, the meaning of those words have been the subject of a recent decision of the New South Wales Court of Appeal in Solution 6 Holdings Limited v Industrial Relations Commission of New South Wales [2004] NSWCA 200, to which I shall shortly refer. Before doing so however it is necessary to have regard to some earlier appellate decisions.

8 In Stevenson v Barham (1976-1977) 136 CLR 190, Mason and Jacobs JJ in the High Court of Australia in determining the meaning of these words referred to previous decisions in the New South Wales Court of Appeal when determining whether a share farming agreement was one whereby work was performed in an industry. The substance of their Honours' judgment is directed to the rejection of a proposition that to come within the predecessor of s 106 the contract or arrangement must be subversive of the scheme of industrial regulation achieved by or under the Industrial Relations Act. Their Honours held that to come within the section the contract must be one "which leads directly to a person working in any industry ". Their Honours concluded that: "the share-farming agreement provided directly for the employment of the first respondent in the dairy farming or dairying industry and, in accordance with the provisions of the agreement, he performed work in that industry. This, so it seems to us, is the end of the appellant's case in this Court…" (at [202]).

Barwick CJ agreed with the reasons for judgment of Mason and Jacobs JJ.

9 However, this begs the question of when it can be said that a contract is one which "leads directly" to a person working in an industry.

10 I next refer to the decision in the New South Wales Court of Appeal in Production Spray Painting and Panel Beating Pty Ltd v Newnham (1991) 27 NSWLR 644. In these proceedings the Court of Appeal was called upon to consider whether a contract for the sale of a retail ladies boutique business was one whereby work was performed in an industry so as to found jurisdiction under a predecessor to s 106. It had been asserted that the contract for sale contemplated that the purchaser would operate and manage the business and therefore led directly to a person working in the business. This contention was rejected by all members of the Court of Appeal.

11 In considering the matter Mahoney JA said that the relevant section "looks to the purpose of the transaction itself and to whether the purpose of the transaction was that relevant work be performed. In the terms of the section, it is the transaction, that is, the 'contract or arrangement or ...' that is to be the cause of ('whereby') the work being performed. This suggests, I think, that what is in question is not merely an accidental consequence of the transaction but that which was its purpose to bring about" (at [649]). His Honour concluded that the purpose of the transaction was the sale of the business and that the transaction did not have a relevant purpose that the purchasers of the business should perform work in it, even though it was contemplated by the parties to the transaction that the performance of work would be likely. As his Honour said "it was of no interest to the vendor whether the purchasers worked in the business or closed it up".

12 The test was put differently by Priestley and Handley JJA. Their Honours concluded that: "The impugned contract, etc, therefore must directly, that is under or pursuant to its terms, provide for the performance of work in an industry. Accordingly the contrast …is between a contract which leads directly to the performance of work in an industry on the one hand, and on the other a contract which does so only indirectly or in a remote or consequential manner" (at [657]). Their Honours emphasised that although the purchaser of the business intended to work in it, this was not required by the contract of sale. "…the work done by (the purchaser) was not done 'in accordance with the provisions of the agreement', was not 'required' by the agreement, and did not 'fulfil' the purchasers' contractual obligations to the vendor. In no sense was (the purchaser) working for the vendor"(at [657]).

13 It will be seen that the test propounded by Mahoney JA differs in application to the test propounded by Priestley and Handley JJA, although the same ultimate result was achieved by reference to both approaches. Nevertheless, the approach of Mahoney JA is essentially directed to the purpose of the transaction whereas the approach of Priestley and Handley JJA directs attention to the provisions of the agreement by reference to their impact on the work to be done.

14 Euphoric v Ryledar (2002) 117 IR 1 is a judgment of the Full Bench of this Court. The substantive reasons for judgment were given by Schmidt J (Wright J, President and Walton J, Vice-President agreeing). Those proceedings dealt with an agreement for the sale of petroleum products. There was an obligation on the seller to deliver the product to the purchaser at particular places. This obligation was rejected as grounding jurisdiction because the contract did not deal with the work required to effect delivery. "The contract was silent as to how the work involved in effecting delivery would be performed, or by whom. Those were matters entirely for the (seller)" (at [37]). Whilst it was necessary for the petroleum which was sold to be delivered, this was said to be "a consequential result of the sale contract" and (the buyer) "had no interest in how this was done, on what terms, or by whom. They could only complain if they did not receive delivery of the petroleum purchased, at the sites specified. It follows that this contract was simply not one which enlivened the Court's jurisdiction as the result of the delivery obligations" (at [40]).

15 The most recent appellate decision in this area is the judgment of the New South Wales Court of Appeal in Solution 6 Holdings Limited v Industrial Relations Commission of New South Wales [2004] NSWCA 200. The substantive judgment of the Court is that of Spigelman CJ. Mason P and Handley JA agreed in substance with that part of the judgment of the Chief Justice dealing with this particular matter. The proceedings in Solution 6 Holdings arose out of a share sale agreement. The completion was said to be conditional upon a Mr Fish entering into an employment contract with the purchaser and key employees not having resigned or not having expressed an intention to resign.

16 I set out paragraphs [58] and [59] of the judgment of the Chief Justice which encapsulates the approach to construction contended for by his Honour and which was the subject of agreement by Mason P and Handley JA: "[58] Although it is not an alternative test, I find it difficult to conceive of a contract, etc. which can be said to directly lead to the performance of work unless the contract, etc. both envisages the performance of work and has an impact upon the conditions of such performance. It may well be that these are minimum conditions for the conclusion of "directness" to be drawn. [59] In my opinion, the Share Sale Agreement is to be characterised, and characterised only, as a contract for the purchase and sale of a business. It contains provisions dealing with the continuation of existing employment relations and, in one case, for the creation of a new relationship equivalent to the pre-existing relationship, i.e. the transfer of Mr Fish as a senior executive from the operating company to the new holding company. However, it cannot, in my opinion, be said of any of the provisions of this Agreement upon which the Opponents rely, whether individually or for their combined effect, that they lead to the performance of work in an industry in a manner that is 'direct'. It cannot be said that the Share Sale Agreement "directly envisages" the performance of work or has "recognisable impact on the conditions of" that performance (to use the VG Haulage test). Furthermore, it cannot be said that that performance is a purpose of the Share Sale Agreement. Nor can it be said that it provides for the performance of work under or pursuant to its terms (to use the two tests propounded in Production Spray Painting ). Nothing in the Share Sale Agreement requires anyone to perform work (to use a formulation from Production Spray Painting and Majik Markets ). It envisages the continuation of or, in one case, the creation of an employment relationship, but it leads to the performance of work only in an indirect or remote or consequential manner".

17 It is now necessary to have regard to the provisions of the agreement the subject of these proceedings in the context of the state of the law and principles as established by these authorities. One of the matters that needs to be considered is whether the applicant was required to carry out work by reason of the contract. In other words, was it of any interest to the respondents whether the applicant performed work in the business or closed it up. Put another way, can it be said that the respondents had no interest in how the work was to be done, on what terms or by whom? Or, as put by Spigelman CJ, can it be said that the contract directly envisaged that work would be performed by the applicant and that it had a "recognisable impact" on the conditions of that performance?

18 Quite clearly paragraph 23(c) provides that a purpose of the contract was the carrying on of three business activities therein described. Paragraph (d) requires the applicant to "do all the work necessary to conduct the business" and then specifies a number of areas in general terms. Paragraph (e) makes specific reference to the payment of a wage of $2,000 per month to the applicant, albeit until the Ginseng business was self-supporting and by reference to the funding of that wage by the respondents. Nevertheless, the use of the word "wage" is, in my opinion, an incident in common English usage of a word associated with an employment relationship.

19 Mr James Miller of counsel who appeared for the respondents submitted that it would be inappropriate to construe the use of the word "wage" in this way. However, paragraph (e)(ii) also refers to a wage payable to "an employee". I can only assume that whoever used the word "wage" for the purpose of describing the contract intended to use the word consistently within paragraph (e). Once the respondents asserted that the interlocutory application would be determined by reference only to the material contained within the summons, then the respondents are so confined, including the ordinary English usage of the words used, whether or not they bear any resemblance to the words used by the parties when conducting the negotiations and reaching agreement on the terms of the contract.

20 Finally, I note that there is a reference in paragraph (f) to the provision of office space in the premises of Woozoo out of which "the applicant could work".

21 Not unnaturally, the competing submissions of the parties emphasised different aspects of the agreement. The respondents contended that the agreement was, in essence, one whereby they invested in an existing business and that whilst the work undertaken by the applicant was contemplated by the agreement the agreement did not lead directly to the employment of any persons. These submissions emphasised that if there was to be an agreement for the performance of work by the applicant it would be an agreement between him and KGAC. Likewise, it was submitted that there was no detail in the agreement touching upon the manner in which the work would be performed by the applicant militating against its characterisation as an agreement whereby work is performed in an industry. There was insufficient impact upon the conditions pertaining to the performance of work.

22 The submissions of Mr I Latham of counsel on behalf of the applicant highlighted the difficulty in applying the various formulations of the circumstances in which an agreement would be one whereby work was performed in an industry as contained in the various appellate authorities to which I have referred. Mr Latham submitted that the performance of work was directly envisaged by the agreement, that there was some impact on the performance of that work and, although not necessarily precise, was at least, if not more detailed than that which was the subject of the High Court decision in Stevenson v Barham. He also referred to the fact that the applicant was required to perform work and that this was therefore one of the purposes of the agreement.

23 There is obvious tension in the approach to construction contended for by Mahoney JA in Production Spray Painting when compared with the formulation of the test by Priestley and Handley JJA. Perhaps the difficulty lies in the manner in which the "purpose" test as formulated by Mahoney JA is to be applied. In obvious cases it may be possible to characterise in general terms an agreement so as to reflect not only the predominant purpose but also adequately reflect what was intended by reference to all of the operative provisions of the agreement. Thus, it may be possible as in Solution 6 to characterise the agreement overall as a share-sale agreement and to be able to describe all of the operative provisions as doing nothing more than supporting the overall intention of the agreement. However, there may be circumstances in which an agreement for the sale of shares or for investment in a business may contain detailed provisions relating to the employment of a particular person on particular terms. I do not understand the judgment of Mahoney JA to require a consideration of whether an agreement is one whereby work is performed in an industry to be determined solely by reference to a predominant or overall purpose of the agreement without reference to any of its detailed provisions. Indeed, the approach of Spigelman CJ in Solution 6 would seem to indicate to the contrary. It is permissible to have regard to any provisions within such an agreement which might directly impact upon the performance of work by a particular person.

24 I conclude that the provisions of the contract upon which I am required to determine this interlocutory matter differ significantly from the share sale agreement which was the subject of the determination by the Court of Appeal in Solution 6. I have previously described the provisions of that agreement in terms of any employment situation and they are to be contrasted with the provisions of the contract the subject of these proceedings. There is no mention of the work to be performed by the applicant as being a condition precedent to the operation of the contract; rather the contract specifically intends that the applicant will perform the task of running the business as described and will be paid a wage for doing so, at least until a certain stage is reached in terms of financial viability. Likewise, it cannot be said that whether or not the applicant ran the businesses would be of no concern to the respondents. The contract clearly anticipates that the applicant will perform the work required of him. In fact he is required to "do all the work necessary" to conduct the business activities which are described. This, I think also sufficiently distinguishes the factual matrix of these proceedings from Ryledar. The applicant has had to work to make the investment feasible but there is greater specificity concerning the work including the payment of a wage.

25 For these reasons I am of the opinion that it cannot be asserted that the jurisdiction of this Court can under no circumstances be utilised by the applicant for the purpose of these proceedings. As I pointed out in my earlier judgment, based on well-known authority in this Court, the burden on the respondents in securing an order dismissing the summons for lack of jurisdiction is a heavy one. It has to be "plain that the invocation of the jurisdiction impugned is wholly misconceived or, upon analysis, lacks an arguable legal foundation" (see Kirby P (as his Honour then was) in the New South Wales Court of Appeal in Majik Markets Pty Ltd v Brake and Service Centre Drummoyne Pty Ltd (1991) 28 NSWLR 443 at 446). I am unable to conclude that there is no arguable legal foundation for the applicant's case nor that the proceedings are wholly misconceived in terms of the jurisdiction of this Court, on the basis, as I have emphasised, of the provisions of the contract which I have considered for the purposes of this interlocutory application.

26 Accordingly, the notice of motion is dismissed. There seems no reason why costs should not follow the event. The respondents are to pay the applicant's costs of the notice of motion assessed under the Legal Profession Act in default of agreement.

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Judgment (35 paragraphs)

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