Choi v Yim & Anor

INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: MARKS J Thursday 11 December 2003 Matter No IRC 7002 of 2001

HYUN SUNG (MARCO) CHOI v SIN YONG YIM & ANOR Application under s 106 of the Industrial Relations Act 1996 INTERLOCUTORY JUDGMENT ON STRIKE OUT APPLICATION NSWIRComm 425 [2003]

1 These interlocutory proceedings relate to a summons filed by the applicant Hyun Sung (Marco) Choi in which he seeks certain relief under s 106 of the Industrial Relations Act 1996 ("the Act") against the respondents Sin Yong Yim and Tae Sik Kim.

2 Sections 105 and 106 of the Act are in the following terms: 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.

106 Power of the 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. (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.

3 The summons in summary alleges that the applicant had established a business importing ginseng products from Korea. The business failed when it was allegedly the subject of fraud by a customer. The applicant, following discussions with the respondents allegedly entered into an agreement made orally by which the respondents would invest funds in the business, would become directors and equal shareholders with the applicant in a corporate entity being the vehicle which conducted the business and, relevantly: (d) The applicant would do all the work necessary to conduct the 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 product to Coles and Woolworths supermarkets (through the a (sic) broker of supermarket stock, NBN) and to other supermarkets directly). (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.

4 The summons alleges that the respondents withdrew from the business after contributing initial capital and that their failure to support the business financially brought about a situation whereby the applicant was removed as a director from the business and the business has, in effect, been destroyed.

5 The summons contains allegations that the business agreement was an unfair contract within s 106 (1) of the Act with particular reference to "the conduct of the Respondents." Particulars given include the following:

(a) The Respondents, without proper cause and without paying any compensation, unfairly and unjustly excluded the Applicant from the business KGAC. (b) The Respondents have destroyed the business built by the Applicant under the name KGAC. (c) The Respondents, in August 2000, ceased paying the Applicant for work performed under the Business Agreement. (d) In all the circumstances, the weekly amount payable to the Applicant under the Business Agreement was less than the amount that he ought fairly to have been paid. (e) The Respondents have taken the whole of the stock of the business of KGAC and converted that stock to their own use contrary to the spirit and intent of the Business Agreement and notwithstanding that 1 of the initial 3 containers was a gift promised to the Applicant well before the Business Agreement was contemplated. (f) Contrary to the spirit and intent of the Business Agreement, the Respondents have taken the GW containers and converted that stock to their own use without making any payment for that stock and notwithstanding that: (i) the Applicant remains personally responsible for payment to the supplier of the GW containers; (ii) the Applicant paid for all freight and other expenses associated with the GW containers. (g) Contrary to the spirit and intent of the Business Agreement, the Respondents have deprived the Applicant of the opportunity to share in the profits on the sale of the remaining stock in the initial 3 containers and the stock in the GW containers. (h) Contrary to the spirit and intent of the Business Agreement, the actions of the Respondents have deprived the Applicant of the opportunity to share in the future profits of the business in which they had agreed to participate. (i) The Respondents have harmed the Applicant's capacity to continue selling and importing ginseng products and have damaged his reputation and the goodwill he had developed among customers.

6 The summons makes claims for monetary compensation by reference, inter alia, to unpaid wages, loss of share of profits, loss of opportunity for future wages and future profits and the like.

7 The strike-out application brought by the respondents is supported by submissions to the following effect: 1. The business agreement is not an agreement within s 106 of the Act in that it is not a contract as defined whereby a person performs work in an industry as that expression has been construed in decided cases. 2. That so much can be gleaned from the manner in which the summons is framed taking each of the statements of facts and assertions as contained within the summons at their highest. 3. This follows from the factual situation that prior to entering into any agreement or arrangement with the respondents the applicant was conducting a business through a corporate entity, and that after entering into that agreement the same business was conducted by the same corporate entity. Accordingly, the agreement was not one which by its terms led directly to a person performing working an industry, did not lead to the making of an offer and acceptance of an offer to perform work but merely contemplated or envisaged that work would be carried out as a possible consequence. It was to be characterised purely as an investment by the respondents in an existing business and therefore lacked the necessary characterisation to come within s 106.

8 The applicant in resisting the strike out application joined issue with the respondents on the substantial point as to whether the agreement came within s 106 but also submitted that the application was in any event premature and that this was not the "appropriate time" to consider the matter.

9 The relevant principles which apply to interlocutory applications of this kind are well established and well recognised although their application is not easily made to individual cases.

10 I am able to dispose of these proceedings by considering one only of the issues raised and I shall proceed on this basis.

11 There is now a long line of authority in this Court and its predecessors concerning the approach to be taken to strike out applications of this kind. It has as its genesis the well known passage from the decision of the Full Court of the Industrial Court of New South Wales in Nagle v Tilburg (1993) 51 IR 8. The Full Court applied a principle stated by Barwick CJ in the High Court of Australia in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 128-9. In Nagle the Full Court said: "The principle to apply by a court entertaining a challenge to jurisdiction in a preliminary or threshold way was considered by the Supreme Court of New South Wales, Court of Appeal in Majik Markets Pty. Limited v. Brake and Service Centre Drummoyne Pty. Limited (1991) 28 NSWLR 443; 39 IR 169, Kirby P. observed (at 446; 170):

Such a course is often a sensible one where a party has a substantial threshold argument which, if it succeeds, will knock out the claim and save the costs and inconvenience that attend a protracted hearing of proceedings on the merits. But, as with any threshold relief of this kind, it must be conserved to a clear case where it is plain that the invocation of the jurisdiction impugned is wholly misconceived or, upon analysis, lacks an arguable legal foundation. Necessarily, refusal of relief at the threshold will not finally determine that jurisdiction exists for any order which the Commission might make between the parties. This is because, to secure relief, the claimants must demonstrate that no order could be made which would be within jurisdiction. This burden, which is a heavy one, was accepted by the claimants. In the same case, Mahoney J.A. said (at 455; 179):

The argument as to the jurisdiction of the Commission proceeded in the absence of evidence other than, it would appear, a statement of agreed facts. That statement evidenced, in each case, essentially that the relevant franchise agreement had been entered into and the performance of it had been guaranteed by certain of the applicants as there provided. A copy of the relevant franchise agreement was accordingly before the Commission. It appears that no other evidence of substance was then given and in particular no evidence as to the circumstances of the franchise agreement or of any arrangement, condition or collateral arrangement relating to it. Were the matter to proceed before the Commission it would no doubt be open to the parties to produce evidence in relation to such matters. However, the argument before the Commission and before this Court has proceeded by reference only to the brief statement of agreed facts and the terms of the relevant franchise agreement. ... These matters are relevant in an application for relief such as is now sought from this Court. In so far as prerogative relief is sought on the ground that the arrangement which has been made does not fall within s.88F, it is in principle necessary that this Court know what the arrangement in question is so that it can determine whether that arrangement is one which falls within s.88F. Ordinarily, what the arrangement is can be determined only after the whole of the evidence has been given before the Commission and the Commission has made the findings of fact necessary to determine what the arrangement is. However, it is often sensible for the parties to attempt to avoid the time and expense involved in a full hearing of the proceeding and for this purpose the course is sometimes adopted of inviting this Court to act upon an agreed basis. But, at least in a case such as the present, the Court may do so only where the agreement demonstrates what, after a full determination by the Commission, the arrangement is or, at least, the agreement lays down the parameters within which a finding as to the arrangement can be made. We would draw from those authorities the proposition that whilst it is desirable for a case to be determined at an early stage it is only open to do so at the appropriate stage of the proceedings, that is, 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 a determination to be made. In General Steel Industries Inc. v. Commissioner for Railways (N.S.W.) (1964) 112 CLR 125 Barwick C.J. held that the jurisdiction to terminate an action summarily for want of a cause of action in the plaintiff was to be sparingly employed and ought not to be used save where the lack of the cause of action was clearly demonstrated. The Chief Justice commented (at 128,129):

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". 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". 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."

12 These observations have been repeated by subsequent full benches of this Court on many occasions. They are referred to in the joint judgment of Wright J, President and Walton J, Vice President of this Court in Euphoric v Ryledar (2002) 117 IR 1 in pars 8 to 14. The thrust of these full bench decisions is to the effect that firstly jurisdiction to strike out an action at an interlocutory stage is to be used "sparingly" and only where it is abundantly clear that there is no arguable basis for any cause of action in the Court and secondly only when all of the factual material is available to enable such a determination to be made. These full bench decisions are to the effect that it will only be in rare circumstances that it will be appropriate to determine a jurisdictional argument which requires examination of a factual matrix prior to the substantive hearing of the case.

13 It may be that the agreement which forms the basis of these proceedings may be characterised in the manner contended for by Mr Miller of Counsel who appeared for the respondents in support of the strike out application. However, I have reservations as to whether this is the appropriate time at which to determine this matter. My reservations are based on the fact that there are allegations contained within the summons which allege an agreement "by which" the applicant would perform certain work. Whether, eventually, the respondents are successful in denying the existence of any such agreement must await a time when the necessary factual material is adduced, being the time of the substantive hearing. Likewise, there are allegations of unfairness which could, if sustained, arguably give rise to the grant of relief under s 106. The position might be different if all of the provisions of the agreement had been reduced to writing and the parties conceded that the matter could be determined by reference to the terms of the written agreement only. This is not the case in these proceedings even though the applicant has filed a substantive affidavit in support of the summons. Mr Miller submitted that there were deficiencies in the affidavit and criticised the language used in it. However, again, this is not the appropriate time to consider matters of this nature, that is, as part of a strike out application.

14 It follows that I am of the opinion that the respondents have not discharged the burden of demonstrating that this is the appropriate stage to attempt to characterise the agreement upon which the applicant relies in these proceedings in the manner contended for by the respondents, and on this basis the strike out application should fail.

15 In these circumstances it becomes unnecessary to deal with respondents' principal attack on the jurisdiction of the Court to grant relief in these proceedings namely that the agreement does not fall within s 106 of the Act. This is matter a which will need to be debated at an appropriate time in the proceedings.

16 The parties were in agreement that costs should follow the event.

17 I make the following orders: 1. The notice of motion is dismissed. 2. The respondents' are to pay the applicant's costs in an amount as assessed in default of agreement. ________________________

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