Get Ahead Wealth Solutions Pty Ltd and anor v JLF Corporation Pty Ltd

LEGISLATION CITED: Industrial Relations Act 1996 ss105, 106

CASES CITED: Schwartz v Central Sydney Area Health Service & Anor [2002] NSWIRComm 79 Westfield Holdings v Adams (2001) 114 IR 241

HEARING DATES: 11, 12 and 13 February 2008 10 and 26 March 2008 (written submissions)

FIRST AND SECOND APPLICANTS Mr B Cross of counsel Solicitors: Stevens & Associates Mr N Stevens LEGAL REPRESENTATIVES: RESPONDENT Mr A Metcalfe of counsel Solicitors Ebsworth & Ebsworth Lawyers Ms A DeBoos

Get Ahead Wealth Solutions Pty Ltd and anor v JLF Corp Pty Ltd

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") by the applicants, Get Ahead Wealth Solutions Pty Ltd ("Get Ahead") and Joanne Marie Reid, against the respondent, JLF Corporation Pty Ltd ("JLF"). The proceedings seek a number of orders including an order declaring a consultancy agreement between the applicants and JLF to be an unfair contract and void ab initio in certain respects and varied in other respects. The applicants also seek consequential orders including the payment of monetary compensation, interest and costs. 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. 2 The amended summons for relief by which the proceedings are constituted alleges that Ms Reid was induced to leave secure employment with St George Bank Limited by Mr John Fitzgerald, the managing director of JLF, to become a consultant to that company. The applicants entered into a consultancy agreement with JLF to develop and promote a "custodian wealth building program" which was a vehicle designed to encourage members of the public to acquire real estate that was being sold by interests associated with JLF. The amended summons alleges that at the time that the consultancy agreement was entered into, Ms Reid was in receipt of a salary package of $140,000 pa together with bonuses and benefits and it was on this basis that she negotiated for the payment of "advance commissions" at a rate of $150,000 pa. The consultancy agreement was entered into on 9 February 2006. It provided that Get Ahead would receive $3,000 commission for every house and land product sold by Ms Reid. 3 By about April 2006, Ms Reid was concerned at the low level of sales being achieved by her. The amended summons alleges that she was told by Mr Fitzgerald that he was not concerned by this. In May 2006, Ms Reid participated in a seminar training session and was informed by a representative of JLF at the end of that session that it did not appear that there was a "fit" between Ms Reid and JLF and that she should consider looking for alternative employment. 4 Ms Reid ceased performing work for JLF through Get Ahead on 30 June 2006. The amended summons claims a "constructive dismissal" by JLF. Following the termination of the consultancy arrangement, JLF demanded repayment of $53,900, being net advance of commissions that had been paid to Get Ahead during the period of the consultancy agreement. JLF commenced proceedings against the applicants in the Local Court of New South Wales seeking to recover those monies, which proceedings have been stood over pending the determination of these proceedings. 5 The amended summons alleges that the consultancy agreement was unfair for the purpose of s 106 of the Act in a number of respects, which I shall summarise as follows: 1) It permitted termination of the contract without any or any adequate notice on the basis of the alleged constructive dismissal. 2) Get Ahead had been denied the payment of commission on the sale of properties completed after termination of the consultancy agreement. 3) JLF contended that the agreement, in providing for the payment of regular monies to Get Ahead during its operation on an advance against commission basis, allowed it to recover those advances net of any commission earned. This was said to be unfair in that it permitted Ms Reid to perform work over a period of five months without receiving adequate remuneration.

The factual background 6 The consultancy agreement between the applicants and the respondent appointed the applicants as a contractor to "develop, promote and manage the custodian wealth building program" which was said to be designed "to obtain investors for the custodian house and land products." Promotional material produced by the respondent, which became evidence in the proceedings, describes "the Custodian WealthBuilders program". In essence, the program encourages investors to buy vacant land owned by an entity within the JLF Corporation group, to arrange for a house to be built on that land through facilities provided by the JLF Corporation group, for that purpose to borrow monies arranged through Investloan Pty Ltd, a company within the JLF Corporation group, to rent out the constructed home through facilities provided by the JLF Corporation group, and, eventually, to replicate the process by means of revaluing the property acquired or any other property utilised by investors for the purpose of obtaining equity to participate in the program. Apart from referrals and repeat business, potential investors were attracted by attending seminars organised from time to time which, in New South Wales, were addressed by Mr Fitzgerald or Mr Michael Quinn, the New South Wales manager. The consultancy agreement describes the Custodian WealthBuilders program as one being "designed and developed" for the purpose of investors acquiring house and land products and as being "an integrated multi-tiered program" which was said to combine a number of elements including "education of prospective investors and investors", sourcing finance, "monitoring and providing feedback on the performance of the investment to investors" and "encouraging repeat investments from investors." 7 The specific duties of a consultant were set out in Schedule 2 to the agreement including, relevantly for the purpose of one aspect of these proceedings, "In-home Assessment". 8 Ms Reid attended a Custodian WealthBuilders seminar in Sydney in October 2005 where she met Mr Fitzgerald. She had a subsequent meeting with him concerning the financing of the respondent's land and house packages through her then employer, St George Bank. She had a series of further meetings with Mr Fitzgerald during which she also met Mr Michael Quinn. In mid-November 2005, Ms Reid said that Mr Fitzgerald asked her to become a consultant with the respondent. She alleges that he told her that it would take around two years for her to build up sufficient volumes of sales to enable her to earn her then current salary with St George Bank of about $140,000 plus bonuses. He is alleged to have told her that there would be no loss of income during this period and that she would be paid at an income level of around $140,000. In about December 2005, during the course of further discussions, the applicant was given a copy of a proposed consultancy agreement. There was mention in that agreement of "advances" which would be paid regularly. Ms Reid said that she asked Mr Fitzgerald what would happen if she did not achieve sufficient sales to have earned commission at a level of that paid to her by way of advances. She says that Mr Fitzgerald replied, "You are getting caught in the detail. You only need to answer two questions. One, do you believe in what we're doing and two, do you want to be part of it?" Believing that this was indicative that there would be no obligation to repay these monies, the applicant proceeded to negotiate the payment of advances at a rate of $150,000 pa so that she would not suffer any income loss. She says that she was required by Mr Quinn to use a company structure for the purpose of the consultancy. Mr Quinn, in evidence, did not deny that the use of a company structure was mandatory, although Mr Fitzgerald's evidence was that it was not a requirement of the respondent. 9 In any event, in compliance with the stipulation made by Mr Quinn, Ms Reid incorporated the first applicant, Get Ahead. The applicants became party to a consultancy agreement with the respondent dated 9 February 2006. Get Ahead was named as contractor and Ms Reid as an associate. Get Ahead, as contractor, was appointed a consultant to the respondent "to develop, promote and manage the Custodian Wealthbuilding program" in the nominated territory, being the state of New South Wales. The contractor acknowledged that it was an independent contractor and was "responsible for payment of all taxes (including superannuation) in connection with income received by the contractor…." 10 The consultancy agreement required the contractor to appoint the associate, that is Ms Reid, as "the managing owner" who was to be the chief executive officer "responsible for the overall management and supervision of the contractor's business…." Furthermore, Ms Reid as managing owner was required to "at all time remain the legal and beneficial owner of all of the shares in the contractor…." 11 The consultancy agreement provided for the payment of commission "for every investor introduced by the contractor within the territory that acquires and completes the acquisition of custodian house and land products." The commission was $3,000 for each such product sold. 12 The consultancy agreement required the respondent to evaluate the sales performance of the contractor from time to time and after discussion to establish "the sales performance criteria we expect the contractor to achieve." Specifically, clauses 7.3 and 7.4 provided as follows: "7.3 If at any time we are of the view that the contractor is not achieving the sales performance criteria then we may call a meeting with the contractor . The parties will promptly meet to review the sales performance of the contractor and the contractor in consultation with us will implement strategies for improving the sales performance to achieve the sales performance criteria within the proceedings 3 months. 7.4 After the expiry of 3 months from the date of the meeting referred to in clause 7.3, the contractor's sales performance will be reviewed and if in our opinion the contractor is still not achieving the sales performance criteria , we reserve the right to take whatever action we consider necessary including but not limited to requiring the contractor to attend at the contractor's cost any additional training or information sessions that we may reasonably nominate to the contractor or terminate this agreement." 13 Item 4 of Schedule 1 to the consultancy agreement set out special conditions with respect to the payment of "advance on commissions". These special conditions are of particular significance for the purpose of these proceedings and I set them out hereunder: "Item 4 Special conditions 1. We agree to provide the contractor with an advance on commission in the first year of $150,000.00, which will be payable by us in fortnightly instalments (in arrears) based on the total annual advance divided by 26. Our requirement to pay this advance is conditional upon the contractors sales performance which is subject to review pursuant to clause 7. At commencement the sales performance criteria is as stipulated in 2 below. 2. The payment of each instalment of the advance on commission will be dependent upon the contractor achieving the following sales performance criteria: (a) 8 properties by 3 months; (b) 20 properties by 6 months; (c) 35 properties by 9 months; (d) 50 properties by 12 months. 3. On the earlier of the date the advance is paid in full or the date the commission payable exceeds the advance amount payable on a fortnightly basis for a period of 2 consecutive fortnights the advance will discontinue." 14 Clause 14 dealt with the termination of the agreement. It provided for termination "immediately" if a number of events occur concerning conduct of the contractor. The only provision allowing for termination concerning conduct of the contractor of a general kind is Clause 14.2(h), which is directed to a breach by the contractor of the agreement and a failure to remedy that breach within 14 days of the contractor receiving a breach notice. 15 Clause 14.2 deals with the "effect of termination." There is nothing contained within Clause 14.2 which concerns the payment or repayment of commission. There is nothing otherwise within Clause 14.1 dealing with grounds for termination of a specific kind that has any application to the circumstances of these proceedings. 16 Ms Reid commenced working in the respondent's Sydney office on about 30 January 2006. She worked closely with Mr Quinn while she learned the respondent's presentation techniques and the protocols established by the respondent for the conduct of sales interviews. There was one other consultant working out of the Sydney office, Mr Stuart Booth. 17 Mr Quinn, as the manager of the Sydney office, allocated leads that were generated as a result of persons attending the respondent's seminars. Those leads were classified by Mr Quinn as being either "A", "B" or "C" grade leads. The classification was made by reference, substantially, to a person's assets and borrowing capacity against assets, on the one hand, and capacity to service a loan on the other. Mr Quinn classified "A" leads as having sufficient income and assets to enable them to acquire a house and land package. "B" leads were those who Mr Quinn said had a good income and by "minor adjustments" would be able to obtain sufficient borrowing capacity to acquire a house and land package. He was of the opinion that "A" leads were people with sufficient wealth to be within a comfort zone and therefore not as anxious to embark upon a wealth creation program as "B" leads who, in his experience were more concerned about building wealth. "C" leads were those with "almost no borrowing capacity" and who would need to either increase income, reduce debt or obtain more assets before acquiring a house and land package. Mr Quinn described "C" leads as being "a long term investment" for the respondent.

18 I should add that Mr Fitzgerald's concept of the classification of "A", "B" and "C" leads was somewhat different to that of Mr Quinn. It is not necessary that I resolve the tension in these two assessments for the purpose of disposing of these proceedings. 19 With respect to the dispersal of leads, Mr Quinn said that Mr Fitzgerald "prefers that I only provide new sales consultants with "B" and "C" leads. This is so that the new sales consultant can practise and develop their sales skills on these leads. The "A" leads are generally given to the experienced sales consultants. This is because the "A" leads are expensive to acquire and these leads already have assets and equity freely available which can make them more challenging to convert as these clients could be in a comfort zone." 20 Ms Reid said that throughout the period that she worked for the respondent, she regularly worked 12 - 15 hour days. In his evidence, Mr Quinn complained that Ms Reid was not always in the office conducting interviews. Ms Reid said that this was because she conducted many of her interviews with persons at their homes. This complied with one of the specifications made by the respondent concerning home-based interviews. It was Mr Quinn's opinion that interviews were better conducted in the office and it was this that coloured his opinion that Ms Reid was in some way deficient in failing to attend the office at all times. 21 It is obvious from the evidence that there were personality difficulties between Ms Reid and Mr Quinn from the time that she commenced work in the Sydney office of the respondent. Mr Quinn said that he found her resistant to being trained to sell using the respondent's methodology. Ms Reid said that she found Mr Quinn to be overbearing. She complained that he did not allocate to her sufficient appropriate leads to enable her to convert them into sales. Mr Quinn said that the number and quality of the leads that he gave to Ms Reid were more than favourable when compared to those allocated to himself and to Mr Booth. Mr Quinn said that Ms Reid did not follow the respondent's protocols in that she was distracted by the need to establish the ability of a prospective purchaser to negotiate finance. In Mr Quinn's view, all that was necessary was to demonstrate a borrowing capacity and then finalise the finance details after the property had been purchased. 22 Not all of the records, which refer to the leads that were allocated to the applicant, are available. Some of the documentation was tested during the course of the proceedings. It became apparent that some of the better leads, which Mr Quinn said he had allocated to Ms Reid, were not, on analysis, persons who would have the financial capacity to acquire a property and some of the persons concerned were clearly unable to proceed because of personal difficulties such as loss of employment, matrimonial problems and the like. 23 Mr Quinn first developed concerns about Ms Reid and her competency during the course of February 2006. By the end of February, he concluded that she had demonstrated an inability to follow instructions and an inability to sell the respondent's products. 24 There is evidence that Mr Quinn became critical of Ms Reid. One example which he gave was a purchase by her of a laptop computer which she wished to use for the purpose of her work. He thought that her decision to purchase the computer and her ultimate purchase was made impulsively because "as far as I knew she had not researched what computer might suit her personal needs nor did she ask for a price or capabilities." Nevertheless, evidence in the proceedings clearly indicated that before making the purchase, Ms Reid had made enquiries of a person with expert knowledge about computers within the respondent's organisation, had been given certain technical advice, which she followed, and had decided to acquire the computer from the same source as negotiated by Mr Quinn, because no-one else could match that price. This clearly indicates that Mr Quinn's concerns were unfounded. Nevertheless, without enquiry, he formed an adverse impression of Ms Reid resulting from the purchase of the computer. 25 In April 2006, Ms Reid had a conversation with Mr Fitzgerald in which she indicated that she was not happy with the sales results that she had achieved. Mr Fitzgerald told her that he did not care if she did not make a sale in 6 months and that he was not putting pressure on her. 26 This is consistent with evidence given by Mr Fitzgerald that he regarded the first five months of a consultant's engagement as involving a process of learning and that he would not expect a consultant to make any or any significant sales in this period. Mr Fitzgerald also said that he anticipated that Ms Reid would not have earned sufficient commission at $3,000 per sale in order to claw back the commission advances that she had received at a rate of $150,000 pa for 12 to 18 months after commencing as a consultant. 27 Furthermore, there was evidence that a consultant just starting out would be at a considerable disadvantage when compared with established consultants with respect to what was described as a "pipeline" of leads. These are leads with whom a consultant would have an involvement. As I understand the concept, from the evidence of Mr Fitzgerald and Mr Quinn, the "pipeline" consisted of the aggregate of persons with whom a consultant may have dealt in the past, and was currently dealing, who continued to express interest in the respondent's wealth creation program. It was the evidence of both Mr Fitzgerald and Mr Quinn that an established consultant would have accrued a "pipeline" of leads whose needs they could service with a view to enhancing sales. Such a "pipeline" was not available to a new consultant such as Ms Reid, and would only accrue over a period of time. The evidence of Mr Fitzgerald and Mr Quinn differed substantially, however, concerning the appropriate period of time during which one might measure the availability of leads in the "pipeline". It was the evidence of Mr Fitzgerald that the respondent's business closed down each year from 15 December to early January and that it in effect recommenced in February each year. He said that leads went "cold" during this period and that the "pipeline" needed to be re-established at the beginning of each year. Mr Quinn described such a notion as "ludicrous". It was Mr Quinn's evidence that after four years of engagement with the respondent as a consultant, he had established a significant "pipeline" of leads in all categories. In some cases, he said, it could possibly take years to convert leads into sales. 28 On 17 May 2006, there was a disagreement between Mr Quinn and Ms Reid concerning the ability of the persons with whom she was dealing to secure finance to complete a purchase of the respondent's products. He produced a report containing the names of the persons concerned and said that she had not converted a number of those persons to sales. Ms Reid explained that some of the persons did not, in fact, have sufficient borrowing capacity to acquire finance and, furthermore, complained that that report had never been shown to her before. 29 At about that time, Ms Reid attended a sales meeting in Sydney at which were present sales consultants from Brisbane, Sydney, Perth and Melbourne. She participated in a role-playing exercise conducted by Mr Scott Watson, the respondent's legal counsel, who played the part of a difficult client. Mr Fitzgerald and Mr Quinn said that she did not perform appropriately during that role-playing interview. Ms Reid complained that Mr Watson had acted in an unduly aggressive manner. Mr Quinn said that he had been no more difficult than he had with other consultants. 30 Nevertheless, later that day Mr Fitzgerald had a conversation with Ms Reid about her performance in which he indicated that he did not think that there was "a fit" between her and the respondent. Ms Reid was under the impression after that meeting, which I accept, that both Mr Fitzgerald and Mr Quinn had expressed the opinion that they did not think that she was an appropriate person to continue as a sales consultant with the respondent. 31 During the course of May and early June 2006, Ms Reid said that Mr Quinn indicated that she should start looking for another job. I accept the evidence of Ms Reid. 32 On about 20 June 2006, Ms Reid told Mr Quinn that she had received a job offer which she wished to accept and she wished to give four weeks' notice. Mr Quinn advised her that she could "finish up" the following week. Accordingly, Ms Reid ceased working for the respondent on Friday 30 June 2006. She commenced other employment one week later although, she said in evidence, that it was possible that she could have commenced that employment earlier. 33 The applicants were not paid any remuneration for the period 23 June to 30 June 2006. 34 On about 29 June 2006, Mr Fitzgerald handed Ms Reid an invoice which seems to indicate that taking into account commissions paid and after making allowance for sales which had been effected and after deduction of a sales training fee said to be $200 per month (but I understand to have been deducted at $100 per month) the sum of $58,300.21 was due to "JLF", which I assume to be a reference to Mr Fitzgerald personally. The statement was headed "Joanne Reid Commissions". 35 Ms Reid received a further invoice from the respondent claiming an amount of $56,840.32. She protested that these monies were not owing by her. Later when the matter was not resolved between solicitors acting for all parties, proceedings were commenced by the respondent to recover those monies in the Local Court. 36 Overall, I conclude on the basis of the evidence that there was tension between the representations made by the respondent and its expectations of the performance of the applicants. The respondent emphasised that the applicant should be involved in a long-term strategy of fostering leads so as to convert them to sales over a period of time. However, the respondent had short-term expectations about the conversion rate and its translation into sales. On the evidence, I conclude that Ms Reid believed that she was expected to take a longer term view and that she was to be involved in dealing with leads over a long period of time with a view to ultimately effecting sales to them. Her expectations were created by the respondent's own documentation and by what she was told particularly by Mr Fitzgerald. This was inconsistent with the expectations of the respondent, and particularly Mr Quinn with whom Ms Reid worked most closely. He was anxious that Ms Reid move much more quickly to achieve sales. It was the evidence of the proceedings that Mr Quinn earned an override commission of $1,000 for every sale effected by another consultant. The concerns of Mr Quinn were ultimately reflected in concerns expressed by Mr Fitzgerald.

Was the contract unfair? 37 When determining matters of unfairness under s 106 and application of its provisions, it is clear that any value judgement exercised must be made on an objective basis having regard to, and reflecting, contemporary community values and standards. I have discussed my understanding of these matters in Schwartz v Central Sydney Area Health Service & Anor [2002] NSWIRComm 79 at paragraphs [71- 73] and [81- 82]. "71 It is a trite observation that a pre-condition for the exercise of any power under s 106 is a finding that the relevant contract is unfair. A helpful discussion as to the approach of the predecessor tribunals to this Court to the determination of whether a contract etc is unfair is contained within the joint judgment of Fisher CJ and Hungerford J in the Industrial Court of New South Wales Full Court in Baker v National Distribution Services Ltd (1993) 50 IR 254. At 271 their Honours said: 'The test of unfairness within the meaning of s 88F of the Industrial Arbitration Act, and hence s 275 of the present Act, has received much attention by the Court and by the previous Industrial Commission over very many years, but, in our review of the cases, the approach stated by Sheldon J in Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371 over 26 years ago has endured; his Honour commented (at 374) that unfairness of a contract or arrangement was to be determined according to "the common sense approach characteristic of the ordinary juryman ….It is a plain matter of morals not law." His Honour cautioned, however, (at 374,375) that the section's "massive power makes it imperative that it should be exercised with proper restraint … it should not permit itself to become a refuge for those who are merely disgruntled with a bargain entered into on even terms. … the discretion should be exercised to protect victims of wrong dealing not to prescribe anodynes." Those words by his Honour echoed what had been said earlier by Beattie J in Agius v Arrow Freightways Pty Ltd [1965] AR (NSW) 77 at 89 that it was a matter of deciding "in each particular case by the application of the tribunal's common sense and sense of justice whether a particular transaction is unfair, harsh and unconscionable".

The nature of the unfairness attracted by s 88F was considered later by the Industrial Commission in Court Session (Perrignon and Dey JJ, Cahill J dissenting) in A & M Thompson Pty Ltd v Total Australia Limited [1980] 2 NSWLR 1 at 13 as follows: "It has been said that fairness is determined by the commonsense approach of a juryman and that it is a moral and not a legal issue ( Davies' case). Whether this be so or not, it does seem that in distinguishing between what is fair and what is not fair the Judge must apply standards which appear to him to provide a proper balance or division of advantage and disadvantage between the parties who have made the contract or arrangement. In doing so he would always have to bear in mind the conduct of the parties, their capability to appreciate the bargain they had made and their comparative bargaining positions when entering into the contract or arrangement." ' (at 271-2). 72 It is my understanding that in determining whether there is unfair conduct for the purpose of proceedings brought under s 106 and especially under sub s(2), the Court is required to exercise a value judgment reflecting contemporary community values. The contemporary values may be derived from the commonsense approach characteristic of the ordinary, reasonable, hypothetical 'standard' member of the community. Such a person will be neither an employer nor an employee, must be careful to weigh up the competing interests of the applicant as an employee and the respondent as an employer and those interests must be accommodated and viewed objectively and balanced within the context of the factual matrix which applies to them. Such a process will accommodate the reasonable requirements and understanding of an applicant as an employee and the reasonable requirements and understanding of a respondent as an employer in the context of the needs of the employer to undertake its activities in an efficient, effective and competent manner. 73 Of course the identification of contemporary community values is not without its own difficulties. Some insight as to the difficulties involved may be gained from the discussion by Professor John Braithwaite in the article entitled 'Symposium on Community Values in Law' published in vol.17 of the Sydney Law Review at 351. Professor Braithwaite draws on a body of literature to make a distinction between community attitudes and community values, the former not necessarily assisting a court in determining a matter, the latter having much greater relevance. An obvious example of an attitudinal matter is the debate concerning abortion. The corollary and underlying value against which such debate is conducted is 'respect for human life, health, freedom of choice'." "81 I have already referred to the process which is involved in determining whether a contract or arrangement etc or conduct is unfair. In the context of this process it is important to observe that there will be many cases where there is no absolute defining boundary which delineates what is fair from what is unfair. Often a range of conduct or activities may be said to fall within the limits of what is assessed to be fair, and, by corollary not unfair. This is because of the lack of absolute and scientifically determined criteria which differentiate the concepts of what is unfair. 82 The assessment which is to be made judged by the standard of the ordinary, reasonable, hypothetical 'standard' member of the community is not capable of precise analysis and delineation. There will be a variety of opinions held by such a person. The exercise of a value judgment in these circumstances is obviously made more difficult, but it is a difficulty which is not confined to judges of this Court. By way of analogy, evaluations of what is 'reasonable' are made daily by judges in all courts determining claims based on breach of duty of care in negligence, and those brought under certain provisions of the Trade Practices legislation."

38 The applicants claimed that the consultancy agreement was unfair in a number of ways which I shall now deal with: 1) The applicants said that the consultancy agreement was a sham. In reality, the agreement was one between the respondent and Ms Reid and the interposition of the company in all the circumstances had no meaningful effect other than to deprive Ms Reid of any entitlements that she might receive as an employee, such as annual holidays, superannuation payments and the like. 2) It was asserted that the consultancy agreement was unfair in that it allowed the respondent to seek to make a claim for repayment of advances against commission on the termination of the engagement. In this regard I note: (a) The contract is silent as to whether the advances made are repayable in the event of termination. (b) At best, the provisions of the contract are ambiguous or, at least, not clear and this is compounded by the equivocal manner in which Mr Fitzgerald responded to Ms Reid when she enquired about this matter before entering into the contract. (c) In any event, it is unfair, unconscionable and harsh to permit a person to perform work on a full-time basis for a period of five months without any remuneration in circumstances where the respondent acknowledged that her prospect of making successful sales in this period was limited because she was in training. During this period she had, in effect, no entitlement to any or any worthwhile remuneration and she had expended monies by way of travelling expenses and the like. In addition, Mr Fitzgerald said that he did not think Ms Reid would earn sufficient commission to repay her advances for 12 - 18 months. 3) There was deducted from monies otherwise payable to the applicants the sum of $100 per month for training. It was Ms Reid's evidence that formal training was irregular. 4) If the respondent was concerned about the performance of Ms Reid it should have, in conformance with its obligations under the consultancy agreement, advised her about those concerns and it should have discontinued the payment of advances on commission after three months. An explanation as to why this did not occur is the concession by Mr Fitzgerald that he was unfamiliar with the detail of the consultancy agreement, including Clauses 7.3 and 7.4. 5) Ms Reid was responsible for effecting a number of sales. The applicants should be entitled to be paid for sales effected prior to the consultancy agreement coming to an end. Furthermore, given the circumstances in which the agreement came to an end, she should be entitled to be paid for sales from leads developed by her prior to the cessation of the agreement but finalised after that time. 6) The criticism of Ms Reid was that she had not converted sufficient leads into sales. However, this ignores the reality of the situation, namely that she was still in a probation period and secondly she was expected to attend to the needs of clients in the areas of understanding and education as well as finalising sales. Whilst the ultimate aim of the respondent was to achieve sales, it was an integral part of the retention of the consultant, as referred to in the agreement and as referred to in the respondent's documentation, that she should spend a considerable amount of time with each and every client in order to foster and enhance their ability and propensity to complete a sale. 7) Ms Reid claimed that she had been "constructively dismissed." It is clear that the respondent's personnel identified that she was not performing to the respondent's expectations and that she was not "a fit". In these circumstances, the real and effective cause of the termination of the agreement was the respondent's attitude. As such it was the initiator of the process by which the agreement came to an end. It is appropriate that notice should have been given or payment made in lieu, subject to mitigation. In any event, Ms Reid should be paid for the period 23 - 30 June 2006. 39 With respect to the first alleged indication of unfairness, namely the interposition of the company between Ms Reid and the respondent, there is, in my opinion, no evidentiary material that would allow the Court to conclude that there was any unfairness associated with this aspect. Whilst it is clear that Ms Reid expended monies in connection with the incorporation of the company and that the utilisation of the company would deprive her of direct entitlement to annual holiday pay, superannuation and the like, there may well be taxation and other advantages which would accrue by use of the company. The utilisation of a company per se as a mark of unfairness would arguably impact upon the retention of consultants generally within the community through the interposition of a corporate structure in terms of a finding of unfairness for the purpose of s 106 of the Act. 40 However, I agree that each and every one of the remaining matters set out in [38] is an indication both singly and in the aggregate that the contract, which is sought to be impugned in these proceedings, was unfair for the purposes of s 106. In particular, an expectation that a person would be expected to engage in full-time work without, in effect, any remuneration for a substantial period of time carries with it all of the hallmarks of unfairness as reflecting community standards and values. Except in circumstances where a person is clearly carrying on some form of activity on his or her own account, the risk of deriving earnings from personal exertion translated into sales should be borne by the ultimate entrepreneur and not by the person engaged in the performance of work. The unfairness which tainted the applicants' contract with the respondent was exacerbated by the failure of the respondent to adhere to the contractual terms governing sales performance criteria and the termination of the contract in circumstances where the applicants had no real hope of having achieved sales during a period of five months that would have equated with the value of the monies which the respondent said it had advanced to the applicants. This conclusion applies irrespective of the effect of the provisions of the contract. If they were to be construed so as to require repayment of any debit advances as against sales, they would be unfair. If they are not so construed, the conduct of the respondent in seeking repayment rendered them unfair in all the circumstances. 41 The respondent submitted that the applicants were in fact being financed into their own business and in these circumstances it was not unfair for the respondent to ask them to repay the monies advanced to them. Such a submission does not, in my opinion, accord with the facts. I do not understand, in all the circumstances, how one might characterise what the applicants were required to do under the consultancy agreement as being in the nature of the conduct of a business. Ms Reid was expected to devote her attention on a full-time basis to servicing leads that were given to her by the respondent. The nature, extent and degree of the applicants' entrepreneurial conduct and activities were severely circumscribed by the provisions of the consultancy agreement and the activities expected to be undertaken on behalf of the respondent. I reject the basis for any such submission. 42 I have no hesitation in finding that the contract was unfair for all of these reasons.

Consequential orders 43 In all the circumstances, and having regard to the nature of the unfairness which I have described, it is appropriate to vary the contract from its inception so as to provide that the monies which were advanced to the applicants should be treated by them for all purposes as earnings to which they became entitled, irrespective of whether sales had been effected or not. Accordingly, the applicants would be under no obligation to repay any of those monies to the respondent. 44 In the circumstances that the contract makes no provision for the payment of any training fee, and because, as Ms Reid asserted, training was only provided on an irregular basis, an order should be made for the repayment by the respondent to the applicant of all training fees which the respondent had deducted. 45 This leaves for consideration, however, the claims for outstanding commissions with respect to sales completed both before and after the termination of the agreement. In that Ms Reid, as I understand the evidence, was always under the impression that the advance commissions which she received were, truly, an advance against commissions to be earned, albeit not repayable on termination of the agreement, if Ms Reid were to be paid commissions on sales effected by her prior to termination of the agreement in addition to the advances received she would, in effect, be gaining a windfall. For this reason, I am not disposed to order the payment to the applicants of commissions for sales completed during the course of the agreement. 46 However, the situation is arguably different with respect to sales completed after the agreement. There was evidence that after termination of the agreement, the respondent had to use its own resources, including the resources of consultants, to finalise the sales of leads serviced by the applicants during the course of the consultancy agreement. There is no evidence of the nature and extent of the further work expended by the respondent, nor is there evidence of the state of each of the sales as at the date of termination of the agreement, including the extent of the work performed by Ms Reid. In all the circumstances, I would propose that the applicants be compensated to the extent of one half of the commission which would otherwise be payable with respect to those sales that were completed after the agreement was terminated. This would result in the payment of $1,500 by the respondent to the applicants for each such sale. I shall order accordingly.

Notice/mitigation 47 It is also necessary to determine whether and what notice should have been given by the respondent to the applicants. Obviously, if the Court were to find that in the circumstances the respondent should have given the applicants notice of termination, it would be necessary to determine as a matter of fairness the amount of that notice, which would then translate into an award for monetary compensation under s 106(5). 48 In that, as I have found, the circumstances of the termination of the agreement, which was brought about by the respondent, was not based on any assertion of breach by the applicants, the summary termination of the agreement without notice was, in my opinion, intrinsically unfair. 49 In the normal course of events, the Court would then examine and determine what period of notice should have been given so as to reflect an appropriate monetary order. However, s 106(6) requires the Court to take into account whether the applicants took any action to mitigate any monetary loss suffered by reason of the termination brought about because of the unfair conduct of the respondent. 50 Ms Reid obtained alternative employment one week after the termination of the agreement which, on her evidence, was at a higher rate of remuneration than that which the applicants were receiving under the agreement. As a Full Bench of this Court pointed out in Westfield Holdings v Adams (2001) 114 IR 241 at [202], it is necessary to determine whether and to what extent this mitigating factor, namely an alternative source of income, should be taken into account in determining what monetary order should be made under s 106(5). This subsection, in turn, directs attention to the making of a monetary order that the Court considers "just in the circumstances of the case." 51 If it were not for this mitigating factor, it would be necessary to take into account all of the matters which this Court considers in determining what notice is appropriate. They include the circumstances in which the applicant came to be engaged, the length of service, seniority or part played in the respondent's organisation, the basis for remuneration and the circumstances of termination. Of course, in the circumstances of these proceedings, the agreement had only been in operation for a short period of time. Nevertheless, the respondent had, as I have found, determined to terminate the agreement in circumstances where Ms Reid had not been given an appropriate opportunity to establish herself and to convert leads into sales. In these circumstances, it might be thought that a period of two months notice would not be unfair. However, taking into account that a period of one week only elapsed between termination and the gaining of alternative employment, I would fix an appropriate period of notice as being just, in all the circumstances, of one month. The applicants should be compensated accordingly and I will so order. 52 The respondent argued that the basis for compensation should be something less than the equivalent of $150,000 pa. It is suggested that an appropriate rate was the wages component of remuneration paid to real estate sales persons. I disagree because firstly, as the respondent itself pointed out, the work of its consultants was significantly different to that performed by real estate sales persons. Secondly, fairness dictates that the compensation should be fixed by reference to the level of remuneration actually agreed upon between the parties.

Costs and interest 53 The parties asked that costs be reserved and I shall do so. It would seem in the circumstances that the question of interest should also, as a matter of logic, be reserved.

Orders 54 Consequent upon the findings of unfairness which I have made, I hereby make the following orders: 1) The consultancy agreement between the applicants and the respondent is hereby varied from its inception to provide that, notwithstanding any other provision therein contained, upon termination of the agreement for any reason the applicants will not be required to repay any monies paid to them by way of an advance against commissions, due credit being given, however, to the respondent for any monies actually paid to the applicants by way of commission. 2) Upon termination of the agreement, the respondent will pay to the applicants from time to time commission in the sum of $1,500 upon the completion after the termination of the agreement of every sale to a former client of the applicants with whom the applicants had substantial dealings prior to the termination of the agreement. 3) Notwithstanding any other provision of the agreement upon termination, the respondent shall pay to the applicants remuneration at the rate of $150,000 pa for a period of one month. 4) The respondent shall pay to the applicants a sum of money equal to all amounts deducted by the respondent from advances paid to the applicants for training. 5) The parties are to bring in short minutes of order reflecting the monetary amounts payable pursuant to the above orders. 6) Costs and interest are reserved with liberty to apply.

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