Great Scott International Pty Ltd v Cosmetic Suppliers Pty Ltd

APPLICANT Mr D Chin of counsel Solicitor: Ms A L Sharp Henry Davis York LEGAL REPRESENTATIVES: RESPONDENTS Mr J Fernon SC of counsel Solicitor: Mr P Brown/Ms E Raper Baker & McKenzie

JUDGMENT: - 7 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: MARKS J Monday 28 June 2004 Matter No IRC 4548 of 2002 GREAT SCOTT INTERNATIONAL PTY LTD v COSMETIC SUPPLIERS PTY LTD AND ANOR Application under s 106 of the Industrial Relations Act 1996

INTERLOCUTORY JUDGMENT ON APPLICATION TO JOIN ADDITIONAL APPLICANT

1 By summons filed on 7 August 2002 Great Scott International Pty Ltd as applicant commenced proceedings against Cosmetic Suppliers Pty Ltd as first respondent and Sebastian Australia Pty Ltd as second respondent claiming certain relief under s 106 of the Industrial Relations Act 1996 ("the Act").

2 The summons sought a declaration that "the contracts and/or arrangements between the applicant and the respondents whereby work was performed in an industry were in whole or in part unfair, harsh or unconscionable and against the public interest". Consequential orders were sought varying particular provisions of a Sales Agency Agreement said to be made between the applicant and the second respondent. In addition an order was sought avoiding ab initio "any arrangement constituted by the letter dated 23 January 2002" and an order avoiding ab initio an annexure to a novation agreement the effect of which was to substitute the first respondent in place of the second respondent as the contracting party in the sales agency agreement.

3 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. (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.

4 It will be observed that it is a precondition to the exercise of any jurisdiction or power by this court in terms of an application made under s 106 of the Act that there be a finding of unfairness with respect to a contract as defined. The summons identifies as the subject matter of the finding of unfairness the contracts and/or arrangements said to be made between the applicant and the respondents.

5 These interlocutory proceedings arise out of an application brought by the applicant to amend the summons by including as an additional applicant, Scott Krauss, who is said to be the sole director and shareholder of the applicant.

6 The notice of motion filed by the applicant did not specify the precise manner in which the summons was to be amended, nor was there any identification of the contract as defined in s 105 of the Act with respect to which a finding of unfairness was sought. During the course of submissions Mr D Chin of counsel, who appeared for the applicant in support of the notice of motion, argued that the contract as defined was the same contract which was the subject of the summons as initially filed, but did not identify it with precision, or at least sufficient precision to enable the respondents or, indeed, the court, to be able to deal with the principal matter raised by the respondents in opposition to the motion, namely the application of s 108B of the Act.

7 After the hearing of the notice of motion on 18 May 2004, the applicant forwarded a proposed amended summons for relief by letter dated 26 May 2004 followed by counsel's written submissions on 4 June 2004. The proposed amended summons was said by Mr Chin in these written submissions to still "substantially focus" on the sales agency agreement. In effect the means by which the present applicant could perform its obligations under that agreement was the activity of the proposed additional applicant, Mr Kraus. It was said that the joinder of Mr Kraus as an additional applicant was "thus based upon his alleged (and substantially agreed) participation in circumstances which gave rise to the initial application for an order under s 106 constituted by the current summons, namely: the conception, operation and termination of the (sales agency agreement)". In addition to clarifying the manner in which the quantum of the claim was set out in the amended summons it was submitted by Mr Chin that Mr Kraus had sufficient interest in the contract sought to be impugned to entitle him to be joined into the proceedings and, for this, he relied on Metrocall Inc v Electronic Tracking Systems Pty Ltd (No.2) [2000] NSWIRComm 260, reported at [(2000) 102 IR 309]. However, as was made clear in Metrocall, it is still necessary for an applicant to proceedings to be a party to the contract sought to be impugned by reason of the provisions of s 108 of the Act. In dealing with this position Mr Chin submitted that there was an arrangement involving both the existing applicant and the proposed additional applicant and the respondents which was a contract as defined for the purposes of ss 105 and 106 of the Act. Whether this is so cannot be determined on the basis of the existing summons and the proposed amended summons. It would seem to me that a determination as to whether there was in fact an arrangement of the kind as described to which the proposed additional applicant was a party cannot be determined at this particular stage of the proceedings. It would be necessary for sufficient evidence to have been filed to enable a determination about such a matter to be made. It may be that such a determination cannot be made until all of the evidence has been led and evaluated in the substantive proceedings. It would follow, therefore, that it would be inappropriate to determine this particular issue at this particular time. This accords with the decision of the Full Court of the Industrial Court of New South Wales in Nagle v Tilburg (1993) 51 IR 8. In a passage which is well known, commencing at page 10 and which has been repeatedly affirmed in many Full Bench decisions of this Court subsequently, the Court held that there had to be a clear demonstration of the lack of jurisdiction but that such a determination should be made at the appropriate time, namely when all of the relevant evidence was available. As the court said: "…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." (at page 11).

8 It follows, therefore, that I decline to deal with this matter by reference to whether the contract as defined in s 105, which is the subject of the proceedings as currently constituted, is or is not identical with the contract as defined which is the subject of the proposed amended summons. Such a determination must be made at an appropriate stage in the proceedings. It follows that this is not the appropriate stage at which to consider any argument as to whether the proposed additional applicant was a party to that contract for the purpose of s 108 of the Act.

9 However, the respondents asserted that the introduction of a new applicant would constitute a new application and would be caught by s 108B of the Act even though the contract sought to be impugned in the proposed amended summons was identical with the contract the subject of the proceedings as currently constituted.

108B Time for making application (1) An application for an order under this Division in relation to a contract that has been terminated must be made not later than 12 months after the termination of the contract. (2) The Commission does not have jurisdiction to extend the time for making any such application or to accept an application made after the time prescribed by subsection (1).

11 The respondents submitted that the amendments sought by the applicant constituted a fresh application, or at least an application for an order as contemplated by s 108B. The summons as originally filed asserted that the contract as defined and which was the subject of the proceedings as originally constituted was terminated on 3 May 2002. Accordingly, s 108B precluded the bringing of an application 12 months after that date and therefore precluded the amendment of the summons as sought by the applicant.

12 The applicant relied on the judgment of a Full Bench of this Court in Metrocall Inc. Those proceedings involved an appeal from a decision of a judge at first instance to the effect that s 106 proceedings could be amended by including a claim brought by an additional applicant if that additional applicant had been entitled to commence the proceedings by way of separate action. That entitlement rested in part on s 108 of the Act, which entitles a party to a contract to commence proceedings under s 106.

13 For my part, I find the decision in Metrocall unexceptional. However, this decision was given before s 108B commenced operation with effect on 24 June 2002. Accordingly, the Court in Metrocall was not called upon to determine the impact of s 108B on the proceedings.

14 However, a more recent decision of a Full Bench of this Court in Crowe v UCS Developments Pty (2003) NSWIRComm 234 does, in my opinion, provide assistance in the determination of these proceedings. Crowe involved consideration of an application to amend a summons seeking relief under s 106 of the Act. The proposed amendment sought to add two additional respondents. Both the original summons and the proposed amended summons sought a finding of unfairness of a contract of employment between the applicant and one of the original respondents. The two additional respondents were sought to be joined because of their alleged participation in the circumstances which gave rise to the original application. That is, as was observed by the Court in Crowe:

"…the fourth respondent purchased the assets of an entity within which the applicant worked and which commenced paying the applicant's salary. It is further alleged that the applicant reported to the third respondent whilst employed by the second respondent. However it is not alleged in the summons that the applicant became employed by the fourth respondent. The summons proceeds on the basis that the applicant's employment continued with the second respondent and that the fourth respondent brought about the termination of his employment with the second respondent which occurred through the actions of the third respondent as a director of the fourth respondent. The proposed amended summons still has as a substantial focus the contract of employment between the applicant and the second respondent and his employment by the first and second respondents." (paragraph [54]). The Full Bench explained the basis upon which the joinder of the additional respondents was sought as being "their alleged participation in the circumstances which gave rise to the initial application for an order under s 106 constituted by the original summons".

15 The Court held that "On its face, s 108B has the effect of imposing a time limitation on the filing of a summons seeking relief in respect of a particular or identifiable contract. That is, on and after 24 June 2002, a summons cannot be filed in the Court seeking relief under s 106 'in relation to a contract' terminated more than 12 months prior to the filing of the summons and there is no jurisdiction to extend the time so limited." (at para [39]). It was then necessary for the Full Bench to determine whether the proposed amended summons constituted an amendment to the application for an order already made or whether it constituted "a separate application". In describing that task the Full Bench formulated the question in "a slightly different way," being "…does the amendment, in substance rather than in mere form, give rise to an application for an order declaring wholly or partly void or to vary the same contract or arrangement as that identified in the original application, or does it amount to an application for an order in respect of a different contract or arrangement?" (at [52]). The Full Bench conluded that in the circumstances of those proceedings the application to amend the summons and the proposed amended summons did "not constitute a fresh application for an order, but are in substance an amendment to an application for an order made under s 106(1) prior to s 108B coming into effect." (at [55]).

16 The Full Bench concluded that "There may be circumstances in which an amendment to an original application may be so substantial or its nature such as to warrant the conclusion that it could be characterised as an application for an order caught by s 108B. That is not the situation here." (at [56]).

17 The question in these proceedings is whether the proposed amended summons constitutes a fresh application for an order under s 106. It seems to me that because an additional applicant is sought to be added to the proceedings this must constitute a new application for the purpose of s 108B. There is, in my opinion, a marked difference between circumstances as in Crowe where an existing applicant seeks to add additional respondents in proceedings directed to the impugnment of the same contract when compared with the circumstances which apply in these proceedings. The proposed amendment to these proceedings seeks to create an additional applicant. It is an application which is sought to be made by a person who has not hitherto made an application for an order under s 106. It is, to that extent, a new application in the sense that it is an application not already made; or, to apply the observations made by the Full Bench in Crowe, the amendment is so substantial and is of such a nature as to warrant the conclusion that it should be characterised as an application for an order caught by s 108B.

18 The applicant submitted that even if s 108B was held to apply that, in the alternative, s 108B had no effect because it had no retrospective operation such as would preclude the joinder of the additional applicant. In making this submission the applicant submitted that a contrary conclusion which I had reached concerning the effective date of operation of s 108B in Larsen v Ondeo Nalco Australia Pty Ltd [2004] NSWIRComm 123 was incorrect. Not unnaturally, the respondent expressed a contrary view and relied upon that decision.

19 Without in any way wishing to detract from Mr Chin's careful submissions in this regard, nothing which he has put has persuaded me that my decision in Larsen was incorrect. In any event that decision is currently the subject of an appeal and, no doubt, the outcome of that appeal will determine this controversy in a conclusive fashion. For these reasons I trust it is sufficient for the purpose of this interlocutory judgment that I have regard to my reasons for judgment in Larsen and repeat that in my opinion s 108B operates as and from the date of assent, namely 24 June 2002. Accordingly, as I have held that the proposed amended application falls within s 108B and is caught thereby, it is so caught with effect from 24 June 2002. For these reasons the application to amend is incompetent and must be dismissed.

20 The question of costs has not been argued in detail before me and I shall reserve costs.

21 This leaves outstanding a motion for security for costs brought by the respondent which can be dealt with on the basis of the liberty to apply which has been granted previously.

I make the following orders: 1. The application to amend the summons is dismissed. 2. Costs are reserved. 3. Liberty to apply previously ordered continues.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.