Hall & Anor v Strathfield Group Ltd

Hall & Anor v Strathfield Group Ltd - [2001] NSWIRComm 266 - NSWIRComm 2001 case summary — Zoe

[24]

18 It is appropriate at this juncture to refer to the principles which apply when dealing with strike out applications in connection with summonses filed under s 106 of the Act. The relevant principles have been conveniently summarised by Wright J, President of this Court in Virtue v NSW Department of Education (1999) 92 IR 428 at 447-8. His Honour said: "1) The discretion of a court to determine a case at an early stage, when appropriate, has been repeatedly accepted. 2) As a general rule it is desirable that an objection to jurisdiction be determined as early as circumstances will conveniently admit so that the tribunal does not embark on a hearing which it lacks authority to conduct. The course of a court entertaining a challenge to jurisdiction in a preliminary or threshold way 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. 3) However, a further general proposition is that all issues arising should be dealt with in the substantive proceedings unless the basis for a challenge, either on jurisdictional grounds, or for lack of a reasonable cause of action, be clearly demonstrated. 4) Threshold relief of the kind sought here 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. 5) Necessarily, refusal of relief at the threshold will not finally determine that jurisdiction exists for any order which the Court 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. The resulting burden is a heavy one. 6) Accordingly, 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, 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. 7) Similarly, the jurisdiction to terminate an action summarily for want of a cause of action is to be sparingly employed and ought not to be used save where the lack of the cause of action was clearly demonstrated." (at 447-8).

[29]

23 As I understand the submission made by Mr Watts it is directed to the consequences of the successful outcome of the proceedings in favour of the second applicant. The submission seeks to characterise the adjustment of the amount of goodwill paid as being a remedy which is unrelated to, or does not have the necessary nexus with a contract as defined whereby a person performs work in an industry. In my opinion such an approach is not permissible. It is necessary, when considering matters of this kind to address the powers and jurisdiction of the Court and the manner in which remedies may be formulated and assessed to determine whether the processes are appropriate and permitted. Whilst the end result may appear to be unrelated to the philosophical approach of the powers and jurisdiction of the Court, if all of the processes are conducted within jurisdiction, and are otherwise appropriate, then the result cannot be attacked in this way. In any event merely because an attack is made on the amount of goodwill paid in conjunction with the sale of a business does not take a matter outside of the normal purview of s 106 proceedings. Proceedings of this kind were commonly encountered in connection with the sale to persons of trucks in work, involving the payment of goodwill. It was a common feature of those proceedings that the goodwill payment was attacked. It is possible to characterise the factual circumstances which have given rise to the allegations made in these proceedings in a similar way. In a simplistic sense, the first applicant in conjunction with another person conducted a business utilising a trust structure. They were approached to sell that business on the basis that they would continue to work for it. They allege that the business was operated by the purchaser in a manner which created relevant unfairness. In circumstances of this kind it matters not whether the person applying for relief under s 106 of the Act is the purchaser or the vendor; in appropriate circumstances either party to a transaction may feel wronged and may make allegations of unfairness. Provided that there is a contract as defined in s 105 which is found to be an unfair contract by reason of the combination of the definition contained within s 105 and the operation of s 106(2), then this is sufficient to confer jurisdiction and power on this Court to make orders under s 106.

[39]

34 The final submission made by Mr Watts was that in order to succeed in its claim the second applicant would have to rely on pre contractual representations made by the respondent and that it was precluded from relying on those representations because of the provisions of cl 6 of the Sale Agreement which I have previously set out. In the absence of any application to delete or vary cl 6 then, it was said, the second applicant could not rely on it. The difficulty I have in dealing with this submission is that it is unclear at this early stage of the proceedings as to the precise basis upon which the applicants, and in particular the second applicant will formulate their case. It is obvious from the manner in which the summons is framed that the second applicant's claim is based significantly on events which occurred after the respondent became the owner of the business. Whether and to what extent the second applicant will rely upon expectations which were unfulfilled, and the basis for those expectations, will not emerge until all of the relevant evidence has been put on, so as to establish the factual circumstances against which the proceedings will be conducted. I do not think that this is the appropriate time of the proceedings to consider such an argument. Indeed my assessment as to what is involved can be gleaned from a subsidiary argument put by Mr Watts in support of this submission. It was as follows: "The second applicant does not plead, with respect the element of unfairness which it must establish, that there was any breach of any agreement or any fault of the respondent. Rather it alleges that after the respondent became the owner of the business , the second applicant's expectations as to what would happen were not met as a consequence of various factors but not as a consequence of any breach of the Sale Agreement - see paragraph 4.1 - 4.11 of the Summons for Relief. In such circumstances, and independently from the reasons set out in the preceding paragraph, the required element of unfairness cannot be made out so as to establish a basis for a s 106 claim. The second applicant bore the relevant commercial risks as to what the respondent might do once ownership of the business changed."

[41]

36 I have endeavoured to deal with each of the submissions made on behalf of the respondent in these proceedings. There is, however, another reason why the respondent's strikeout motion must fail. This is because, as Mr Kite stated during the course of submissions, the applicants rely essentially on a single arrangement constituted by the two contracts. It is said that when both contracts are taken together they become an arrangement, and that arrangement as a whole satisfies the definition of s 105 and the provisions of s 106(1). That is the arrangement itself which provided for the sale of the business and the engagement by the respondent as purchaser of the business of, inter alia, the first applicant to work in the business became a contract as defined whereby a person performs work in an industry. This approach is consistent with that adopted by Hungerford J in Kwong & Anor v Stone Microsystems (Aust) Pty Ltd & Anor (1996) 82 IR 255. At 309 his Honour said: "The interaction of two or more separate contracts between different parties as being able to constitute together an "arrangement" under which work was performed in an industry within s.88F of the former Industrial Arbitration Act (comparable to s.275 of the present Act) was considered by the Industrial Commission in Court Session in Custom Credit Corporation Limited v. Goldsmith (1976) AR (NSW) 98. The Commission said (at 131) But it must be true to say, we think, that it is significant that Parliament did not see fit to include in the Act any definition of "arrangement", which is not a term of art and is not a word which has a very precise meaning. Looking at the setting in which it is used in s.88F, we are of the opinion that in one of its meanings " arrangement" embraces transactions which do not give rise to contracts or obligations, that is to say, obligations enforceable at law; but we are also of the opinion that in another meaning it embraces a situation where there exist two or more separate contracts which, notwithstanding their separateness, are, given the facts, so sufficiently associated with each other in a practical sense as together to constitute an arrangement of which each contract is a part . (italics added) The Commission further said (at 134-135): We think that all of these matters are consistent with the conclusion that there was a deliberately made plan or arrangement between the vendor and the lender for the purpose or to product the effect of advancing the business interests of both and under which would be facilitated the obtaining of customers who would purchase dealerships from the vendor with moneys advanced by way of loan from the lender, and that neither the work contract nor the loan contract stands isolated from the other, and we are satisfied that the evidence of concerted action by both the vendor and the lender clearly establishes that such a plan or arrangement was in fact made and existed. The plan or arrangement of course, could not at the time of its making come within s.88F because it did not at that stage result in or have effect of a person working in an industry. We are of the opinion, however, that, when in a particular case the initial plan or arrangement was widened, as it were, by the involvement of a worker who entered into a work contract with the vendor and a loan contract with the lender, a new arrangement whereby a person performed work in an industry, and thus one falling within the ambit of s.88F, ipso facto sprang into existence, the parties to which were the vendor, the lender and the worker and components of which were the work contract and the loan contract.

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