Hardinge v Gert Schidor Design Pty Ltd & Anor

APPLICANT (RESPONDENT ON NOTICE OF MOTION) Mr A Rogers of counsel Solicitor: Mr V Tsolakis Tsolakis Solicitors LEGAL REPRESENTATIVES: FIRST AND SECOND RESPONDENTS(APPLICANT ON NOTICE OF MOTION) Mr C J Whitelaw of counsel Solicitor: Ms S David David Legal

JUDGMENT: - 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION Coram: Staff J 27 April, 2004

BIRON HARDINGE V GERT SCHIDOR DESIGN PTY LTD AND ANOR

Application under s 106 of the Industrial Relations Act 1996 INTERLOCUTORY JUDGMENT [2004] NSWIRComm 106

1 In these proceedings Biron Hardinge ("the applicant") seeks an order pursuant to s 106 of the Industrial Relations Act 1996 ("the Act") declaring void ab initio in part or alternatively varying the contract between the applicant and the first respondent pursuant to which work was performed on behalf of the first respondent in an industry so as to provide that the terms of the contract be strictly complied or that in the event of breach by the first respondent that the first respondent be liable to the applicant in liquidated damages in the sum of $100,000.

2 By notice of motion filed on 8 December 2003 the applicant moved the Court for leave to amend its summons by the addition of the following particular to paragraph 12 of the grounds: (v) the contract is not capable of effective enforcement against the First Respondent.

3 The amendment was consented to by the respondents and in those circumstances, on 6 February 2004, I granted leave amending the applicant's summons.

4 By notice of motion filed on 2 February 2004 the respondents moved the court for an order that the summons for relief be set aside against both respondents for want of jurisdiction or in the alternative set aside against the second named respondent. The grounds advanced in support of this application were as follows: 1. The subject mater of contract made between Biron Hardinge and Gert Schidor Design Pty Ltd on 10 November 1999 does not attract the jurisdiction of the Commission - see Mitchforce Pty Ltd v Starkey (No. 2) [2003] NSWIRComm 458 revised. The contract was a commercial rental agreement for the use of a Clipper Bus by Schidor Design Pty Ltd for an advertisement it was producing for a client and the contract was drafted up by Biron Hardinge who is the Applicant in the Summons for Relief.

If the Commission does have jurisdiction it should nevertheless hold that on the facts of this case it should exercise its discretion to decline its jurisdiction in the proceedings - see Mitchforce decision.

The second respondent named in the Summons for Relief was never a party to the contract which is the subject matter of the Summons for Relief and was not entitled to receive and did not receive any payment of money under that contract.

The second respondent named in the Summons for Relief was not involved in the making of any arrangement with the Applicant for Relief separate to or additional to the contract pleaded in the Summons. His only involvement was that he was the sole director of the first named respondent in the Summons. The contract as a matter of law was made by the first named respondent not by the second named respondent.

On the 28 February 2001 Judge Goldring in the District Court of New South Wales held that Gert Schidor, the second named respondent to the Summons for Relief, was not a formal party to the contract made between Biron Hardinge and Gert Schidor Design Pty Ltd and ordered that he be released as a party to those proceedings. The correctness of that decision was later confirmed on appeal by the New South Wales Court of Appeal on 22 March 2002.

The respondent to the Motion chose to litigate its alleged financial claim arising out of the contract made on 10 November 1999 against Gert Schidor Design Pty Ltd and Gert Schidor in the District Court by filing a Statement of Claim against those entities on the 16 June 2000. It only decided to file parallel proceedings, based on the same contract, in the Industrial Relations Commission after he lost his appeal against the decision of Judge Goldring and waited 15 months after that appeal judgment before doing so. The District Court proceedings are yet to be heard and finalised. In the circumstances, the filing of the Summons for Relief amounts to an abuse of process. It should therefore be set aside.

The Claim for Relief pleaded in the Summons for Relief under s.106 of the Act has no reasonable prospects of success against either of the named respondents, but in particular against the second named respondent. It should therefore be set aside.

5 Insofar as it is necessary, for the purposes of this motion, to record its terms, the grounds contained in the summons for relief as filed on 24 June 2003 were as follows: … 2. The Second Respondent was at all material times the sole director of the First Respondent, a personal (sic) involved in the making of the unfair contract and one deriving benefit from the contract. 3. The Applicant is the owner of a motor vehicle known as an Ansair Flxible (sic) Clipper Bus (Chassis No AF-84), ("the bus"). 4. By written agreement ("the Agreement") dated 10 November 1999 the Applicant agreed to hire the bus to the First Respondent and the First Respondent agreed to pay to the Applicant the agreed rent charges in relation to the hire of the bus and other moneys. 5. In pursuance of the Agreement, the Applicant hired the bus to the First Respondent.

Rent Charges 6. The rental terms of the Agreement were as follows: (a) The First Respondent would pay to the Applicant the sum of $19,000.00 which sum would, without further charge, (i) allow the First Respondent use of the bus for a period of 30 days; (ii) allow the First Respondent use of the bus for up to 3,500 kilometres; (iii) give to the First Respondent labour for 15 days during the months of November and December 1999. (b) The First Respondent would pay, in addition, for requirements outside of clauses (a)(i), (ii) and (iii) in the preceding subparagraph, the rental charges were: (i) bus hire - $250 per day (ii) $1.30 per kilometre (iii) labour - $450 per day. 7. Pursuant to the Agreement the Applicant allowed the First Respondent use of the bus and provided labour. 8. In breach of the Agreement, the First Respondent has failed to pay to the Applicant all charges as agreed. Particulars Amount due Amount paid Hire of bus as per invoices 1555,1560 $ 2,791.50 $2,000.00 Labour as per invoices 1556, 1561 $ 9,900.00 -

Accommodation & Meals as per invoices 1556, 1559 $ 2,706.72 - $15,923.22 $2,000.00

Amount due: $13,923.22 Further Conditions of the Agreement 9. In addition to the rental charges, the Agreement contained terms and conditions relating to modification and restoration of the bus. Particulars

… 10. Pursuant to the Agreement the First Respondent modified and re-painted the bus. 11. In breach of the Agreement the First Respondent neglected and/or failed to restore the bus as agreed. Particulars

… 12. The said contract was unfair within the meaning of the Industrial Relations Act. Particulars of Unfairness (i) The First Respondent was not required to post a bond to ensure compliance with its obligation for restoration of the vehicle.

(ii) The contract did not contain a requirement as to strict compliance with the obligations of the First Respondent.

(iii) The failure of the First Respondent to restore the bus as it was obliged to do.

(iv) The Second Respondent was the effective party to the contract but was not bound to honour its provisions.

6 In 2000 the applicant and his company Radio Masts (Australia) Pty Ltd sought to recover from the defendants, Gert Schidor and his company, Gert Schidor Design Pty Ltd, in proceedings commenced in the District Court, damages for what was said to be breaches by the defendants of the agreement dated 10 November 1999 as referred to in the summons.

7 By an amended notice of motion filed in court before Goldring DCJ on 23 February 2001 the defendants sought an order that: 1. The proceedings against the first defendant (Mr Schidor) be struck out.

8 On 23 February 2001 Goldring DCJ made orders striking out the proceedings against the first defendant.

9 An appeal was lodged by the applicant to the Court of Appeal.

10 On 22 August 2002 Powell JA with Mason P agreeing, Santow JA dissenting dismissed the appeal. The majority found that the first respondent in these proceedings was the party to the agreement to hire the bus from the applicant and that the second respondent in these proceedings was not a party to the agreement.

11 On 3 March 2004 Mr R M Hanwood Arbitrator made an Award in the District Court in favour of the applicant in these proceedings in the sum of $73,327.43. There was no appearance for the defendant and the hearing proceeded in the absence of the defendant.

12 An affidavit of the second respondent was tendered in the proceedings before me in which Mr Schidor advised that due to financial problems being experienced by his company it was unable to continue funding its defence in the District Court action.

13 Mr C J Whitelaw appeared for the respondents and attacked the summons on three bases. Firstly, that the summons was an abuse of process. Secondly, the Commission lacked jurisdiction to hear the summons and thirdly, if jurisdiction exists, as a matter of discretion, it should not be exercised. In developing his first argument, Mr Whitelaw contended that the summons filed by the applicant constituted parallel proceedings and therefore was an abuse of process. Reliance was placed on the decision of Master Macready in Milano Constructions Pty Ltd v JD Holdings Pty Ltd [2001] NSWSC 899. In that matter a statutory demand was served on a director of a company and shortly thereafter, the plaintiff filed a statement of liquidated claim in the District Court naming the same defendant.

14 Master Macready referred to a number of cases that dealt with the relevant principles. Reference was made to Portfolio Projects Pty Ltd v Oakes Building Co Pty Ltd (1987) 5 ACLC 911 where Needham J said: "It seems to me to be an abuse of the process of this Court to make a claim for that sum of money that is included in the Common Law claim and seek to wind up the company in parallel proceedings in the Equity Division because of the failure to pay the plaintiff …"

15 These comments were adopted by Santow J (as he then was) in Roy Morgan Research Centre Pty Ltd v Wilson Market Research Pty Ltd (1996) 14 ACLC 925 at 929 where his Honour referred to what was said in Mala Pty Ltd v Johnston (1994) 13 ACLC 100 at 102. In that case Master Adams held: "As to abuse of process, it is prima facie an abuse of process for any party to institute two proceedings for the one claim. That much, I think, appears from a case cited to me this morning. Portfolio Projects Pty Ltd v Oakes Building Co Pty Ltd (1987) 5 ACLC 911. I use the words 'prima facie' because there can be an explanation why two proceedings are issued and it is a matter for the court to determine whether the explanation is sufficient. That, I think, appears from the Re Bond Corporation Holdings Ltd (1990) 8 ACLC 153; (1990) 1 WAR 465 where there was at the time of the filing of a petition civil proceedings in the court which involved a dispute as to the same amount.

16 In Milano it was concluded that there was no adequate explanation as to why there were two parallel sets of proceedings and found, prima facie, to be an abuse of process.

17 Counsel observed that there was no allegation that the contract made on 10 November 1999 was unfair until the Court of Appeal dismissed the applicant's appeal against Judge Goldring's decision that the second respondent was not a party to that contract.

18 Mr A G Rogers counsel for the applicant submitted that that the proceedings brought in the District Court alleged that the applicant had a claim against each of the respondents. However, the Court of Appeal held that the only sustainable claim in contract was against the first respondent. The applicant believes that the first respondent is incapable of paying any judgment arising out of the District Court proceedings. Counsel submitted that the substantial complaint by the applicant in these proceedings is that the contract he entered into is unfair because it is incapable of enforcement. This, it was submitted, is a question of fact and not one with which the District Court is entitled to concern itself. Mr Rogers contends that the District Court has not been asked to vary the contract in any respect and has not been asked to award compensation against the second respondent.

19 In respect of the second issue, Mr Rogers submitted the contract envisaged work being performed and that there was therefore jurisdiction to entertain this application. In respect of whether relief could be granted against the second respondent, it was submitted this could not be determined until all the evidence was filed.

20 The essential issues in these proceedings are firstly, whether there has been an abuse of process by initiating parallel proceedings in this Court and the District Court and secondly, whether the contract between the parties is capable of attracting the jurisdiction of this Court.

21 In Brown v Rezitis (1970) 127 CLR 157, the High Court held that a person may be a party to proceedings under s 88F (a predecessor to s 106) though not a party to the contract or arrangement in question, and that the power of the Commission to make an order for the payment of money under s 88F(2) (see now s 106(5) of the current Act) is not limited to the making of an order for the payment of money by one of the parties to the contract or arrangement but extends to such orders as can reasonably be thought to have a real connection with the making, variation or avoidance of the contract or arrangement.

22 Barwick C J said at 164: It must be borne in mind that one of the purposes of the section is to deal with subterfuges, subterfuges which will take the worker out of the relationship of master and servant and therefore out of the operation of an industrial award designed, amongst other things, for the protection of workers in industry. There may be persons involved in the subterfuge who are not parties to the contract or arrangement but who are in reality the actors deriving benefit from the making or the execution of the contract or arrangement. Also the power given to the Commission includes a power to declare the contractual arrangements void as from their making, not merely void as between the parties, but absolutely void. If there are other persons whose rights are known to depend on the continuance of the contract as a valid instrument according to its terms, then natural justice may in the circumstances require the Commission to afford such persons an opportunity to be heard. Again the avoidance of the contract or arrangement may be a step in uncovering the real transaction benefiting at the expense of the worker parties other than those in whose name the contract or arrangement was apparently made.

23 His Honour's judgment is primarily directed to the proper construction and scope of what was then s 88F(2), and the question of whether there was any basis for making the order actually made by the Industrial Commission of New South Wales in that case. Namely, an order that a variety of persons having connections both close and remote with transactions could be made jointly and severally liable for the whole of the amount decided upon as necessary to restore the applicant to his previous position.

24 Clearly the relief available under s 106 is wider than that available under the contract which is sought to be enforced in the District Court.

25 I have therefore come to the view that the District Court proceedings and the proceedings before this Court are not parallel proceedings.

26 It was further submitted by Mr Whitelaw in dealing with his submissions regarding abuse of process that it was not open to the Court to go behind the findings made by the District Court or the Court of Appeal.

27 It seems to me, as was submitted by Mr Rogers, that whether relief could be granted by this Court against the second respondent would require an examination of all of the evidence. At this stage of the proceedings the applicant has not filed his evidence. I will return to the implication of this submission later in this judgment.

28 The second submission to support strike out of the summons was that the Court lacks jurisdiction. The essence of Mr Whitelaw's submission was that the agreement between the parties was an arms length commercial deal struck between parties with equal bargaining power. In substance, it was submitted the contract is one of a commercial rental agreement requiring the renter, in return for the use of the bus for creating a Coca Cola commercial, to pay the agreed rental charges, the agreed charges for the bus driver and the costs of restoring the bus to the satisfaction of the applicant after the filming of the commercial was finished.

29 Mr Whitelaw submitted that the fact that any person had to perform work in any industry was entirely incidental to the principal focus of the agreement. It was not the main purpose or intention of the agreement it was submitted.

30 Relying on Mitchforce and the authorities cited in that case, Mr Whitelaw submitted that it is abundantly clear that a contract will not be found to be unfair in the absence of some genuine employment nexus. That nexus, it was submitted, is totally absent in this case. The purpose and substance of the agreement was to rent out the Clipper bus for a commercial return.

31 However, in my view, the existence of a commercial agreement is not decisive of whether work is performed in an industry: see Mitchforce Pty Ltd v Starkey (No 2) [2003] NSWIRComm 458 where Wright J President and Walton J Vice-President, Boland J, not dissenting on this aspect at [41], [42] said: 41 We do not agree that, in law, in order for a contract (as defined in s 105 of the Act ) to fall within the Commission's jurisdiction, there is a requirement that the relevant contract or arrangement have "an industrial colour or flavour" in addition to the requirement to demonstrate that the contract or arrangement led directly to the performance of work. Shortly stated, our conclusion has been reached having regard to the provisions of s 106 as they presently stand and is reinforced by the legislative history of the relevant provisions, including the clear purpose of the initial enactment of the predecessor provisions in 1959 and the consistent approach to the construction of the provision following the leading decision of the High Court in 1977 ( Stevenson v Barham) . 42 It is, in our view, well settled that the relevant jurisdictional test of "whereby a person performs work in any industry", will be satisfied where the impugned contract or arrangement directly, that is under or pursuant to its terms (noting, of course, the difficulty of using verbiage such as "term" when considering a broader arrangement - a matter to which we will return to later), provides for the performance of work in any industry. The consequential performance of work is not enough: see Production Spray Painting & Panel Beating Pty Ltd v Newnham (1991) 27 NSWLR 644 at 657. We do not consider that there is any co-extensive test to be applied to the effect that the contract must have an industrial colour or flavour about it (in the sense that, as was discussed in some of the earlier cases, the contract or arrangement must be subversive of industrial standards or arise in an industrial context, such as being associated with a contract of employment or a contract for services designed to undermine employment standards).

32 Mr Whitelaw submitted that the agreement, by its terms, did not directly require any work to be done by either the applicant or anyone else, for the first respondent.

33 The agreement between the parties was an annexure to an affidavit of Mr Schidor sworn 19 December 2000 and tendered by Mr Whitelaw. Clause 3(a) of the agreement is as follows: (a) that no person other than the owner or nominated driver [insert name] is authorised to drive the vehicle without the written consent of the owner.

34 Both counsel seemed to accept that the applicant was the driver and this appears to be the evidence of Mr Schidor, that is, the applicant was employed by the first respondent to drive the bus.

35 Mr Rogers referred to Annexure G to the Affidavit of Mr Schidor. This is a letter from the first respondent to the applicant dated 10 January 2000. The letter purports to set out a breakdown of invoices provided by the applicant to the first respondent. Reference is made to Invoice No 1556. Under the heading "Labour" a claim for $3,150 is made in respect of additional days because of extended shoot time. A number of invoices forwarded by the applicant to the first respondent were also annexed to Mr Schidor's Affidavit although, apparently, some of the invoices were subject to challenge in the District Court. Reference is made in these invoices to "additional labour" and "labour rate $450 per day".

36 It is not clear to me whether in order to determine the fairness of the agreement an examination of the written document will be all that is necessary or whether in order to determine such question it will be necessary to consider the totality of the relationship between the parties.

37 Mr Rogers relied on Ex parte V G Haulage [1972] 2 NSWLR 81 at 88 where Jacobs JA with whom Mason JA and Hardy AJA agreed said: It seems to me that the legislature was concerned to empower the industrial tribunals, more recently the Commission alone, to examine contracts and arrangements which led directly to the employment of persons and the performance of work in any industry, not simply because the contract or arrangement in a commercial sense involves the provision of goods and services, with a consequent performance of work in an industry, but rather because the impugned agreement or arrangement itself directly envisages the employment of a person or persons in industry and has a recognizable impact upon the conditions of that employment, and, whether or not it envisages that a contracting party will perform the work, discloses a purpose that by the adoption of the arrangement the industrial objectives of the legislation will be more or less defeated.

38 Mr Rogers submitted that the agreement envisaged work being performed, in particular, that the applicant would drive the bus.

39 In the absence of the whole of the evidence it is not possible to identify, at present, whether it was a term of the agreement that the labour provided was that of the applicant. It is therefore difficult to assess the significance of any such term to the question of jurisdiction at this preliminary stage of the proceedings.

40 As the authorities, particularly, Nagle (T/as W D & J L Nagle & Sons) v Tilburg & Anor (1993) 51 IR 8 and Virtue v New South Wales Department of Education and Training (1999) 92 IR 428 at 447 - 448 make clear a decision on a motion does not determine the respondents' legal rights.

41 It is therefore not necessary for me to come to a final view in respect of a number of the respondents' submissions. In particular, whether the agreement by its terms did, or did not, directly require any work to be done by either the applicant or anyone else for the first respondent.

42 It is sufficient for me to find, as the material stands, that I am not able to make a finding in those terms having regard to the limited material before the Court that, if it was a term of the contract that labour would be provided, and it may have been a term, that the labour was that of the applicant himself.

43 In my view, there is insufficient material before the Court to make a final determination in this regard although the material points to the applicant providing his labour to the first respondent.

44 Mr Whitelaw referred the Court to Euphoric Pty Ltd v Ryledar Pty Ltd & Anor (2002) 117 IR 1 where a Full Bench found that it lacked jurisdiction in considering an application under s 106. At 12 the Court said "the contract plainly enough led to the performance of work, in order that delivery (of petrol) could be physically achieved, the performance of the work necessarily involved, was not the purpose of the obligation."

45 For the reasons already given, I am unable to come to the view expressed in Euphoric.

46 In the circumstances, I find that it is premature to determine whether or not there is jurisdiction to consider this matter. I am not persuaded, as a matter of law that the relief sought is justified. I therefore dismiss the motion.

47 Finally, although it might be argued that satisfaction of the District Court judgment would render these proceedings otiose and that the Court should therefore decline to entertain these proceedings until execution has been attempted, I do not think that is the appropriate course to adopt. The applicant seeks joint and several orders against the first and second respondent.

48 Mr Rogers, in respect of this issue, referred the Court to s 18A of the Arbitration (Civil Actions) Act 1983 which is in the following terms: 18A Order for Rehearing (1) The court by which an action was referred to an arbitrator, or the registrar of that court, must order a rehearing of the action if an application for a rehearing of the action is made before the award becomes enforceable as a judgment or order of the court. (2) An order for rehearing cannot be made if the amount claimed in the action, or the value of the property to which the action relates, does not exceed the amount prescribed by the regulations for the purposes of this section. (3) An order for rehearing need not be made if it appears to the court or registrar that the applicant failed to attend a hearing before an arbitrator on the action and the applicant fails to satisfy the court or registrar that there was good reason for the failure to attend the hearing. (4) The court or registrar may in an order for rehearing direct that the rehearing be a full or a limited rehearing as the court or registrar thinks appropriate. In the absence of such a direction, the rehearing is to be a full rehearing. This subsection has effect regardless of whether the applicant requested that the rehearing be a full or a limited rehearing or made no such request. (5) In making an order for a limited rehearing, the court or registrar is to specify in the order the aspects that are to be the subject of the rehearing. The aspects may be described by reference to specific issues in dispute, specific parties to the dispute, or otherwise. (6) The court or registrar may at any time before or during the rehearing make an order amending an order for rehearing.

49 Mr Rogers in respect of this issue submitted that, in circumstances where the respondent had chosen, because of financial incapacity not to participate in the District Court proceedings, that in light of s 18A(3) of the Arbitration (Civil Actions) Act it is inherently improbable that it would make out sufficient grounds to establish a basis upon which it ought to be granted a rehearing. In respect of this aspect of the matter I accept Mr Rogers submission. However, in light of the decision that I have come to, the Court need not be troubled with this issue.

1. The notice of motion filed on 8 December 2003 is dismissed. 2. The respondents are directed, in accordance with r 18A(4) of the Industrial Relations Commission Rules, to file a reply to the summons within 21 days of the date of this judgment. 3. The question of costs is reserved.

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