Kennett and Anor v Mayrana Pty Ltd and Ors [2006] NSWIRComm 357 | Case summary

Kennett and Anor v Mayrana Pty Ltd and Ors [2006] NSWIRComm 357 | Case summary | Zoe

1 Mr Kennett and Mr Pak commenced proceedings in 2003 pursuant to s 106 of the Industrial Relations Act 1996 ('the Act'). The applications finally pressed challenged the fairness of a contract, arrangement or collateral arrangement, for the sale of Excelsior College and the performance of work by the applicants for the first to third respondents. The respondents denied that they ever employed the applicants, or that any contracts were unfair as claimed. 2 When this hearing commenced, the claims pressed were contained in amended summonses filed on 21 April 2005. In September 2005, the respondents had filed a motion seeking that the proceedings be dismissed for want of jurisdiction. That motion was listed for hearing before Staunton J in January 2006, but the hearing did not proceed when the applicants filed further affidavits, shortly prior to the hearing. The parties later agreed, after all affidavit material had been filed, that the question of the Court's jurisdiction to entertain the claims advanced would be dealt with at the outset of the hearing of the proceedings. 3 The parties' agreement was accepted in circumstances where the parties proposed to lead extensive competing expert evidence on accounting matters which related to the sale price agreed for the College and the orders pressed in the amended summonses, as to the fairness of that aspect of the agreement. The claims advanced in the two amended summonses were similar. It was common ground that if there was no jurisdiction to entertain the claims so advanced, a significant amount of hearing time would be saved by the jurisdictional issue being determined at the outset. 4 There was then a change in representation, so far as the fourth respondent was concerned and amendments to the motion pressed by the respondents, as the result of various developments. The respondents' motions, in their final form, sought orders dismissing both summonses for want of jurisdiction. 5 When the hearing of the jurisdictional matters relied upon commenced, the first to third respondents also announced that they would seek to argue that the Court had no jurisdiction to entertain the claims brought, because in truth they amounted to a claim for breach of contract, relying on Sydney Water Corporation Ltd and Anor v Industrial Relations Commission of NSW and Anor (2004) 61 NSWLR 661. That issue had also been raised in an amended motion filed for the fourth respondent. The applicants opposed that argument being advanced at that stage of the proceedings, given the lack of notice they had received. Consequently, this judgment does not deal with that question, which was left to be dealt with in the balance of the hearing, if it proceeded. 6 On the second day of the hearing the applicants further amended their summonses, without objection. The claims advanced were similar. In Mr Kennett's case, the claims finally pressed were:

The agreement of employees of the Vendor (including teaching staff) to which the Purchaser wishes to offer employment from Completion accepting such employment on such terms as may be offered by the Purchaser. (clause 3.1(iv)) 12 In their reply, the respondents claimed that the Deed of Sale of the College required that Excelsior College Pty Limited terminate the employment of all of its employees and consultants. While the College was sold as a going concern, Mr Kennett and Mr Pak were never employed by the first respondent and never performed any work for any of the respondents, as they claimed. Various representations relied upon were also denied. 13 The sale of the College resulted from a series of deeds and contracts which the parties and Excelsior College Pty Limited entered. 14 In their motion, the respondents claimed that the contract of 5 July 2002 on which the applicants relied, was a contract whereby the respondents, other than the fourth respondent, confirmed their intention to make a particular offer to purchase Excelsior College and that the applicants indicated that they were prepared to accept such an offer, when made. Neither this document, nor the later deed of sale which the parties entered, nor any of the other documents relied upon, was a contract whereby any work was performed, as s 105 of the Act requires. 15 A call option deed was entered by each applicant and the first respondent on 19 July 2002, whereby the applicants agreed to sell the College. The respondents' case was that this was also not a contract whereby any work was performed, as s 105 of the Act requires. Even if it were a related condition or collateral arrangement, the performance of work was not a significant purpose of the contract, as s 106(2A) requires. An amending deed was entered on 7 August. It was submitted to be in the same position, merely being an amended contract for sale of a business and was not a contract whereby any work was performed, as s105 of the Act requires. Even if it were a related condition or collateral arrangement, the performance of work was not a significant purpose of the contract. 16 On 16 August, a deed of completion was entered. It was also argued not to be a contract whereby any work was performed, as s 105 of the Act requires. Even if it were a related condition or collateral arrangement, the performance of work was not a significant purpose of the contract. 17 Even if the view was reached on the evidence, that some form of contract or arrangement existed, under which work was performed by the applicants for the respondents, separate from these sale of business contracts, it was the respondents' case that the Court had no jurisdiction to deal with claims for any relief advanced in relation to the sale of business contract, because the claims advanced and the money orders sought, did not directly or closely relate to the performance of work in an industry. Evidence

19 The case advanced for the first to the third respondents was that none of the written agreements provided for the employment of the applicants. There was no scope for the claim that the business sale agreement was partly written and partly oral, given the express provision made in the deed, which included a provision merging all previous representations in the deed which the parties entered. 20 The applicants' evidence, taken at its highest, did not support a conclusion that employment of the applicants was a part of the business sale contract. At best, the applicants gave evidence as to their state of mind, that 'but for' the offers of employment they received, they would not have sold the College. The documents, however, evidenced no such linkage. It was submitted that the case was indistinguishable from Production Spray Painting & Panel Beating Pty Ltd and Ors v Newnham and Ors (1991) 27 NSWLR 645 and the transaction considered in Fish v Solution 6 Holdings Pty Ltd (2006) 80 ALJR 959. 21 It was further argued that the evidence did not even permit the conclusion that employment contracts had ever come into existence, so as to provide a basis for the conclusion that the business sale agreement was a collateral arrangement or a related condition, as s106(2A) envisaged. The evidence did not demonstrate that the business sale agreement was conditional on such employment agreements. That was not how the case was pleaded in any event, as the applicants' further amended summons confirmed. 22 It was submitted that in any event, the necessary interrelatedness which s 106(2A) required, could not be established. Nor could it be established that the performance of work was a significant purpose of the contractual arrangements made. 23 At best, if it could be concluded that an employment relationship had come into existence, it was a contract for 6 months' casual employment. In truth however, the evidence showed that only Mr Kennett was ever made an offer of employment after the sale, which he rejected. Mr Pak never received any offer. 24 It was also argued that the evidence demonstrated that the central focus of the applicants' case was the relief sought in relation to the variation of the sale of business agreement. It was accepted that s 106(2A) did not require it to be established that the sale agreement itself provided for the performance of work, unlike the section as it stood when Solution 6 Holdings Ltd and Others v Industrial Relations Commission of New South Wales and Others (2004) 60 NSWLR 558 was decided. Nevertheless, the claim could not fall within the section, because it could not be established that the performance of work was a significant purpose of the contractual arrangements in question. The construction of the word 'purpose', it was submitted, ought to be approached in accordance with the discussion of the High Court in News Limited v South Sydney District Rugby League Football Club Limited and Others (2003) 215 CLR 563. 25 Even if those submissions were wrong, it was further submitted that s 106(5) did not permit the making of the money orders claimed. The money orders sought in relation to the purchase price were not 'closely connected with the performance of work' and hence not within jurisdiction (See Solution 6 at [73], [92]-[95] and [160].) 26 In addition to the matters pressed for the other respondents, the case advanced for the fourth respondent, Mr Traynor, was that the claims advanced were, in reality, seeking to have the Court create an employment relationship which did not exist. Such an order was beyond jurisdiction and made it apparent that there could be no jurisdictional foundation for the claims advanced by the applicants. 27 Further, as to the claims advanced against Mr Traynor, it was submitted that the complaint was that he undertook a due diligence for the purchase of the College and that the applicants placed some reliance upon him. It was not alleged that he was concerned in the creation of any unfair contract. His calculations were made under the contract which others had agreed. It was argued that if Mr Traynor's calculations had been carried out incorrectly, no relief could flow under s 106, although it might give rise to other claims against him. If his calculations were correct, but the contract under which they were made was unfair, there could also be no relief granted against him under the section. 28 In any event, s 106(2A) did not go far enough to permit the relief claimed in relation to the business sale agreement. The allegation made in the further amended summons was that Mr Traynor did not perform his work with due care, an allegation of professional negligence and that he had a duty not to undertake that work. Neither claim could ground relief under s 106. A breach of either type might ground relief in damages, but not under the section, because it presupposed that the contracts were fair, but were breached in some way. 29 That Mr Traynor should be made vicariously liable for the conduct of the other respondents, was not a claim available under the section, it was argued. Nor could it be claimed in proceedings such as this, that he had got his calculations wrong. Nor was a claim available on the basis discussed by the High Court in Brown v Rezitis (1970) 127 CLR 157, even on the basis that Mr Traynor had some involvement in the operation of the contract in question. The High Court was not there speaking of a professional negligence claim. 30 The case advanced for the applicants, was that their primary case was that whether or not the parties' negotiations resulted in a concluded employment agreement, the negotiations were about work in an industry, so as to attract jurisdiction. (See V.G. Haulage Services Pty Ltd; Re Industrial Commission of New South Wales [1972] 2 NSWLR 81 at 86 - 87). Those negotiations were inextricably linked with the sale process. The applicants relied on undertakings given during the negotiations. Given the time at which the jurisdictional argument was pressed, their claim of causative effect had to be taken at its highest. 31 In any event, the evidence showed that work was performed by the applicants during the period of the sale of the College and that the sale contracts were concerned with the performance of work, containing as they did restraint of trade clauses. The restraints had been observed by the applicants. 32 The submission that s 106(2A) of the Act was not relied upon, given the way in which the case was pleaded, was denied. Whether the sale documents were seen as a related condition or a collateral arrangement, the applicants' case was that they intended to enter on a joint endeavour, in which they would each continue doing work in an industry, in the context of a change in ownership of the college. They were led to this view by the respondent's representations. The applicants would demonstrate that reasonable people in their position were entitled to rely on such representations, where they had been promised work into the future and had continued to carry out that work. 33 As to the construction of s 106(2A), it was accepted that the High Court's approach in South Sydney District Rugby League Football Club was relevant. It followed that attention had to be paid to the applicants' evidence, as well as to the words of the written documents the parties had entered, in order to establish what the parties had set out to achieve in their agreements. 34 As to the fourth respondent, it was submitted that Mr Traynor played a significant role in triggering the mechanism whereby the sale price was reduced substantially. The due diligence investigation he conducted was central to the question of whether the applicants would continue to work within the College, as well as the consideration they would receive from, amongst other things, entering into the restraint of trade agreed. 35 The expert evidence led by the applicants raised concerns as to the adequacy, accuracy and propriety of Mr Traynor's work. While at one point it was asserted that the College had made a substantial loss of over $120,000, the respondents later varied the figure to a profit of $35,000. In the circumstances, Mr Traynor was a proper party to the proceedings, on the basis that he had contributed to the unfairness complained of, even though he was not a party to the contract. See Brown v Rezitis (1970) 127 CLR 157 at 168. 36 In further written submissions, it was noted that the respondents had sought to suggest that:

The arguments advanced in relation to Burgess v Mount Thorley Operations Pty Limited 41 It is convenient to deal first with this aspect of the respondent's case. As has oft been observed, this is not a Court of strict pleading. In that context, the decisions in Burgess v Mount Thorley Operations Pty Limited, both at first instance and on appeal sought to emphasise the need to ensure that justice is achieved between the parties, by the Court ensuring that it is the case sought to be pressed in the pleadings and not new claims advanced for the first time only in final submissions, which the respondent is called upon to meet. 42 This, like many other cases, undoubtedly involves a summons which, despite its repeated amendment, could have been better framed. What was clear from the summons pressed, however, was that both applicants claim that they had worked for the first to third respondents after the sale. They each sought orders of variation and/or avoidance of that aspect of their agreements. In that respect, they sought orders of variation as to the circumstances in which their contracts might be brought to an end, other than for 'serious misconduct' (claim 4). Consequential money orders were also pressed in relation to the 12 months' notice necessary to bring the relationship to an end (claim (i)), and for unpaid invoices for work actually performed (claim (ii)). Those claims were pressed in the context of alleged representations, that the applicants would be engaged full time 'at a senior executive level.' 43 Given the way in which the claims were framed, it was no surprise to find that in their submissions, the applicants asserted that they had performed work for the respondents under contractual arrangements which they had entered, after they had received representations on which they had relied. Those submissions were also consistent with the particulars of the claims earlier provided, although, again, I accept that the particulars too, could have been better expressed. 44 The question of whether or not the applicants were entitled to rely on s 106(2A) of the Act, must be answered in the context of the claims made in the summons. Those claims must be considered in the context of the legislation as it stands, when the matter is heard, given the basis upon which the amending legislation here in question was introduced. (See Industrial Relations Amendment Act 2005 transitional provisions inserted as clause 19B of Schedule 4 of the Act.) That explains why the parties devoted their attention to the proper construction of the legislation as they did, in the cases which they each advanced. 45 What ought not to be overlooked in this case, is that these proceedings were commenced in 2003, well before the Court of Appeal's decision in Solution 6 was given in 2004. The adoption of the narrower approach to the construction of the section in that case, and the subsequent amendment of the legislation no doubt explains some of the history of the proceedings in the meantime. 46 In 2005, the Parliament saw fit to amend s 106 to overcome the effect of the approach adopted in Solution 6. The result was the enactment of s 106(2A). There was no necessity for the applicants to amend their summonses to specifically plead the amended section, in order to be entitled to rely upon it at the hearing of their claims. The section as it stands is the basis of the Court's jurisdiction to consider the claims which the applicants seek to advance. Just as the applicants were not entitled to complain about the jurisdiction being narrowed, as the result of the Court of Appeal's decision in Solution 6 and could not prevent the respondents from relying on that decision, the respondents are not now entitled to complain, or to prevent the applicants from relying upon the enactment of s 106(2A).

'... in applying s106 the Court is to first establish whether any work has been performed in an industry and then to identify the contract or arrangements whereby that work is performed. The High Court specifically stated that it was to invite error to begin by identifying the contracts and the way in which they are related.' 49 This is one of those cases where the respondents contend that neither Mr Kennett nor Mr Pak performed any work in an industry, as they claimed in their summonses and as the section requires. Further, that even if it could be found that such work was performed, the evidence did not establish that it was performed under the contracts sought to be attacked in these proceedings. 50 Accordingly, what must first be considered is whether or not the evidence, as it stands, permits the conclusion that work was performed for the respondents after the sale, as the applicants claim. There was no issue that if the work was performed, it was work in an industry. 51 It was common ground that prior to the sale of the College, Mr Campbell and Mr Kennett discussed Mr Kennett being employed as President of the College after the sale and that Mr Pak would be employed in marketing. Mr Campbell also discussed such marketing work with Mr Pak. Mr Kennett and Mr Pak each gave evidence that after the sale, they performed work at the College. That evidence was supported by the evidence of Ms Carol Brash, a teacher employed at the College, who continued working there after the sale. Her evidence was that after the sale, both Mr Kennett and Mr Pak continued attending the College and performing the work they had previously performed. 52 After completion of the sale, on 19 August Mr Kennett was given a written offer of employment as a casual consultant for 10 hours per week by Academies Australasia (Management) Pty Limited, another of Garratt's subsidiaries. He did not accept that offer. It was Mr Kennett's evidence that the offer was inconsistent with his earlier discussions with Mr Campbell. Discussions about the August offer ensued, but no agreement was reached and on 10 October, Garratt's advised Mr Kennett that the 19 August offer had lapsed, it not having been accepted. 53 It was the respondents' case that this was the only offer of employment ever made to Mr Kennett and that Mr Pak was never made any offer at all.

Was the work performed under the contract or arrangements in question? 56 In those circumstances, what next falls to be determined is whether or not the evidence was capable of providing the basis for a finding that Mr Kennett and Mr Pak performed that work under the contract or arrangements sought to be attacked in these proceedings. 57 The contract or arrangements to which the orders sought are addressed, comprise of a number of written documents, as well as oral representations and offers claimed to have been made by Mr Campbell, a director of Garratt's, prior to the sale, which Mr Kennett and Mr Pak claim they accepted and relied upon. 58 None of the sale documents relied upon evidence any offer of employment having been made by Garratt's to either Mr Kennett or Mr Pak, although the deed of sale includes a restraint provision which contemplated that they would work for Mayrana. Garratt's was not a party to any of the documents entered by Mr Kennett or Mr Pak in relation to the sale of the College. It was Garratt's subsidiary, Mayrana, which purchased the business and was a party to the transaction as documented. The deed of sale contemplated offers of employment being made to employees of Excelsior College Pty Limited who Mayrana selected, on terms it wished to offer, before completion of the sale. The deed did not identify those employees, nor did it provide for the terms which they were to be offered. 59 The evidence showed that Excelsior College Pty Limited wrote to its employees advising of the sale and the possibility of offers of continuing employment being made to them by the purchaser. There was no evidence that Mr Kennett or Mr Pak were employees of Excelsior College Pty Limited or that they were sent such a letter. They were shareholders and directors of Excelsior College Pty Limited, working at the College as consultants, through their own companies. There was evidence that Mayrana made written offers to employees of Excelsior College Pty Limited, after the completion of the sale. It was the respondents' submission that nothing turned on this, even though the deed of sale required acceptance of such offers before completion of the sale. There was no evidence that such offers were made to Mr Kennett and Mr Pak. 60 It was common ground, however, that Mr Kennett and Mr Campbell discussed his employment before the sale, which was completed in August. Mr Campbell also discussed Mr Pak's employment with Mr Kennett. In Mr Kennett's case, his evidence was that he had discussed his future role with Mr Campbell on various occasions, but in June suggested that the discussion continue, 'if we sell Excelsior College'. On 10 July, the matter was again discussed, as well as the announcement of the sale. Mr Kennett's evidence was that he agreed to accept the offer of the position of President of the College, with Mr Campbell advising him that he would be provided with a formal agreement in his new capacity, after the sale. It was in that context, that the sale was later announced by Garratt's to the Australian Stock Exchange on 19 July, in terms discussed between Mr Kennett, Mr Campbell and Mr Traynor. In that announcement, extensive reference was made to Mr Kennett, but not to Mr Pak. Mr Kennett was quoted as saying:

65 On completion of the sale Mr Pak and Mr Kennett became shareholders of Garratt's. They were not shareholders of Mayrana, which had purchased the College, or of Academies Australasia, which later offered Mr Kennett employment. They were not directors of any of these three companies. 66 Despite the absence of any formalisation of their employment contracts, on the evidence of both Mr Kennett and Mr Pak, they continued to work at the College, after the sale, doing what they had previously done. The College was sold as a going concern and continued to operate after the sale. They both attended to various administrative work. Mr Kennett also did some teaching and Mr Pak attended to his marketing work. 67 Taking the evidence at its highest, as it must be at this stage of the proceedings, it must be inferred that the work they each performed at the College after the sale was of benefit to Mayrana, as owner of the College, as well as to Garratt's, given that Mayrana was its wholly owned subsidiary. The evidence as it stands also permits the conclusion that the work was performed in accordance with oral agreements which Mr Kennett and Mr Pak had each reached with Mr Campbell, prior to the entry of the sale agreement, as to their ongoing employment in the College business after the sale. 68 The sale agreement later executed in August did not require that any offers of employment made be written. It contemplated that offers of employment would be made to the vendor's employees, prior to completion of the sale. That did not occur in the case of the College's employees who received offers after the sale. On the evidence, both Mr Kennett and Mr Pak had reached agreement on their future roles with Mr Campbell, before the sale deed was executed. The sale agreement contemplated such employment being agreed. It was expressly referred to in the restraint provision. 69 Employment agreements do not need to be evidenced in writing. On their evidence in each case, the applicants claim that without those agreements, they would not have sold the College. 70 It follows that on the current state of the evidence, the conclusion that work was not performed by Mr Kennett and Mr Pak pursuant to contracts sought to be attacked in the proceedings, is not open, given the way in which the claims advanced are framed and explained in the particulars. Is the sale agreement within jurisdiction? 71 The next question which requires consideration is whether the sale agreement is within jurisdiction. 72 Section 106(2A) provides: (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. 73 The Full Bench in Wirraway observed at [51] in relation to the High Court's decision in Fish at [38]:

Purpose is to be distinguished from motive. The purpose of conduct is the end sought to be accomplished by the conduct. The motive for conduct is the reason for seeking that end. The appropriate description or characterisation of the end sought to be accomplished (purpose), as distinct from the reason for seeking that end (motive), may depend upon the legislative or other context in which the task is undertaken. Thus, for example, in describing, for the application of a law relating to tax avoidance, the purpose of an individual, or of an arrangement, it will be necessary to look at what is sought to be achieved that is of fiscal consequence, not at a more remote, but fiscally irrelevant, object, such as increasing a taxpayer's disposable income. Similarly, in the context of competition law, it is necessary to identify purpose by describing what is sought to be achieved by reference to what is relevant in market terms. The purpose of the 14 team term was the objective, in relation to the nature of their business arrangements, that News and ARL sought to achieve; not the reason why they sought to achieve that objective. They may have had different, and multiple, reasons for their conduct. The manifest effect of a provision in an agreement, in a given case, may be the clearest indication of its purpose. In other cases, it may be difficult, or even impossible, to determine the purpose (of a kind relevant to the operation of the Act) of a provision in a written contract merely by reading the document. And, of course, the legislation deals with contracts, arrangements or understandings. 83 Plainly enough, contractual arrangements may have more than one 'significant purpose'. As Callinan J concluded in South Sydney District Rugby League Football Club Ltd at [212], with Gummow J's agreement, purpose must be discerned from evidence as to subjective reasons, and in the case of a party which is not a natural person, from evidence of those people who in fact made the contractual arrangements on its behalf. This idea is taken up directly in the case of s 106(2A), where reference is made to 'the person' who made the contractual arrangements. In this case of course, the respondents have not yet led their evidence. At this stage, evidence as to purpose must therefore be found in the applicants' evidence, as well as in the documents. 84 On the approach of the High Court in South Sydney District Rugby League Football Club Ltd, the purpose or the end result intended by the parties' 'contractual arrangements', is distinct from their motive for seeking that end. Even in the case of a written document however, purpose may not necessarily be revealed merely by reading the provisions made in the contract, arrangement or condition concerned. 85 On their evidence, a significant purpose of the contractual arrangements which Mr Kennett and Mr Pak each made, was that they would have ongoing employment in the expanded business which Garratt's was establishing with the acquisition of the College. That is denied by the respondents. The question must be resolved by having regard to the evidence as to the approach made to Mr Kennett and Mr Pak by Mr Campbell; the ensuing negotiations about both the sale of the College as a going concern and their continuing to work in the expanded business after the sale; the work which they, in fact, performed after the sale; their prior agreement to perform such work and the inclusion of the restraint provision in the sale agreement, which contemplated the performance of such work at the College for Mayrana. 86 There is also evidence that the applicants were anxious to sell the College, having regard to its financial position and competition in the market place. That evidence is no doubt of relevance to the cases which the parties will advance on the merits, but cannot overwhelm the remainder of the evidence as to the purpose of the parties contractual arrangements. 87 In my view, the practical effect of the restraint to which the parties agreed also cannot be overlooked in considering the overall purpose of the arrangement. They were the working proprietors of the College and having agreed to accept ongoing employment in the College, also agreed to tie themselves to work for Mayrana, for a period of three years. What was restrained was not only solicitation of students, staff and customers of the College, but also engaging in a business or activity which was the same as that of the College in Sydney, apart from such work being performed for Mayrana. 88 In the light of all of that evidence, I am unable to come to the conclusion that the necessary purpose cannot be established on the evidence as it presently stands. That conclusion rests on the evidence of Mr Kennett and Mr Pak, that the proposal with which Mr Campbell approached them from the outset and their subsequent discussions, were concerned with both the sale of the College and that they have an ongoing role at the College afterwards; that but for ongoing work after the College was sold as a going concern, they would not have agreed to the sale; that they reached agreement about the performance of work for the purchasers prior to the sale and later performed such work, as the restraint agreement in the deed of sale expressly contemplated; that the sale deed required the vendor to terminate the contracts of its employees and consultants prior to completion and made completion contingent on those Mayrana wished to employ, accepting its offer prior to completion. On the applicants' case, they had already made such agreements, even before the sale agreement was finally executed. 89 While the restraint clause in the sale deed provides only for work being provided by Mr Kennett and Mr Pak to Mayrana, by way of exemption from the restraint agreed, on the submissions advanced for the respondents, the performance of work for Garratt's, or Academies Australasia, would involve no breach of the restraint, but would have amounted to a waiver by Mayrana, given the accepted relationship between it and those companies. 90 I do not overlook that it was also argued for the respondents, that on the evidence, taken at its highest, that all that could be found was an agreement for the performance of casual work for a period of 6 months, which could not provide a basis for the view that the performance of work was a significant purpose of the contractual arrangements made. I am not able to come to the conclusion that what was agreed was so confined, on the evidence as it currently stands.

In Solution 6 , the Court of Appeal held that the Commission may only declare void or vary a collateral arrangement or related condition that itself leads directly tot he performance e of work. This interpretation of the section significantly narrows the scope of the Commission's unfair contracts jurisdiction. It is problematic because an arrangement that leads directly to the performance of work may consist of a formal work contract as well as related agreements, which, if themselves, may not lead to the performance of work. If this interpretation were continued, and a person's total package were not reviewable, then the Commission's unfair contracts jurisdiction would be narrowed to a significant extent for employees and independent contractors. It would then be open to unscrupulous employers to ensure that the contract for work was minimalist and carefully quarantined from other aspects of the relationship that are set out in different documents, or entered into at different times. 94 Examples given of related conditions or collateral arrangements which themselves did not relate to a person's performance of work, but which the Court could declare void or vary under s 106, were a 'superannuation arrangement, share option agreement or franchise agreement' (at p 2). 95 It follows from s 106(2A) that there will be cases where it will be concluded on the evidence that the performance of work was not 'a significant purpose of the contractual arrangements' in question, even though one part of those contractual arrangements was a contract 'whereby a person performs work in any industry'. Nevertheless, if the necessary purpose be found, s 106(2A) expressly permits the variation or avoidance of 'a contract that is a related condition or collateral arrangement'. Whether or not the performance of work was a 'significant purpose' of the particular arrangements is a question of fact to be determined in each case. On the evidence, as it stands in this case, it cannot be concluded that no such significant purpose here existed. 96 The meaning of the phrase which the Parliament has elected to use in s 106(2A), 'a significant purpose', is one which also may conveniently be considered in the context of the pre-existing approach to the proper construction of s 106, in which purpose played an important part. The approach of Mahoney P in Production Spray Painting & Panel Beating Pty Ltd and Ors v Newnham and Ors (1991) 27 NSWLR 645, was applied in later decisions of the Full Bench of the Court (see Euphoric Pty Limited v Ryledar Pty Limited and Anor (2002) 117 IR 1, for example.) 97 Production Spray Painting was a case where a business was sold as a going concern and the performance of work after the sale by the purchaser, rather than by the vendor, was said to give rise to jurisdiction. Mahoney P's approach required a focus on the purpose of the transaction in question. His Honour observed at 649 - 650:

This understanding of "whereby" is, in my opinion, in accordance with the decisions which, for this Court, establish the meaning of the section. Thus, it was the purpose of the share-farming agreement considered in Stevenson v Barham that work be done in the relevant industry. The operation of the relevant service station by the individuals concerned was the purpose which was sought to be achieved by the "Solus Contract" considered in the Caltex case (at 170B, 171C-172C). In Ex parte VG Haulage Services Pty Ltd; Re The Industrial Commission of New South Wales [1972] 2 NSWLR 81, a case cited subsequently by the High Court, it was the purpose of the transaction whereby the lorry and the work agreement were purchased that the purchaser should be given work to do with the lorry and that he should do it (at 83-84). 98 His Honour also doubted that the 'section would apply to a transaction in which the performance of work was merely an accidental incident or consequence of it', such as the purchase of an article from a retail shop (at 651). Even where the transaction contemplated or envisaged that work was to be performed, it would not necessarily be one whereby work was performed on his Honour's approach, because there was 'a distinction between the purpose of a transaction and that which the parties have stipulated shall be done in order that the purpose of the transaction be achieved' (at 651). The contract there in question also required the vendor to perform certain work, prior to the sale being completed. His Honour concluded that the purpose of the vendor doing the work of managing the business until completion, was so that the purpose of the transaction be achieved, that is, that the purchasers have the benefit of the goodwill they had purchased. In this case, of course, the circumstances were different, in that it is the work which the vendors argue they agreed to perform after the sale, in the ongoing College business, which is said to ground jurisdiction. 99 His Honour finally observed at 651:

100 Consistently perhaps with these last observations, in amending s 106, to introduce ss (2A), the Parliament has not used the phrase 'the purpose of the transaction', which Mahoney P had earlier discussed, but rather 'a significant purpose of the contractual arrangements made by the person'. That approach is consistent with that discussed by the High Court in South Sydney District Rugby League Football Club Ltd, in relation to the ascertainment of purpose in the context of Trade Practices legislation. (See for example the observations of Gummow J at [62]). 101 The Parliament also did not refer, as it could have done, to the contractual arrangements made by 'the parties' to the contractual arrangements. What s 106(2A) requires is that the performance of work be 'a significant purpose of the contractual arrangements made by the person', not the narrower focus that it be 'the purpose of the transaction' or even that it be 'a significant purpose of the contractual arrangements made by the parties', which might imply that the purpose must be jointly that of all of the parties. 102 In conclusion, therefore, on this aspect, I am satisfied that while the sale transaction undoubtedly had the purpose of the transfer of the College as a going concern to Mayrana and that the purpose of the restraint agreed was to ensure that Mayrana had the benefit of the goodwill of the business it acquired, the restraint also had the purpose of ensuring that Mr Kennett and Mr Pak could perform work for Mayrana, during the three year period of the restraint they had given. That was consistent with the agreements earlier reached with Mr Campbell, that the applicants would each perform work at the College after the sale. On the evidence it cannot be concluded that the sale agreement and the work agreements were not related. The purpose of the work agreements was undoubtedly the performance of work in the ongoing College business. It cannot be concluded that that purpose, was not a significant purpose of 'the contractual arrangements made', or that the agreement that Mr Pak and Mr Kennett would work in the College after the sale, was only the means by which the parties to the sale agreement ensured that their other purposes were achieved, as was concluded in Production Spray Painting. 103 In Fish, Gleeson CJ observed in relation to the construction of s 106, as it then stood that:

[41] The second consideration was mentioned earlier in these reasons and is not unrelated to the first. Performance of work in an industry is the hinge about which s 106 turns. It is the arrangements (contractual and non-contractual) whereby a person performs work in an industry that the Commission may avoid or vary. That is, it is the arrangements (contractual and non-contractual) according to which a person performs the work (or in consequence of which or in fulfilment of which a person performs that work) which may be avoided or varied. And although the notion of "avoiding" an arrangement that is not enforceable may be awkward, determining that some new arrangement will obtain for the future (thus "varying" the arrangement) presents no such awkward juxtaposition of ideas. Further, to focus attention upon the arrangements whereby a person performs work in an industry, no matter whether the arrangement is found in the contract the parties have made or only in some related condition or collateral arrangement, sufficiently meets the need, identified by Barwick CJ in Brown v Rezitis [38], to recognise that these provisions of the Act have, as one important purpose, dealing with subterfuges which take workers outside the operation of industrial instruments intended to protect workers in an industry. At the same time, to read s 106 as hinged about performance of work in any industry and empowering the Commission to deal only with such of the arrangements between parties as can be described as a contract whereby a person performs work in any industry confines the jurisdiction of the Commission to declare a contract void or to vary it within bounds that leave intact the jurisdiction of the Supreme Court over other kinds of contractual obligations. 104 These conclusions have been overtaken by what the Parliament did in enacting s 106(2A), as his Honour later noted. The respondents seek to avoid the consequences of the amendments made by the Parliament, in the construction pressed. To accept their arguments would be, in my opinion, to fail to give effect to the Parliament's clear intent.

(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. 113 Here, neither inconvenience or improbability of result, suggests that the literal meaning of s 106(5) was not what the Parliament intended, particularly having in mind the amendment made with the introduction of s 106(2A). 114 The word 'contract' wherever used in s 106, is used in its defined sense, as provided in s 105 - that is 'any contract or arrangement, or any related condition or collateral arrangement, but does not include an industrial instrument .... '. In its express terms, s 106(5) is concerned with money orders to be made by the Court 'in connection' with such contracts, which the Court has 'declared wholly or partly void, or varied'. The scheme of s 106 permits such money orders to be made in relation to both contracts under which work is performed (s 106(1)) and those which 'are a related condition or collateral arrangement' (s 106(2A)), so long as, in the latter case, the requirements of s 106(2A) are met and the Court has ordered their variation, or has declared them void. 115 In discerning legislative purpose in this case, it may not be overlooked that s 106(2A) was enacted to overcome the Court of Appeal's decision in Solution 6, which had the result of narrowing the broad construction of the section which had earlier viewed the Court as having jurisdiction to make both orders of avoidance and variation as to related conditions and collateral arrangements, as well as to make money orders in connection with such orders. That the High Court later agreed with the Court of Appeal's narrow approach to the construction of the section, does not take away from the Parliament's earlier decision to amend the section to overcome the approach which the Court of Appeal had adopted. I am satisfied that it did so in a particular and unambiguous way, which must now be given effect. 116 To adopt the narrow construction urged for the respondents would also be directly contrary to the ordinary cannons of statutory construction, which require that in the case of ambiguity, beneficial legislation such as s106 be construed 'so as to give the fullest relief which the fair meaning of its language will allow.' (See Bull v Attorney General (NSW) (1913) 17 CLR 370 at [384] and the discussion in Statutory Interpretation in Australia 6th Ed Pearce and Geddes at [9.2]) 117 In any event, as I have said, I am satisfied that there is no ambiguity and that nothing in the language of the section, as amended by the insertion of s 106(2A), would permit a proper reading of its terms to confine s 106(5), by excluding the making of money orders in respect of 'any contract declared wholly or partly void, or varied', pursuant to the express provision made for such orders in s 106(2A). The fourth respondent 118 As to the position of the fourth respondent, Mr Traynor, the case advanced against him is not as a party to any of the contracts or arrangements in issue, but as a person culpably associated with their operation. In this respect the applicants rely on the approach of the High Court in Rezitis at 168. 119 Mr Traynor was an accountant engaged by the respondents to conduct a due diligence of the accounts and operations of the College. The sale price depended in part on the College's profitability, about which Mr Kennett and Mr Pak had made certain representations, as to which the purchaser was to satisfy itself. Mr Traynor was engaged to conduct the resulting due diligence for the purchaser. The sale price was later reduced as a result and the applicants advance various complaints as to how Mr Traynor's involvement amounted to a culpable association with the operation of the unfair aspects of the contract and arrangements about which complaint is made. 120 It might be that the applicants face difficulty in making out a case where a proper exercise of the Court's discretion would permit money orders to be made against Mr Traynor under s 106(5). What had to be demonstrated at this stage of the proceedings, however, was that the Court had no jurisdiction to make any orders against him, given the claims advanced and taking the applicants' evidence at its highest. The applicants complain in their cases, that Mr Traynor was involved in conduct which permitted unconscionable advantage to be taken of them. They seek to rely on expert evidence, to make good that claim. 121 Given the conclusions which I have reached in relation to the question of the Court's jurisdiction to deal with the sale agreement and having regard to the particular claims advanced against Mr Traynor and the evidence which seeks to make it out, at this stage of the proceedings I am unable to conclude that the Court lacks jurisdiction to make orders sought against Mr Traynor.

Kennett and Anor v Mayrana Pty Ltd and Ors

At a glance

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Before

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Judgment (113 paragraphs)

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Cases Cited (21)

Cited By (8)