Land v Emerald City Design Pty Ltd

APPLICANT Mr M Moir of counsel Agent: Mr R Marshall Employment Consultant LEGAL REPRESENTATIVES: RESPONDENT Mr K Nomchong of counsel Solicitor: Mr S Trew Holding Redlich

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

Application under s 106 of the Industrial Relations Act 1996

1. On 13 August 2004, Jennifer Rebecca Land filed a summons under s 106 of the Industrial Relations Act 1996 ("the Act") seeking relief against Emerald City Design Pty Ltd ("Emerald City"). 2. Ms Land had been dismissed from her employment with Emerald City on 14 August 2003 on the grounds of alleged carelessness leading to an irretrievable breakdown in the employment relationship. Ms Land sought various orders including as follows: 1. An order declaring void in whole or in part or varying in whole or in part either from its commencement or from some other time the contract of employment between the Applicant and the Respondent under which the Applicant performed work in an industry except to the extent that the Applicant received remuneration and benefits from the Respondent or became entitled to receive such remuneration or benefits. 2. Further, in addition, an order that the contract of employment between the Applicant and the Respondent under which the Applicant performed work in an industry was unfair, harsh and unconscionable and contrary to the public interest. 3. Further, in addition, an order varying the contract of employment between the Applicant and the Respondent from its commencement so as to include the following terms: (a) In the event that contract of employment is terminated by the Respondent for any reason, the Respondent shall give to the Applicant one year's notice of the termination date or payment in lieu of such notice of termination. (b) For the purpose of (a) (above), such payment shall be calculated by reference to a total remuneration package of $87,230.52 per annum. 4. Further, in addition, an order that the Respondent pays an amount to the Applicant as compensation for distress, humiliation and stress arising from the unfairness of the contract. 5. Further, in addition, an order that the Respondent pay to the Applicant such amount of money in connection with the contract so avoided or varied as may appear to be just in the circumstances. 3. Ms Land's application for relief under s 106 of the Act followed an earlier application by her on 4 September 2003 for relief from unfair dismissal under s 84 of the Act. The unfair dismissal application was discontinued by Ms Land on 3 December 2003. 4. On 17 September 2004, Emerald City moved the court for an order that Ms Land's summons for relief under s 106 be set aside on the grounds that the orders sought by Ms Land in her summons were beyond the court's jurisdiction to grant by reason of the operation of s 109A of the Act. 5. Section 109A of the Act provides: 109A Exclusion of certain contracts in connection with unfair dismissals (1) This Division does not apply to a contract of employment that is alleged to be an unfair contract for any reason for which: (a) an application has been or could have been made by the employee under Part 6 (Unfair dismissals), or (b) such an application could have been made but for the provisions of section 83 that exclude the employee from making an application under that Part. (2) In this section: contract of employment means any contract or arrangement under which work is done by a person in the capacity of an employee, and includes a related condition or collateral arrangement with respect to such a contract. dismissal has the same meaning that it has in Part 6. Background 6. Ms Land commenced employment with Emerald City on 5 May 2003 as a senior designer. On 7 August 2003, Ms Land assisted another member of staff to change certain elements in the graphics of a television advertisement. The advertisement was aired nationally on 9 August 2003 and following. On 12 August 2003, Emerald City learned that the timing of the audio and graphics was incorrect. It is alleged by Emerald City that the advertisement was aired approximately 80 times at an average cost of $10,000. 7. On 13 August 2003, it is alleged that the advertisement contained a second error, which had occurred at the time that Ms Land had corrected the first error. The error involved the incorrect branding of the client's identity in regional areas. 8. On 14 August 2003, Ms Land was advised that her employment was terminated forthwith on the grounds that her carelessness had seriously damaged the goodwill of Emerald City and exposed it to a potential claim for a significant amount of money.

Submissions of the Parties 9. Ms K Nomchong of counsel appeared for Emerald City on the motion. Counsel's principal contention was that Ms Land's unfair contracts claim was really an unfair dismissal claim in disguise and therefore, s 109A operates to exclude jurisdiction: Beahan v Bush Boake Allen Australia Limited (1999) 47 NSWLR 648 at 692, (1999) 93 IR 1, 41-42. It was contended by Ms Nomchong that the applicant was engaged for a fixed term of six months. Further, it was contended that on an examination of the pleadings that the complaint of unfairness in the s 106 proceedings is all about the unfairness of the dismissal. Having failed in her attempt to bring unfair dismissal proceedings, the applicant now seeks to agitate her claim under s 106. The application ought to be seen for what it really is, a "forum shopping" exercise. 10. Ms Nomchong relied upon the decision of Boland J in Balsdon v Murray Irrigation [2003] NSWIRComm 251 in relation to the principles which apply to determine whether or not the proceedings are at an appropriate stage for the Commission to determine an objection to jurisdiction. In Balsdon his Honour held that there was sufficient material to determine a jurisdictional issue because of the availability of facts and the fact that the applicant had made a previous unfair dismissal claim which was then discontinued. 11. Mr M Moir of counsel appeared for Ms Land on the motion. Counsel's principal contention was that in order to succeed on the notice of motion it must be "demonstrated that there is no power for the Court to grant any relief to the applicant" when taking the applicant's case at its highest: Virtue v New South Wales Department of Education and Training (1999) 92 IR 428 at 448 and Euphoric Pty Limited v Ryledar Pty Limited and Anor (2002) 117 IR 1 at 45 which followed the principles set out in Nagle (T/as W D and J L Nagle & Sons) v Tilburg & Anor (1993) 51 IR 8 at 10-12. 12. Mr Moir contended that in considering whether the summons is caught by s 109A, a consideration of the claim in the summons is required: Beahan. It was further contended that the terms of the summons considered in Beahan (set out at 656-657) are similar to the summons filed by Ms Land and to those considered in Steinhardt v Sapphire Bioscience Pty Ltd [2004] NSWIRComm 42; Fallins v Credit Suisse Asset Management (Australia) Ltd [2004] NSWIRComm 112; Bowman v Ricegrowers' Co-Operative Limited [2004] NSWIRComm 102 and Russo v Quality Bakers [2004] NSWIRComm 50. 13. It was further submitted that the mere fact that an applicant had previously brought a claim for unfair dismissal does not of itself mean any summons will be caught by s 109A: Farrington v West Harbour Rugby Football Club Ltd [2003] NSWIRComm 270. 14. In the alternative, it was submitted that the question of whether an application is, in essence, a claim for unfair dismissal is a question of fact that can only be determined after hearing evidence: Costopoulos v Hansen Yuncken Pty Limited [2003] NSWIRComm 335 at [79]. 15. Further, in the alternative, it was submitted that it was not appropriate to deal with the motion at this stage having regard to the obligation imposed by s 109 of the Act to endeavour to settle unfair contract claims by means of conciliation; McGowan v Australian Broadcasting Corporation (2001) 104 IR 244 at 251 and Balsdon at [22].

Consideration 16. The issue in these proceedings is whether Ms Land's claim for relief under s 106 of the Act is an unfair dismissal claim in disguise and therefore, by virtue of the operation of s 109A, beyond the Court's jurisdiction to grant. 17. At the outset of the proceedings, I raised with the parties whether the Commission should endeavour to deal with the matter by way of conciliation prior to hearing the motion. This course was opposed by Ms Nomchong. 18. An application was made by Emerald City that the requirements of r 82 of the Industrial Relations Commission Rules 1996 (the Rules) be waived. This application was not opposed by the applicant. Rule 82(2)(c) requires a notice of motion to have been filed within the time required for entering an appearance, that is, seven days after service of the summons. Pursuant to r 88 of the Rules, I waive compliance with r 82(2)(c). 19. The approach to be taken to a threshold challenge to jurisdiction was recently considered by Wright J President, Walton J Vice-President, (Schmidt J not dissenting) in Euphoric. After referring with approval to passages from Nagle v Tilburg their Honours said at [9]-[14]: 9 This approach has been followed and adopted in numerous cases in both the Court Session and the Commission. The analysis of that judgment which was essayed in Virtue v NSW Department of Education and Training (1999) 92 IR 428 at 447 - 448 has been cited and followed in a number of subsequent judgments; see, for example, Heath Group Australasia Pty Ltd v Pengly (2001) 110 IR 376; Hall v Strathfield Group Ltd [2001] NSWIRComm 266 (subject to appeal); Alsford v Castech Pty Ltd [2001] NSWIRComm 259. 10 The applicable principles were set out in Virtue in this way (at 447 - 448): (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. 11 In order to succeed in a motion to dismiss on a preliminary basis a summons for want of jurisdiction, a respondent must demonstrate that there is no power in the Commission to grant any relief sought in the application. 12 However, as indicated in the fifth proposition cited above from Virtue "refusal of relief at the threshold [that is on a basis of a preliminary point or motion] will not finally determine that jurisdiction exists for any order which the Court might make between the parties". In other words, it remains open to a respondent unsuccessful on a preliminary motion to maintain its arguments as to lack of jurisdiction for the purposes of the final hearing. 13 Further, as observed in the seventh proposition and notwithstanding the public interest in having struck out at an early stage proceedings for which there is no jurisdiction, "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 [is] clearly demonstrated". 14 The jurisprudence of this Court represented by the judgment of the then Full Industrial Court in Nagle v Tilburg, and the cases which have followed it, has been important in controlling a practice which had developed in the jurisdiction of some respondents too readily raising jurisdictional arguments at an early stage, at times with at least the appearance of a forensic tactic or an attempt to place logistical difficulties in the way of a less well-resourced applicant. The decision in this matter should not be seen as, or become, a basis for the rigour which has hitherto been exercised in the jurisdiction to be lessened. These observations are made only to emphasise the decision in this matter has depended on the very particular and relatively rare set of circumstances raised by these proceedings. It should not be interpreted or considered by those who practice in the jurisdiction as signifying any lessening of the stringency with which the approach in Nagle v Tilburg will be adhered to. 20. In the present case, Ms Land originally sought relief under the unfair dismissal provisions of the Act. It was claimed that the dismissal was harsh, unreasonable and unjust. Ms Land sought monetary compensation. Ms Land later discontinued her unfair dismissal claim, apparently accepting that her remuneration calculated on an annual basis exceeded the statutory limit prescribed for the purposes of s 83(1)(b) of the Act. A claim was then brought under s 106 of the Act. 21. The summons contends that Ms Land's contract of employment was unfair, harsh and unconscionable as follows: (a) It permitted the Respondent to terminate the contract of employment without sufficient notice or payment in lieu of notice. (b) It discriminated on economic grounds against and to the detriment of the Applicant. (c) It discriminated against the Applicant in the absence of an industrial union of employees to protect the Applicant's industrial interest. (d) It discriminated against the Applicant having regard to the Applicant's position and responsibilities. (e) It invested the Respondent with significant discretionary powers that may and have been used to the substantial disadvantage of the Applicant, particularly in the circumstances relating to termination of the contract. (f) The Applicant was at all material times in a position of unequal and inferior bargaining power in respect of her dealings with the Respondent and was specifically in such a position at the time of termination. (g) It permitted the Respondent to deprive the Applicant of the significant benefits of long-term secure career employment and/or employment at all. (h) It failed to provide for any reasonable payment to the Applicant by the Respondent upon termination of employment for any reason. (i) It failed to contain provisions and protection consistent with Australia's international obligations under the International Labour Organisation's Termination of Employment at the initiative of the Employer Convention to which Australia is a party. (j) It permitted the Respondent to terminate the Applicant's employment without taking all reasonable steps to minimise or reduce the stress, hurt and suffering of the Applicant at the time of the termination and into the future, in circumstances where such stress, hurt and suffering was foreseeable. (k) It permitted the Respondent to terminate the Applicant in a manner that caused her considerable stress, hurt and suffering, impaired her future employment prospects and reduced her quality of life. (l) It failed to contain the terms in paragraph A 3 (above). 22. The relief sought by Ms Land was: (i) Payment in lieu of notice 12 months payment =$87,230.52 Less paid =$0 Total =$87,230.52 (ii) Amount compensating the Applicant for stress, hurt and suffering, impairment of employment prospects and loss of enjoyment of life =$10,000 23. The operation of s 109A was considered in Beahan. In that case the Full Bench made the following observations at 692: In our opinion, it is central to the operation of s.109A that an excluded contract of employment is one where it is alleged that it is unfair for any reason for which an unfair dismissal claim could have been made. In other words, and as Mr. Hannaford observed during the second reading debate in the Legislative Council (at 4032) "if somebody wants to argue that the terms of his contract are unfair, unconscionable or harsh, he will still be able to achieve a variation of the contract by an application" under s 106; and, as Ms Kirkby said in the same debate (at 4033), an applicant "will still be able to plead an unfair contract case but this will be on the terms of the contract and not on whether the termination of the contract was unfair".

The answers given by the Attorney-General to the concerns expressed by Ms Kirkby provide further insight, we are satisfied, into the purpose of the amendment having in mind that the intention as to the operation of s 106 was to "circumscribe it to a limited extent" so that... cases that do not essentially involve dismissal will still be able to be agitated under the general umbrella of the unfair contracts provisions" (at 4036). In minimising concern that the amendments were "not as drastic as some might think" (at 4035), the Attorney-General gave clear guidance to the real intent of the amendments when he said that (at 4036) "...only the case which is really disguised as an unfair dismissal (in context, we think this clearly should read, as both counsel acknowledged, as " unfair contract") case is to be prohibited under these sections".

It is palpably clear, then, that s 109A has the purpose of removing from the unfair contracts jurisdiction those claims which are in truth or essentially involve unfair dismissals. In a very real sense, and having in mind the way in which this jurisdiction developed, such an approach is unexceptional. It is consistent with the views expressed by the court and the former Industrial Commission in Court Session in cases such as Huskisson RSL Sub-Branch Club v Sullivan and BNY Australia v James , as developed in the later cases of Westfield v Helprin and Harcourt Brace v Cory . Consistent with the approach there adopted are the decisions of the Court of Appeal, as earlier outlined, in Incitec v Industrial Court of New South Wales , Walker v Industrial Court of NSW and Rothmans Distribution Services v Industrial Court of New South Wales . Indeed, the opening words of the explanatory note to the Bill as to its object "...to remove the possibility of unfair dismissal claims being dealt with ... under provisions relating to unfair contracts" make that plain.

In short, our view is that s 109A operates to exclude a contract of employment from the operation of s 106 only where the unfair contract claim is an unfair dismissal claim in disguise and where essentially it is of the nature of an unfair dismissal. Where a claim challenges the terms or operation of a contract of employment by genuine, not superficial or coloured, reasons related to the contract itself then, in our view, it is a claim properly within s 106 and s 109A has no operation in relation to it. A review of the allegations made in the present case, we are satisfied, discloses allegations directed to the contract of employment and not to the applicant's dismissal. It is properly within s 106. Accordingly, the grounds supporting the motion have not been made out. 24. Ms Nomchong submitted that on an examination of the pleadings the complaint of unfairness in the summons was all about the unfairness of the dismissal. Ms Nomchong contended that in order to determine whether the summons is caught by s 109A, the Court is required to distil the essential elements of the applicant's claim under s 106 and then to determine whether the contract is alleged to be unfair for any reason for which unfair dismissal proceedings could have been brought. 25. Complaints of unfairness in this matter include termination of the contract; deprivation of long term secure employment; failure to provide reasonable payment on termination and that the contract permitted termination without taking all reasonable steps to minimise stress, hurt and suffering and loss of enjoyment of life. 26. As was observed in Beahan, there is a distinction to be drawn between unfair contract claims and unfair dismissals, the former being based respectively on a contract as to its terms and operation and the latter on the pure conduct or act of dismissal by a termination of employment. 27. The question whether or not contracts are unfair under s 106 is a matter to be decided upon examination of the facts of each particular case. Gleeson CJ, with whom Kirby P and Priestly JA agreed, in Incitec Limited and Anor v Industrial Court of New South Wales and Ors (1992) 45 IR 155 at 157 said in respect of s 88F, a predecessor to s 106, that the section "is concerned with alleged unfairness or harshness or unconscionability of individual contracts of employment" where the "focus of attention is the contractual relationship between a particular employer and employee". 28. The Chief Justice cited with approval, at 157, the comments by Hill J at first instance in Barry & Ors v Incitec Limited & Anor (1991) 45 IR 143 at 146-147, namely: ... Unfairness may arise either from the terms of the contract itself, the surrounding circumstances, and/or from the manner of performance or operation of the contract...It may arise simply in the special circumstances of and surrounding the particular contract. 29. In Beahan, after reviewing various authorities dealing with s 106, its predecessors and also s 84, the Full Bench said of s 106, at 685: The section, we emphasise, is not concerned with re-establishing an employment relationship which has ended nor with compensating an employee for the loss of his employment contract. In other words, the section is properly concerned with the fairness of the terms of a contract of employment in its various respects and, if relevantly found to be unfair, to provide remedial relief by avoiding or varying the terms of that contract and to order the payment of money in connection with any contract so avoided or varied as is considered just in the circumstances of the case. 30. The question is whether Ms Land's claim challenges the terms or operation of her contract by genuine reasons related to the contract itself. 31. The appropriate approach to be adopted in considering motions such as this is to take the applicant's case at its highest to determine whether the facts are sufficiently established to enable the court to be satisfied that it has the necessary material to reach a clear and final decision. 32. Although it was asserted by Ms Nomchong in submissions that the applicant was employed for a fixed term of six months, there is no evidence before me in this regard. 33. This issue has been raised in an unsatisfactory way and creates doubt in my mind as to the terms of the applicant's contract. Mr Moir did not accept that the applicant was engaged on a fixed term contract, submitting Ms Land was engaged as a permanent full time employee. 34. Mr Moir submitted, quite correctly in my view, that this matter would need to be determined at the trial as there was an evidentiary vacuum surrounding the issue. 35. If the respondent is endeavouring to characterise the contract of Ms Land as a fixed term contract this may, potentially, give rise to unfairness in circumstances where Ms Land contends that she entered into ongoing employment. An essential issue requiring determination is the contractual relationship between the parties. There is insufficient material before me to determine the jurisdictional issue because of the unavailability of facts relating to this issue. On this basis alone this matter is distinguishable from Balsdon. 36. In my view, the stage has not been reached that would permit a determination of whether the challenges to the terms or operation of the contract of employment are superficial and coloured and not related to the contract itself. There is an argument as to whether or not there was a fixed term contract which I cannot determine at this stage. It is only where the relevant facts are available that it is possible, in turn, to consider whether s 109A operates to exclude the contract of employment or arrangement or collateral arrangement from the operation of s 106. 37. I do not consider that this matter has reached an appropriate stage which would enable me to determine if the summons reflects a genuine challenge to the terms of the contract. The variation that is sought to be made to Ms Land's contract is firstly, that the termination of employment will not be unfair, harsh and unconscionable and contrary to the public interest. As Boland J observed in Balsdon there is a fine distinction between these words and those found in s 84 of the Act which provides that if an employee claims that a dismissal was harsh, unreasonable or unjust "he or she may apply to the Commission for relief". An examination of the reality of the claim is required to be undertaken in the face of a s 109A challenge. Whether the grounds pleaded in support of the relief sought in this matter are directed to the alleged unfairness of the dismissal and not unfairness as to the terms of the employment contract itself cannot be resolved at this stage. It was the dismissal of the applicant which motivated her to initially challenge the unfairness of the termination pursuant to s 84 of the Act. However, as Staunton J observed in Farrington this does not mean that any summons subsequently filed will be caught by s 109A. There is no allegation in the summons that the dismissal per se was unfair. 38. In passing I note that Kirby P observed in Walker v Industrial Court of New South Wales & Anor, a decision of the Court of Appeal, (1994) 53 IR 121 at 134-135: ... the existence of alternatives has never excluded a person from pursuing rights expressly conferred by statute. Unless those rights are expressly, or by necessary implication, excluded by the alternative claim, or controlled an obligation to elect or by time limits, the beneficiary of the statutory right can pursue any, or all, or no entitlement. 39. I therefore find, on a preliminary basis, that the Court does have jurisdiction to entertain Ms Land's claim. For the above reasons, I decline to set the summons aside by virtue of the operation of s 109A of the Act. It is therefore appropriate to dismiss the notice of motion.

ORDERS 1. The notice of motion filed on 17 September 2004 is dismissed. 2. The matter is listed for conciliation before me at 11.30 am on Friday 19 November 2004. 3. Emerald City is to file and serve its reply to the summons within 14 days of this decision. 4. I reserve the question of costs.

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