Michael Etherden and Anor v Morgo Street Reserve Trust

RESPONDENT (APPLICANT ON MOTION) Morgo Street Reserve Trust

CATCHWORDS: Unfair Contract - Interlocutory proceedings - Motion to dismiss - Section 108B of Industrial Relations Act 1996 - Whether successive agreements constituted a single contract or arrangement or were separate contracts - Held that initial deed was separate contract - Held second agreement remained on foot albeit varied by later agreements - Claim dismissed in part - Costs

Crown Lands Act 1989 LEGISLATION CITED: Industrial Arbitration Act 1940 Industrial Relations Act 1996

Crowe v UCS Developments Pty Ltd (2003) 130 IR 266 Custom Credit Corporation Ltd v Goldsmith [1976] AR (NSW) 98 CASES CITED: Solution 6 Holdings Limited & Ors v Industrial Relations Commission of NSW & Ors (2004) 60 NSWLR 558 Tallerman & Co Pty Ltd v Nathan's Merchandise (Vict) Pty Ltd (1957) 98 CLR 93 The Commissioner of Taxation of the Commonwealth of Australia v Sara Lee Household & Body Care (Australia) Pty Limited (2000) 201 CLR 520

APPLICANT (RESPONDENT ON MOTION) Mr P Coleman of counsel Solicitor: Mr D Petkovic Carroll & Associates LEGAL REPRESENTATIVES:

RESPONDENT (APPLICANT ON MOTION) Mr G Phillips (SC) Solicitor: Mr H Lee New Workplace Relations

JUDGMENT: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION

MICHAEL ETHERDEN & ANOR v MORGO STREET RESERVE TRUST

Application under section 106 of Industrial Relations Act 1996

1 Michael Etherden and his wife Lynette, the applicants in these proceedings, managed the Urunga Heads Holiday Park at Urunga, south of Coffs Harbour. The Park was part of land managed by the Morgo Street Reserve Trust ("the respondent"), a trust set up under the provisions of Part 5 of the Crown Lands Act 1989 and capable of being sued. 2 The applicants had commenced to manage the Park in February 1996 and did so under a series of contracts or agreements until 30 June 2002, when the contract to manage the Park was awarded to another tenderer. The applicants filed for relief under s 106 of the Industrial Relations Act 1996, claiming that the various contracts or agreements which they had entered to manage the Park between 1996 and 2002 were unfair. 3 The applicants' claim was referred to conciliation pursuant to s 109 of the Act in August 2004 but this process proved to be unsuccessful and a certificate of attempted conciliation was issued on 16 August 2004. 4 On 14 September 2004 the applicants filed an amended summons for relief, the purpose of which it was submitted was to clarify the contracts or agreements that were claimed to be unfair. The amended summons asserted: The contract whereby the applicants performed work as managers of the Park continued until 30 June 2002, a total of six years and five months. The contract comprised, inter alia, a series of written documents as follows:

(d) Undated "agreement" expressed to be for the period 1 May 2002 to 30 June 2002.

Together these documents comprised a single contract at law.

If, in the alternative, the documents comprise a series of contracts at common law then the series of contracts comprise an "arrangement" as that term is used in the definition of "contract" in Section 105 of the Industrial Relations Act 1996.

The relationship and transactions between the applicants and the respondent separately constitute an arrangement as contemplated by the definition in Section 105.

However viewed and characterised at law, the documents, transactions and conduct of the parties comprise a "contract" as defined in Section 105. The contract is one whereby persons perform work in industry. 5 On 30 March 2005, the respondent filed a notice of motion seeking in Part A of the notice that: 1 The proceedings be dismissed; 2 Alternatively, the proceedings, so far as they relate to work performed pursuant to all agreements other than an agreement entered into on or about 1st May 2002, be dismissed; 3 Alternatively, the proceedings, so far as they relate to work performed pursuant to all agreements other than an agreement entered into on or about 25th February 2002 and on or about 1st May 2002, be dismissed; 4 Alternatively, the proceedings, so far as they relate to work performed pursuant to all agreements other than an agreement entered into on 26 April 1999, on or about 25th February 2002 and on or about 1st May 2002, be dismissed; 5 Alternatively, the proceedings be dismissed to the extent of any matter arising out of the amendments to the proceedings by reason of the filing of the Amended Summons on 14 September 2004. 6 The grounds and reasons relied upon by the respondent were as follows: 1 As to each of paragraphs A1 to A4 inclusive, on the ground that the Commission has no jurisdiction by reason that the proceedings were commenced more than 12 months later than the termination of the agreement or agreements to which that paragraph relates, in contravention of s 108B of the Act; 2 As to paragraphs (sic) A5, on the ground that the Commission has no jurisdiction by reason that the amendment was made more than 12 months later than the termination of the agreements to which the proceedings relate, in contravention of s 108B of the Act. 7 Section 108B of the Act provides 108B Time for making application: (1) An application for an order under this Division in relation to a contract that has been terminated must be made not later than 12 months after the termination of the contract. (2) The Commission does not have jurisdiction to extend the time for making any such application or to accept an application made after the time prescribed by subsection (1). 8 The evidence tendered in these interlocutory proceedings was an affidavit of Norma Lillian Daley, a trustee of the respondent, an affidavit of Michael Etherden and an affidavit of Lynette Etherden. The approach I have taken is to take the evidence at its highest in favour of the applicants. Consideration 9 The issue for determination in these interlocutory proceedings is whether the documents referred to in the amended summons and described as "deeds" or "agreements" comprised a single contract, that is a single contract enforceable at common law or, in the alternative, a single arrangement within the meaning of s 105, as contended by the applicants. If the applicants are correct, the fact that the original summons for relief was filed on 26 June 2003, that is within twelve months of the termination date (being 30 June 2002) of the last of the agreements referred to in the amended summons, the Commission has jurisdiction to deal with "the contract" or "the arrangement" and the bar to jurisdiction in s 108B does not apply. 10 I should say at the outset that I do not consider the amended summons constituted a fresh application for orders. It is, in substance, an amendment to an application for an order made under s 106(1) prior to the expiry of the 12 months' period prescribed by s 108B(1), at least in relation to the final undated agreement between the parties referred to in the amended summons. The amended summons, therefore, is not precluded by s 108B: Crowe v UCS Developments Pty Ltd (2003) 130 IR 266.

11 In The Commissioner of Taxation of the Commonwealth of Australia v Sara Lee Household & Body Care (Australia) Pty Limited (2000) 201 CLR 520 it was said by the majority (Gleeson CJ, Gaudron, McHugh and Hayne JJ) at [22]: When the parties to an existing contract enter into a further contract by which they vary the original contract, then, by hypothesis, they have made two contracts. For one reason or another, it may be material to determine whether the effect of the second contract is to bring an end to the first contract and replace it with the second, or whether the effect is to leave the first contract standing, subject to the alteration. For example, something may turn upon the place, or the time, or the form, of the contract, and it may therefore be necessary to decide whether the original contract subsists. 12 The majority then relied upon an earlier case in the High Court of Tallerman & Co Pty Ltd v Nathan's Merchandise (Vict) Pty Ltd (1957) 98 CLR 93 and the judgment of Taylor J when he said at 144: It is firmly established by a long line of cases … that the parties to an agreement may vary some of its terms by a subsequent agreement. They may, of course, rescind the earlier agreement altogether, and this may be done either expressly or by implication, but the determining factor must always be the intention of the parties as disclosed by the later agreement. 13 In relation to the 1996 deed and the successive 1999 contract, it is apparent on the face of the documents that they were two separate contracts. The 1999 contract contained a provision in cl 11 as follows: 'Entire Agreement' this Agreement represents and constitutes the entire agreement between the Trust and Managers and supersedes all other agreements and understandings, written or verbal, that the parties may have had. 14 The 1999 contract was not an agreement merely varying the 1996 deed; it rescinded the earlier agreement entirely. There was no evidence to suggest the intention of the parties was that the original deed was to continue beyond its termination date. Indeed, the affidavit evidence of Mr Etherden indicates that he had to give consideration to several matters before deciding whether or not he would enter into a fnurther agreement to manage the Park.

15 The applicants relied on Custom Credit Corporation Ltd v Goldsmith [1976] AR (NSW) 98 to contend that the successive deeds and agreements entered into between the parties between 1996 and 2002 constituted a single arrangement within the meaning of s 105. In particular, reliance was place on what the Full Bench said at 131: But it must be true to say, we think, that it is significant that Parliament did not see fit to include in the Act any definition of "arrangement", which is not a term of art and is not a word which has a very precise meaning. Looking at the setting in which it is used in s 88F, we are of the opinion that in one of its meanings "arrangement" embraces transactions which do not give rise to contracts or obligations, that is to say, obligations enforceable at law; but we are also of the opinion that in another meaning it embraces a situation where there exist two or more separate contracts which, notwithstanding their separateness, are, given the facts, so sufficiently associated with each other in a practical sense as together to constitute an arrangement of which each contract is a part. 16 In Custom Credit, a company carried on business by entering into contracts with individuals (referred to as dealers) under the terms of which the company sold equipment to the dealers who were to hire out that equipment to the public. The company was paid the purchase price and a commission on each hiring. The company also offered to arrange a personal loan on behalf of dealers so that they could pay the purchase price to the company. A number of dealers entered into separate contracts with the company and in each case a personal loan was arranged for the dealer with the appellant, Custom Credit. Applications by the dealers were made under s 88F of the Industrial Arbitration Act 1940 seeking declarations that the dealership agreements and the loan contracts were void and further sought orders for the payment of certain sums of money.

17 The Commission at first instance made orders avoiding both the dealership agreements and the loan contracts. On appeal, the Commission in Court Session (McKeon, Cahill and Dey JJ) held that the evidence established there was a deliberately made plan or arrangement between the company and Custom Credit for the purpose of advancing the business interests of both and that neither the dealership agreements nor the loan contracts stood isolated from the other. The Court held that when the initial plan or arrangement between the company and Custom Credit was widened by the involvement of the dealer who entered into a contract with the company and a loan contract with Custom Credit, a new arrangement whereby a person performed work in an industry sprang into existence. This arrangement fell within the ambit of s 88F. The parties to the arrangement were the company, Custom Credit, and the dealer, and the components of the arrangement were the dealership agreement and the loan contract. 18 The circumstances here are quite different to those that applied in Custom Credit. There was no overarching plan, understanding or transaction between the parties in so far as the deed dated 15 March 1996 and the Agreement dated 22 April 1999 is concerned that would lead me to the conclusion they constituted a single arrangement whereby the applicants could have had any legitimate expectation or that it was their intention that there would be no interruption to them continuing to manage the Park at the expiration of the 1996 deed. As I noted earlier, Mr Etherden had to consider whether or not he would enter into a further agreement. 19 I find that the Court is precluded from dealing with the deed dated 15 March 1996 by virtue of the provisions of s 108B of the Act. 20 The position in relation to the agreement that covered the period from the expiry of the 1999 contract to 1 May 2002 and the agreement that covered the period from 1 May 2002 to 30 June 2002 is more problematic. It was the respondent's submission that the latter two agreements were not variations of the 1999 agreement but agreements in their own right, especially because they amended "key and fundamental terms of the preceding contracts". 21 The signed agreement made on 25 February 2002 was in the following terms: AGREEMENT made the 25th day of February 2002. This is to confirm the agreement made between MJ and LG Etherden & The Morgo Street Reserve Trust. To extend managers agreement for two months. (sic) From 28/02/02 to 01/05/02 to cover the gap between contracts. The trust agrees to drop the Public Liability Insurance for this period & to pay the April accounts for the park, If (sic) the managers do not receive the new contract. Signed on behalf of the Morgo Street Reserve Trust ………………… Signed by MJ & LG Etherden …………………… …………………… 22 The circumstances under which the February 2002 agreement was made were that at the end of January 2002 the applicants asked the respondent if they could extend the 1999 agreement for another three years. They were told the management of the Park had been put out to tender. The Trust apparently did not realise at this time the 1999 agreement expired on 28 February thinking instead, it appears, the agreement expired on or about 22 April, three years after it was signed by the parties. 23 Consequently, the Trust agreed, "to extend the management agreement for two months pending a decision on the Expressions of Interest." The agreement that the Trust would "drop the Public Liability Insurance" for the period to 1 May 2002 was made on the basis that the applicants' insurance cover expired on 28 February 2002 and if they did not win the contract for a further three years would be liable for the cost of renewal of the insurance cover of over $11,000. 24 In my opinion, the evidence supports a finding that in making the February 2002 agreement it was the parties' intention that the 1999 agreement would remain on foot until 1 May 2002 except in relation to the obligation on the applicants to provide public liability insurance for the period 28 February 2002 to 1 May 2002. The February 2002 agreement refers to "extending" the 1999 agreement. "Extend" in this context means "to lengthen", "to prolong", "to prolong in duration". I am satisfied that the 1999 agreement, albeit varied by the February 2002 agreement, remained on foot up to 1 May 2002. 25 A further agreement, undated but signed, was made for the period 1 May to 30 June 2002. The agreement was in the following terms: AGREEMENT made the day of 2002. This is to confirm the agreement made between MJ and LG Etherden & The Morgo Street Reserve Trust. To extend managers agreement for two months. (sic) From 01/05/02 to 30/06/02 to cover the gap between contracts. The trust agrees to cover all expenses stated in said agreement clause 6.21 & to pay for casual cleaners including workers comp (sic) for the above period.

Signed on behalf of the Morgo Street Reserve Trust ………………… Signed by MJ & LG Etherden …………………… …………………… 26 The circumstances in which the May 2002 agreement was made were explained by Mr Etherden. Apparently, the Trust was having some difficulty with the Department of Lands in obtaining that Department's approval of the contract that had been put out to tender. Mr Etherden said he approached the Trust and asked if it wanted to extend the management agreement for a further period. The Trust agreed in the form of the above agreement. 27 It was submitted for the respondent that "if fundamental obligations vanish, eg, the need no longer to employ staff and no longer to pay costs then a new contract has arisen." I do not agree in this case. The applicants' workers' compensation policy had fallen due for renewal and they were concerned that if they did not win the contract to manage the Park they would incur unnecessary expense. At the suggestion of the Trust, which had a workers' compensation policy, the Trust would take over the employment of the employees referred to in the May 2002 agreement when the applicants' policy expired. The amendment does not indicate that it was the parties' intention to rescind the 1999 agreement. 28 In my opinion, the intention of the parties was that the 1999 agreement would remain on foot until 30 June 2002 subject to the provision regarding the employment of employees and that the 1999 contract only expired on 30 June 2002 along with the May 2002 agreement. But even if I am wrong about this and the effect of the February 2002 agreement, I consider the understanding between the parties was that the terms of the 1999 agreement would continue to be observed by the parties until 30 June 2002. That is, there was a separate arrangement within the meaning of s 105 of the Act between the parties that the terms of the 1999 agreement, subject to the amendments referred to in the February and May 2002 agreements, would continue until 30 June 2002 and that such arrangement is amenable to the Court's unfair contracts jurisdiction: Custom Credit. This was not a situation such as that considered by the New South Wales Court of Appeal in Solution 6 Holdings Limited & Ors v Industrial Relations Commission of NSW & Ors (2004) 60 NSWLR 558 where a distinction was drawn between an enforceable contract and a collateral arrangement and that one could not be the other: see [66]. 29 I find that the Court is not precluded by s 108B from dealing with the agreement dated 22 April 1999, the agreement dated 25 February 2002 and the undated agreement that operated over the period 1 May 2002 to 30 June 2002. Orders

30 The Court makes the following orders: (1) The proceedings, only so far as they relate to work performed pursuant to the deed dated 15 March 1996, are dismissed. (2) The question of costs are reserved. __________________________

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