Mitchforce Pty Ltd v Starkey

195 Firstly, I respectfully disagree with the following observations and conclusions of the Chief Justice: (a) That there is an "industrial colour and flavour test" that is to be applied in determining whether the relevant contract is one whereby a person performs work in any industry. See Mitchforce at [15]-[21], [39], [54] and [58]. (b) That in order to establish jurisdiction the Commission is required to conclude "the contract has a recognisable impact on the conditions of that employment and "work"". See Mitchforce at [13]-[14]. (c) That in expressing the view the law on the issue was well-settled and thereby refusing leave to appeal, the Full Bench relied on first instance decisions in the Commission. See Mitchforce at [31] (d) That Hungerford J in Starkey v Mitchforce Pty Ltd (2000) 101 IR 177 did not apply the authoritative formulation from either Caltex Oil (Australia) Pty Ltd v Feenan [1981] 1 NSWLR 169 or from Stevenson v Barham (1977) 136 CLR 190. See Mitchforce at [30], [47] and [49]. (e) That the relationship between the appellant and the respondents was one-dimensional (because the lease stood on its own as a lease of property) (see Mitchforce at [48]) and, that the sole purpose of the agreement was the occupation of premises and did not lead directly to the performance of work in an industry. See Mitchforce at [58]. (f) That the necessary or relevant "purpose" was not established, inter alia , because the "business was to be conducted on the lessee's own account and because it could not "be said that the lessee was in any sense working for, or even with, a lessor". See Mitchforce at [50].

196 I respectfully disagree with the following observations and conclusions of Mason P: (a) That something has gone seriously wrong with the process. See Mitchforce at [140]. (b) That Hungerford J's conclusion "would mean that every conceivable contract for the supply of goods and services or leasing of commercial premises would fall within the Commission's jurisdiction to avoid or vary it for unfairness, since it is impossible to conceive of any such contract that will not lead to work being done by human agents in its performance". See Mitchforce at [140]. (c) That the Commission's decisions in this case suggests that it holds the view that it has jurisdiction to vary or avoid commercial contracts "that do not by their terms or direct effect require the performance of work in an industry". See Mitchforce at [151].

"Industrial colour and flavour" 198 In my opinion, it is well settled that to come within s 106 of the Act the impugned contract must be "one which leads directly to a person working in any industry": Stevenson v Barham at 201. The consequential performance of work is not enough: Production Spray Painting & Panel Beating Pty Ltd v Newnham (1991) 27 NSWLR 644 at 657. I do not consider that there is any co-extensive test to be applied to the effect that the contract must have an industrial colour or flavour about it. I agree generally with the analysis of the law in this respect as set out in the judgment of the President and Vice President.

199 The Chief Justice found that in order to establish jurisdiction the Commission is required to conclude "the contract has a recognisable impact on the conditions of that employment and "work"". See Mitchforce at [13]-[14].

200 For the reasons expressed by the President and Vice President at [123] - [125] there is no requirement for jurisdictional purposes that a contract must have a recognisable impact upon conditions of employment. I would add that the Commission's unfair contracts jurisdiction is not limited to employment contracts. It hardly seems appropriate, therefore, to speak in terms of impact on employment conditions when a particular contract does not involve employment.

201 At [31] of his judgment Spigelman CJ said: With respect to the challenge to jurisdiction, the Full Bench refused to grant leave to appeal on the basis that it did not consider that there were any jurisdictional issues that raised matters of such importance as to warrant the granting of leave (at [33]). The Full Bench expressed the view that the law on the issue was well settled (at [36]). The Full Bench referred to a number of judgments in the Industrial Commission in which s106 of the Act or its predecessors had been applied to lease arrangements. ( Jennings v Auto Plaza Limited (1993) 46 IR 413; Booth v Kritikos Developments Pty Limited (1995) 59 IR 298; Kostakis v New World Oil & Developments Pty Limited [1997] NSWIRComm 84 (25 July 1997, Schmidt J) and Australian Institute of Music Ltd v LM Investment Management Ltd [2000] NSWIRComm 201. The decisions to which the Full Bench referred were all first instance decisions in the Commission.

202 At [36] of this Full Bench's judgment on appeal judgment the Full Bench also referred to Stevenson v Barham; Caltex Oil (Aust) Pty Ltd v Feenan; and, Production Spray Painting & Panel Beating v Newnham. Clearly, by reference to those cases the Full Bench was not merely relying upon "all first instance decisions in the Commission". Each of the first instance judgments referred to in [31] of Mitchforce were merely instances within which the Commission in Court Session had applied the relevant test, espoused in Stevenson v Barham, Caltex Oil (Aust) Pty Ltd v Feenan and Production Spray Painting & Panel Beating v Newnham, to a scenario involving a lease arrangement. The application of the relevant test in those authorities was, in my view, entirely regular.

203 In Mitchforce at [47] and [49] the Chief Justice considered that Hungerford J did not apply the authoritative formulation from either Caltex Oil v Feenan or from Stevenson v Barham and that the purpose of the agreement between the parties was not to conduct a business and that the agreement did not lead directly to the performance of work in an industry.

204 At [75] of his judgment, Hungerford J identified the relevant higher court authorities wherein the jurisdictional test was developed and then identified that test as follows: a contract must directly, that is under or pursuant to its terms, provide for the performance of work in an industry; the consequential performance of work was not enough. In other words, the section only applied to a contract which has as its purpose the performance of work in an industry and that must be the purpose of both parties.

205 Strictly speaking, the Chief Justice was correct in that the test identified by Hungerford J comes from the judgments in Production Spray Painting and not Stevenson v Barham or Caltex Oil v Feenan. In Production Spray Painting, Priestley and Handley JJA said at 657: The impugned contract, etc, therefore must directly, that is under or pursuant to its terms, provide for the performance of work in an industry, Accordingly the contrast drawn by this Court in Ex parte V G Haulage Services Pty Ltd and approved by the High Court in Stevenson v Barham is between a contract which leads directly to the performance of work in an industry on the one hand, and on the other a contract which does so only indirectly or in a remote or consequential manner.

206 It might be contended that a test that a contract or arrangement "must directly, under or pursuant to its terms, provide for the performance of work in an industry" is not the same as the test enunciated at 201 in Stevenson v Barham, namely, "leads directly to a person working in any industry". On its face, this would appear to be correct because the former test suggests that the contract or arrangement must, by its terms, require or provide for the performance of work, whereas the latter test only requires that the contract or arrangement must lead directly to a person working in any industry. It does not seem to me, however, that the majority in Production Spray Painting were seeking to narrow the Stevenson v Barham test because Priestley and Handley JJA go on to refer in their decision to the contrast that must be drawn is between "a contract which leads directly to the performance of work in an industry on the one hand, and on the other a contract which does so only indirectly or in a remote or consequential manner."

207 In Majik Markets at 465, Handley JA, with whom Kirby P agreed, again referred to the test of leading directly to the performance of work in an industry, thereby confirming his view as to the correct test. His Honour repeated his view of the correct test in Mitchforce at [178] and [187].

208 It may be that in Production Spray Painting, Priestley and Handley JJA used the phrase "under or pursuant to its terms" because they were dealing there with a formal contract for the sale of a business. However, a contract that "under or pursuant to its terms, provides for the performance of work in an industry" must inevitably lead directly to the performance of work. That being so, in the context of the contract they were dealing with in Production Spray Painting the majority's test that the contract "must directly, under or pursuant to its terms, provide for the performance of work in an industry" was not inconsistent with the test enunciated in Stevenson v Barham. It follows that the use by Hungerford J of the majority's test in Production Spray Painting was also not inconsistent with the test in Stevenson v Barham, namely, that the impugned contract must be "one which leads directly to a person working in any industry".

209 Hungerford J said at [75] that: the section [s 106] only applied to a contract which has as its purpose the performance of work in an industry and that must be the purpose of both parties.

210 The Chief Justice also appears to take the view in [58] that in order to attract jurisdiction the purpose of the agreement must be the performance of work. I do not consider that there is an additional or alternative "purpose" test; no such test can be derived from Stevenson v Barham or Caltex Oil v Feenan or Majik Markets. I acknowledge that Mahoney JA sought to apply this test in Production Spray Painting, but it seems to me his Honour was using it in a confirmatory way, that is, to test his agreement with the majority's conclusions as to jurisdiction.

211 Despite his reliance on Mahoney JA's purpose test, what Hungerford J in fact found was that the purpose of the relationship was the Starkey's would conduct the business of a hotel from the tavern for the duration of the lease term and that this "necessarily contemplated the performance of work". It was not necessary, in my opinion, for his Honour to find that the purpose of the relationship was the performance of work. What was necessary in order to attract jurisdiction in this case was that the contract or arrangement leads directly to a person working in the hotel industry. That is precisely what his Honour found and it is expressed at [77] of his judgment. That the Starkeys were, on the evidence that I will come to shortly, "obliged" to operate the tavern seems to me to lead to the inescapable conclusion that this led directly to the performance of work; if one is obliged to operate a hotel business under the terms of the contract or arrangement the performance of work could not be described as "merely an accidental incident or consequence".

212 The difficulty that the higher courts have had with the word "whereby" as it is used in s 106 of the Act and its predecessor provisions, appears to derive from the fact that it is in a statute regulating industrial relations but that the statute does not exclude commercial contracts such as leases and franchise arrangements from the coverage of its unfair contract provisions. Understandably so, of course, given that commercial contracts may require the performance of work. If such contracts were excluded, unscrupulous persons could avoid the unfair contract provisions of the Act.

213 Nevertheless, the higher courts have considered it necessary to place some limits on the Commission's jurisdiction in relation to its reach into the commercial area. Parliament, on the other hand, has not found the same need. The Legislature has not at any point since s 88F was introduced into the Industrial Arbitration Act sought to amend the statute to confine the jurisdiction to contracts with "an industrial character", despite the fact that as long ago as the judgment of the Full Bench in Rolles v Donald Scott Surgicals Pty Limited (unreported, Fisher P, Cahill VP and Bauer J, 19 February 1988), the section was described as affording "a major commercial jurisdiction exercised in the circumstances frequently having little to do with the industrial arbitration and similar litigation normally encountered by industrial tribunals".

214 One means of limiting the Commission's jurisdiction was the "industrial colour and flavour test" but as Wright and Walton JJ have shown, that test has no application. Mahoney JA in Production Spray Painting proposed that in interpreting the meaning of "whereby" it is the purpose of the transaction that needed to be considered. In other words, was the purpose of the transaction the performance of work? Whilst a consideration of the purpose of the transaction will provide some assistance in determining whether or not a contract or arrangement is one whereby a person performs work in any industry, it is not the test laid down by the High Court in Stevenson v Barham and later followed by the majority in Production Spray Painting and Majik Markets, or the test proffered by the Privy Council in Caltex Oil v Feenan.

215 The High Court in Stevenson v Barham considered that the Commission's unfair contracts jurisdiction was limited to those contracts that lead directly to a person working in any industry. It was the fact that the "contract is one which leads directly to a person working in any industry" that gave the contract "the requisite industrial character" and made the Industrial Relations Commission the "appropriate repository" of the unfair contracts jurisdiction. The High Court did not consider the need for any further constraints on the Commission's jurisdiction. The reason for this is surely because, as noted by Wright and Walton JJ at [110], the higher courts have regarded the phrase "whereby work is performed in any industry" as "broad and comprehensive in its scope"; that it must be given effect "according to its width and generality"; and, that its language is "intractable": see Barwick CJ in Stevenson v Barham at 192.

216 At [48] of Mitchforce the Chief Justice considered that the relationship between the appellant and the respondents was one-dimensional (because the lease stood on its own as a lease of property) whereas the relationships in Caltex Oil, Majik Markets and Stevenson v Barham were "multi-dimensional" and that the sole purpose of the agreement was the occupation of premises and did not lead directly to the performance of work in an industry. See Mitchforce at [58].

217 I respectfully disagree with his Honour for the reasons expressed above; in my opinion, there was a further dimension to the relationship beyond merely occupation of premises and this was in the obligation to operate the hotel thereby directly leading to the performance of work. As Handley JA observed at [191], the Starkeys were working proprietors throughout the whole of the relevant period; that they would assume such a role was, on the evidence, the mutual purpose of the transaction. The express terms of the tavern lease provide clear evidence that it was the common intention and purpose of the "transaction" between the parties that the Starkeys were to operate a licensed tavern business from the purpose built premises owned by Mitchforce in Empire Bay; the appellant acknowledged in its evidence before Hungerford J that the Starkeys were obliged to operate the tavern as licensed premises; they could not just "shut the door and go to Bermuda", they had to operate the tavern.

218 However, even if I am wrong about this there was another identifiable dimension to the relationship between the appellant and the respondents and that was the rent deferral arrangement. Whilst Wright and Walton JJ at [189] suggest that "there is some indication in the evidence that the continuation of the business conducted by the Starkeys from the Empire Bay Tavern, and implicitly the continued performance of work in that business, was a purpose of the rent deferral arrangement", their Honours concluded there was no such "clear indication".

219 I respectfully disagree with this conclusion. I consider there was a very real indication in the evidence that the rent deferral arrangement necessitated the continued operation of the tavern by the Starkeys and that this led directly to the performance of work. This patently constituted another dimension in the relationship between the appellant and the Starkeys. I will address this issue in more detail shortly Performance of work

220 The Chief Justice concluded at [50] that the necessary or relevant "purpose" of the agreement between the appellant and the respondents was not established, inter alia, because the "business was to be conducted on the lessee's own account and because it could not "be said that the lessee was in any sense working for, or even with, a lessor". See also [58].

221 I observe in passing that the reference by Spigelman CJ to "purpose", especially at [58], seems to suggest that the Chief Justice considered that this constituted an additional test to the requirement that the contract have an industrial colour and flavour, that it directly envisages the performance of work and that it has a "recognisable impact on the conditions of that employment" and "work". In other words, the Chief Justice appears to formulate four tests as to whether a contract is one whereby work is performed in an industry. For the reasons expressed in this judgment I do not agree with the Chief Justice.

222 At to the issue of purpose, I have already addressed it by expressing the opinion that there is no requirement that the contract or arrangement has as its purpose the performance of work.

223 Handley JA, with whom I respectfully agree on this point, considered that the Starkeys were, in a real sense, working - initially for themselves as "working proprietors" and latterly for the appellant. But in any event, as I understand the current state of the law, there is no requirement that the contract must be one under which one party is performing the relevant work either for, or with, the other party to the contract: Stevenson v Barham at 193, 211-212. Moreover, there is no requirement that a party to the contract must undertake the relevant work personally: V G Haulage at 86-87.

224 In the present case, it was not relevant to inquire whether the Starkeys were working "for or even with, the lessor". The only question is whether the contract led directly to the performance of work.

Matters arising from the judgment of Mason P 225 At [140] Mason P stated: Whatever directness or other relationship Parliament intended by the use of the word "whereby "in s 106 will have been completely dispensed with in the steady but exponential march of jurisdiction under the prevailing interpretation of that section. Something has gone seriously wrong somewhere in the process. I agree with the Chief Justice's identification of the error.

226 The President of the Court of Appeal did not, with respect, independently identify where he considered the "process" had gone "seriously wrong". It would appear, however, that he regarded the error committed by the Commission (both at first instance and on appeal) as that identified by the Chief Justice. It should be apparent that I do not, with respect, consider the Chief Justice has identified any substantive error. I consider that the suggestion the Commission had dispensed with a proper consideration of the meaning of "whereby" was unfair and unwarranted.

227 As to the President's agreement with the Chief Justice as to the identification of error, I have some difficulty reconciling the test implicitly enunciated by the President at [151], namely, that a contract will come within the Commission's jurisdiction under s 106 if by its terms or direct effect requires the performance of work in an industry, with the tests propounded by the Chief Justice at [13]: (i) The contract itself "directly envisages" performance of work

(ii) The contract has a "recognisable impact on the conditions of that employment" and "work" and at [15]-[21], [39], [54] and [58] that there is an additional requirement of "industrial colour and flavour" and at [50] and [58] the purpose of the contract must be the performance of work in an industry. 228 In this respect, the test enunciated by Mason P at [151] would appear to be more consistent with that expressed by Handley JA at [178] and [187] where his Honour said: 178 The jurisdictional fact for the purposes of s 106 is the existence of a "contract whereby a person performs work in any industry". It will be necessary to consider this requirement in more detail later in these reasons, but for the moment it will be sufficient to note that the established test is whether the contract leads directly to a person working in any industry [par 19]. … 187 It is established by Barham [par 19] which is binding on the Commission and this Court, that a contract which only leads indirectly to the performance of work in an industry is not within the jurisdiction of the Commission.

229 The President at [140] considered that the conclusion by Hungerford J "would mean that every conceivable contract for the supply of goods and services or leasing of commercial premises would fall within the Commission's jurisdiction to avoid or vary it for unfairness, since it is impossible to conceive of any such contract that will not lead to work being done by human agents in its performance". I do not consider this proposition to be either fair or correct. Whether a contract leads directly to the performance of work in an industry will be a question of fact in each case. There are any number of cases where the Commission has found, as a matter of fact, the contracts to be beyond the Commission's jurisdiction, the latest significant case being the Full Bench judgment in Euphoric Pty Limited v Ryledar (2002) 117 IR 1, which was handed down after the appeal judgment in this case.

230 It would appear to be suggested by Mason P at [151] that the Commission holds the view that it has jurisdiction to vary or avoid commercial contracts "that do not by their terms or direct effect require the performance of work in an industry". See Mitchforce at [151]. I do not accept that this is so for the reasons I have expressed in this judgment.

231 In analysing the summons for relief and facts as they were presented at first instance, Wright and Walton JJ distilled two "jurisdictional propositions":

1. was the lease a part of a broader arrangement entered into at the commencement of the relationship between the appellant and the respondents, (that included an agreement, representing an arrangement or collateral arrangement to the terms of the lease itself but relevantly connected to it for the purposes of the definition of "contract" in s 105 of the Act) which fell within the reach of the Commission's jurisdiction under s 106 of the Act; or 2. was the lease merely a part of an arrangement, for the purposes of s 105 of the Act, entered into in July 1992, pursuant to which the Starkeys would obtain a deferral of the legal obligations they otherwise had to the appellant under the lease, in return for continuing in the operation of the tavern business, with a common goal that the tavern would be sold as a going concern enabling the recovery of the mounting debt, which resulted in the arrangement falling within the reach of the Commission's jurisdiction under s 106 of the Act? 232 I respectfully agree that these are the two relevant jurisdictional questions. The issue at first instance was not confined to the question of whether the lease was within jurisdiction. The respondents' claim, the evidence in the proceedings and the substance of Hungerford J's consideration involved an "arrangement". Whilst Handley JA in his judgment did not spell out that he approached the issue of jurisdiction from the perspective of an arrangement, in my respectful opinion that was the effect of his Honour's approach. So much is clear from [180] and [188]-[193] of his judgment. That is, Handley JA did not artificially limit his consideration to the terms of the lease but considered the relationship between the appellant and the respondents from a broader perspective. The Chief Justice and Mason P, however, took a "one-dimensional" approach and considered in isolation the bare terms of the lease without having regard to whether an arrangement existed and, if so, whether that arrangement was within jurisdiction.

233 Whilst I agree with the two jurisdictional propositions of Wright and Walton JJ, I respectfully disagree with their Honours' conclusions regarding these two questions. As to the first question, the President and Vice President refer to the evidence of Mr Sutton, the appellant's accountant and the person who mainly communicated with the Starkeys. The evidence of Mr Sutton that "the purpose" of entering into the lease with Sherwood and subsequently the respondent, was so that they "would operate a licensed premises" and that they were "obliged" to operate such a business. Hungerford J referred to Mr Sutton's evidence at [41]-[43]. At [43] his Honour observed: 43 The purpose insofar as the respondent was concerned in granting the lease to Sherwood Trading, and consequently the assignment thereof to the applicants, was described in the following way by Mr Sutton: Q. When you entered into a lease with Sherwood Trading, the whole purpose of entering into that contract with Sherwood Trading Pty Limited is that they would operate a licenced ( sic ) premises, correct?

Q. And they were obliged to operate those premises?

Q. And when Mr and Mrs Starkey took over the assignment, they too were obliged to operate those licenced (sic) premises?

Q. Apart from running the Tavern business that the licence was granted for, they were also required to maintain those premises in a good state of repair, were they not?

Q. And again from the file that has been produced, you wouldn't be surprised to find letters from Mitchforce to Mr Madden reminding him of his obligations as to the gardening and shrubs and to keep the place in good repair?

Q. Part of their obligation under the lease was to do that work, to keep the place looking good?

Q. And the object of the exercise was that if everything went well, the business would operate successfully and the value of the whole Tavern as an enterprise, as a piece of real estate, would go up, is that correct?

Q. Mitchforce invested $1.8 million with that end in mind making a profit out of the venture, correct?

234 Wright and Walton JJ consider at [144] that Mr Sutton's evidence was not sufficient to maintain the conclusion that the lease, from its inception, was a part of a broader arrangement between the appellant and the respondents entered into for the purpose of having the respondents perform work in the hotel industry. It is this conclusion, which I note is reached "not without some considerable hesitation" on the part of the President and Vice President, which I do not agree with.

235 To suggest that " Mr Sutton may well have been referring to what may have been the use of the premises contemplated by the parties and an erroneous description of the content of the lease" overlooks, with respect, the unambiguous concession by Mr Sutton in his evidence that when the Starkeys took over the assignment of the lease they were thereby obliged to operate the tavern as required by the licence.

236 In determining whether there is jurisdiction the Commission is entitled to look to the "substance", "essence" and reality of the transaction and not merely the form of it: Brown v Rezitis (1970) 127 CLR 157 at 169; Caltex Oil at 726; Mitchforce at [180] per Handley JA. The reality of the transaction between the appellant and the Starkeys was that the Starkeys were obliged to operate the tavern thereby leading to the performance of work.

237 The crucial aspect of Hungerford J's judgment regarding jurisdiction is to be found at the closing passages of [77], where his Honour stated: In my view, the relationship between the applicants and the respondent here under the lease constituted an ongoing relationship with the clear purpose, on the facts, that the applicants would conduct the business of an hotel from the Tavern for the duration of the lease term and that necessarily contemplated the performance of work, including as to the maintenance of the premises in good order and repair. (my emphasis) 238 Having identified the features of the transaction between the applicants and the respondent, albeit by reference to the matters identified in Jennings v Auto Plaza, his Honour was clearly, in my view, making a finding of fact as to an arrangement between the parties, which his Honour expressed as a "relationship". His Honour made a finding of fact that "the clear purpose, on the facts, [was] that the applicants would conduct the business of an hotel from the Tavern for the duration of the lease term". This is hardly surprising in light of the evidence before his Honour and, in particular, in the light of the evidence of Mr Sutton as set out earlier in this judgment.

239 The fact that Hungerford J then went on to make the finding, or perhaps more accurately, draw an inference, that this "necessarily contemplated the performance of work", again could hardly be considered extraordinary. His Honour's conclusion meant that this was not a case in which the performance of work was merely an accidental incident or remote consequence of an arrangement. The performance of work was not merely contemplated or merely envisaged as a possible consequence but was, rather, the direct result of the Starkeys' obligation to operate the tavern. It was a finding of fact that was clearly open to his Honour on the evidence. Indeed, as his Honour noted (at [62]), and as was noted by the Full Bench on appeal, the findings of fact were not disputed.

240 There was some criticism of Hungerford J's use of the word "contemplated" in that it was said that mere contemplation of work was not sufficient to satisfy the jurisdictional requirement. In this respect I note the Chief Justice at [13] considered that one of the three elements that are required to conclude that a contract, etc. leads "directly" to the performance of work in an industry is that "The contract itself "directly envisages" performance of work." The Macquarie Dictionary defines "envisage" as "to contemplate; visualise". I find it difficult to distinguish any difference of substance between "directly envisages performance of work" and "necessarily contemplated the performance of work".

241 When regard is had to all of the evidence in the proceedings, it is apparent that the relationship between the parties was not limited to a formal contractual agreement represented by the bare terms of the lease but rather there was a wider arrangement that led directly to the performance of work in the hotel industry. Mitchforce constructed "purpose built" tavern premises in Empire Bay; it applied for a liquor licence on the basis that the Empire Bay area needed a liquor outlet and the appellant submitted that it actively intended to have the licence utilised at the tavern.

242 The appellant and the Starkeys entered into a lease agreement. It is evident from the terms of the lease that the intention of the parties was that the Starkeys were to operate a licensed tavern business from the purpose built premises owned by Mitchforce in Empire Bay. The appellant's evidence was that when the Starkeys took over the lease by assignment, they were obliged to operate those licensed premises.

243 The lease provided that respondents were to pay the appellant rent. The rent was to be calculated on the turnover of the tavern business. Mitchforce transferred its liquor licence to the Starkeys for the purpose of operating the tavern business; without the licence the tavern could not operate. The Starkeys did in fact operate the tavern business from the outset and did in fact seek to meet their rent obligations under the lease from the turnover of the tavern business. Apart from the interest the appellant had in receiving rent derived from the turnover of the business operated by the Starkeys, the appellant had a clear interest in the goods sold at the hotel because clause 3.3 of the lease contained a covenant by the tenant to pay an additional rent of 4 per cent of the value of the liquor purchased by the tenants under the liquor licence.

244 Once it be accepted as a matter of fact that the Starkeys were obliged to carry on a hotel business from the Tavern, as his Honour did, then it is, in my view, unarguable that the work performed in the hotel industry was a "direct result" of an arrangement between the parties and not an "accidental consequence" (see Production Spray Painting & Panel Beating v Newnham at 649 per Mahoney JA) or an "indirect, remote or consequential" result of the deed (see Kostakis v New World Oil & Developments Limited at 10).

245 I turn to the second jurisdictional question identified by Wright and Walton JJ. On the basis of Hungerford J's findings of fact and their further review of the evidence, their Honours conclude that the parties agreed to alter their relationship, as constituted by the lease in its original form, so as to permit the respondents to trade out of their financial difficulties through the rent deferral arrangement. Their Honours observe that: Whilst the terms of the lease were not varied per se, the [rent deferral] arrangement clearly constituted an agreement whereby the respondents would continue to conduct the business at the Tavern until the business was sold. The appellant's interest in the performance of the work was very real and extended beyond a mere reversionary interest. Without the performance of that work, the business could not be sold as a going concern and the appellant would not be able to recover its mounting debt. … The ineluctable inference to be drawn from the evidence is that there were two "purposes" behind entering into the rent deferral arrangement: firstly, to provide a means by which the Starkeys could continue to operate the Tavern and, secondly, to secure the monies that had accrued to the appellant from the sale of the Starkeys business (on the unchallenged findings of the trial judge, whenever the business was sold). … There is some indication in the evidence that the continuation of the business conducted by the Starkeys from the Empire Bay Tavern, and implicitly the continued performance of work in that business, was a purpose of the rent deferral arrangement. However, that evidence is by no means a clear indication that the rent deferral agreement was intended to lead to the performance of work in the tavern.

246 Wright and Walton JJ conclude, however, at [190] that: In the absence of a clear basis for the finding of an "arrangement" for the purposes of s 105 of the Act arising from the agreement for rent deferral and in the absence of a case of that kind having been actively developed by the respondents (and the resulting absence of a relevant conclusion by the trial judge) there is an insufficient basis upon which to reach an affirmative conclusion on the second jurisdictional proposition.

247 With respect, I take a different view to their Honours. I consider there is more than a sufficient basis to conclude that the rent deferral arrangement was an arrangement within the meaning of ss 105 and 106 that led directly to the performance of work in the hotel industry. That the trial judge may not have specifically concluded this was the case or the respondents may not have satisfactorily developed their case in this way is not, in my opinion, a reason for declining to find such an arrangement. If the evidence at first instance supports a finding that the rent deferral arrangement led directly to the performance of work I do not see any impediment on appeal to making that finding, which I do.

248 As Handley JA observed at [192]-[193]: [A]s time went on and the rent escalated remorselessly, the Starkeys were not able to pay the rent in full, and the arrears mounted. The rent became a rack rent and ceased to be a normal overhead. When the arrears are taken into account, the tenants must have been operating the business at a substantial continuing loss. By this stage they were, in a real sense, working for the landlord. The lease was unsaleable, they were locked in, and they had been reduced to the role of managers because the landlord was taking all the profits of the business and leaving them with a loss. … By this time, if not before, the lease had become a contract whereby work was being performed in an industry, because it led directly to the performance of such work in circumstances where the Starkeys were at best working for themselves and the landlord, but in reality they were working for the landlord.

249 It is accepted that Handley JA did not specifically approach the rent deferral agreement as a separate arrangement or collateral arrangement. Rather, his Honour appears to have regarded the rent deferral arrangement as transforming the lease. However, in my opinion, the rent deferral arrangement was an arrangement or collateral arrangement within the meaning of ss 105 and 106 of the Act; the evidence indicated a purpose of the arrangement was the continuation of the business conducted by the Starkeys from the Empire Bay Tavern; and, the arrangement led directly to the continued performance of work in that business. Handley JA's characterisation of how it was the rent deferral arrangement led directly to the performance of work is, with respect, entirely consistent with the evidence.

250 Given the conclusion by Handley JA that the jurisdictional fact had been satisfied, regardless of what might be said to have been the approach taken by the trial judge and the respondents at first instance, I am unable to discern any reason why I should take a different view to his Honour.

Comity 251 Whilst I agree with the President and Vice President that leave to reopen and leave to appeal should be granted, I do not agree that the appeal should be upheld on the basis contended for by the appellant, notwithstanding that such a course fails to achieve comity with the majority views in the Court of Appeal. I have not come to such a decision lightly, especially having regard to the views of Wright and Walton JJ.

252 In normal circumstances there would be no question of following any judgment of the Court of Appeal in its supervisory jurisdiction. These proceedings, however, are highly unusual. As presently advised, s179 is a valid enactment with the consequence that the Commission is the final arbiter of its jurisdiction. To uphold the appeal based on observations by a majority in the Court of Appeal, would amount to a constructive circumvention of s 179. I consider that such a course is inappropriate, particularly in circumstances where I regard observations made by the majority regarding jurisdiction as inconsistent with High Court authority and wrong.

253 I would also observe that in making the invitation to the Commission to revisit its decision to refuse leave to appeal, there could have been no expectation on the part of the majority on the Court of Appeal that the Commission would, inevitably, uphold the appeal either on the basis of the Commission accepting it was wrong in refusing leave based on the majority's observations, or on the basis that the majority was wrong but in the interests of judicial comity the appeal should be upheld. As Mason P said at [150] and [151]: 150 I propose the quashing of orders 11 and 12 made by Hungerford J on 14 November 2000 and the standing over of the balance of the summons for further argument in light of the majority reasons in this Court and the further steps (if any) taken in the Commission. 151 … Only if the Full Bench of the Commission remains of the view that it has jurisdiction to vary or avoid such commercial contracts will it be the occasion for the vexing constitutional issues touching the respective roles of the Commission, this Court and the High Court to be addressed. In this respect, Spigelman CJ agreed with the approach proposed by Mason P.

254 The other important reason for declining to adopt the views of the majority in the Court of Appeal is that I am firmly of the view that the judgment of Hungerford J should not be overturned. In essential terms I consider his Honour was correct in concluding he had jurisdiction to determine the matter, and the unfairness he found was manifest. The Commission is required to act according to equity, good conscience and the substantial merits of the case (s 163(1)(c) of the Act). In circumstances where I consider there was no error as to jurisdiction and that Hungerford J's findings of unfairness were correct, it would be inconsistent with the obligations under the Act for me to adopt the views of the majority in the Court of Appeal given the operation of s 179 and in circumstances where the Court of Appeal acknowledged there was no obligation on the Commission to do so.

Orders 255 I would make the following orders:

1. The appellant's motion to reopen the Full Bench proceedings is granted.

4. The appellant shall pay the respondents' costs of the appeal.

256 PRESIDENT: The orders of the Court are therefore those proposed in the joint judgment at paragraph [192] above. __________________

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