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[2004] NSWCA 197
respondent. Application dismissed with costs; no prohibition issued; no anti-suit injunction granted by the Court of Appeal [62].
The Court of Appeal held that the NSW Industrial Relations Commission had jurisdiction under s106 to hear a challenge to a Compensation and Release Agreement even though that agreement contained a Colorado governing law clause. The statute's reach is determined by the territorial nexus of work 'in and of New South Wales', and documents executed during employment that varied the original employment agreement were part of a single contract 'whereby work is performed' in the NSW industry. The Court refused to grant an anti-suit injunction and directed such applications to the Equity Division. The Claimants' application was dismissed with costs.
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Robert McRann (the Second Opponent) was employed under an Employment Letter Agreement (dated February 1995) by a United States corporation (UIH/UGC) and seconded to manage the Claimant group's Australian pay-television business, performing work in New South Wales between 1995 and July 1997 [5]-[8]. His remuneration included an incentive interest in the Australian affiliates (CTV and STV) that vested progressively and included put and call features and post-cessation rights [7]-[9], [53].
No linked legislation citations have been extracted yet.
In mid-1997, anticipating transfer to a Dutch affiliate, McRann signed a Compensation and Release Agreement (CRA) and a Termination of Employment Letter Agreement which terminated his prior employment and restructured his incentive entitlements. The CRA contained a choice-of-law clause stating it would be governed by the laws of Colorado [11]-[12]. The CRA vested part of his incentive interest immediately, provided Austar (the Australian affiliate) would purchase 50% for a cash payment, and preserved put/call arrangements and a restructuring clause if Austar went public [11], [54].
After Austar floated in July 1999, McRann alleged the respondents failed to restructure his Remaining Incentive Interest into options as contemplated, and he calculated a loss of about $10.5 million [20]-[23]. He instituted proceedings in both the United States District Court for the District of Colorado and in the NSW Industrial Relations Commission under s106 of the Industrial Relations Act 1996, alleging the termination arrangements were unfair, harsh or unconscionable [14], [16]. The Claimants sought to restrain the Commission proceedings by means of supervisory relief (a prohibition writ) and an anti-suit injunction in the Court of Appeal; Peterson J had earlier refused to dismiss the Commission proceedings [3], [16].
The Court of Appeal (Spigelman CJ, Mason P and Handley JA) dismissed the Claimants' application, holding the Commission had jurisdiction under s106 despite the Colorado law clause, that the CRA formed a variation of the pre-existing employment contract and should be read together as a single contract 'whereby work is performed in an industry', and that an anti-suit injunction should be sought in the Equity Division at first instance and could not be granted on the perfunctory material before the Court [32]-[40], [50]-[58], [59]-[61]. The appeal was dismissed with costs [62].
Two principal legal conclusions drove the Court's decision.
Statutory territorial nexus displaces the private international law presumption about foreign-governed contracts. The Claimants relied on the orthodox principle that general statutory words should be read down so as not to affect contracts whose proper law is foreign, citing authorities such as Barcelo and Wanganui-Rangitikei and Latham CJ in Mynott v Barnard [28]-[29]. Spigelman CJ accepted that principle generally but held it was inapposite where the statute itself supplies a specific territorial restriction, namely the phrase 'in and of New South Wales' (derived from earlier Interpretation Act authority). That territorial formula is a clear, comprehensive indicator that the legislature intended the statute to apply to contracts and arrangements affecting work in NSW irrespective of the contract's proper law [32]-[34]. The statutory scheme (broad definition of 'contract', inclusion of 'arrangement', the breadth of 'unfair contract', and the obligation to consider apprenticeship and labour-supply effects under s106(4)) points to an intention to regulate contracts and arrangements impacting NSW industries whether or not their proper law is NSW [35]-[38]. Thus the Colorado governing law clause did not preclude NSW jurisdiction [39]-[40].
The CRA was a variation of the pre-existing employment contract and therefore formed part of a contract 'whereby work is performed' in the NSW industry. The Court analysed the substance of the Employment Agreement and the CRA and noted the CRA was negotiated and entered into during the term of the employment, restructured the incentive component, vested part of the interest earlier and preserved post-cessation put/call and restructuring rights materially similar to the originals [44]-[56]. The CRA did not stand alone in the factual matrix; rather, when read together with the original Employment Agreement and the Termination Letter, it constituted a single contractual arrangement. Consequently, the CRA's provisions relevantly 'related' to the employment contract and thereby satisfied the jurisdictional requirement in s106 that the contract be one 'whereby a person performs work in any industry' [50]-[58]. The Court emphasised that the fact an amendment takes effect at the time employment ceases does not change the character of the instrument as part of the employment contract [57].
On the anti-suit injunction claim, the Court declined to grant relief. It held that anti-suit injunctions should be sought in the Equity Division at first instance and that the material before the Court of Appeal (documents and foreign judgments) was insufficient to determine the full range of discretionary and equitable considerations required to grant such relief [59]-[61]. The Court also noted the Colorado court had refused an anti-suit injunction and that the Claimants' case for such relief in NSW appeared weak on the materials before the Court [61].
Before: The classical private international law approach (reflected in Barcelo, Wanganui-Rangitikei and Mynott) favours reading general statutory words down so they do not affect contracts whose proper law is foreign, absent a clear legislative intention otherwise [28]-[29]. Also, the High Court's test in Stevenson v Barham continues to be the touchstone for assessing whether a contract 'directly' leads to the performance of work in a jurisdiction [49].
After: Old UGC confirms that where a statute supplies a clear territorial nexus tied to the location of the industry (the words 'in and of New South Wales'), that nexus can displace the private international law presumption. The decision thus emphasises statutory purpose and territorial location of the industry as decisive for jurisdiction under s106. It also reinforces the proposition that documents executed during employment that amend remuneration and post-cessation entitlements can be read together with the original employment contract to form a single contract within the statute, enabling the Commission to determine fairness even where a governing law clause points elsewhere [32]-[40], [50]-[58]. Practically, parties cannot rely on a foreign governing law clause to defeat the statutory jurisdiction in cases where the contractual arrangements relate to work performed in NSW.
Passage: "The concern of the legislative scheme is not with the contracts as such...terms and conditions upon which work is performed in any industry in New South Wales." [32] Plain English: The statute is aimed at protecting how work is performed in NSW industries, not at policing only contracts that happen to be governed by NSW law.
Passage: "'in and of New South Wales' ... is a territorial nexus of a clear and comprehensive character..." [33] Plain English: The statutory wording pointing to NSW is strong enough to show Parliament meant the law to apply to work that occurs in NSW, even if the agreement chooses some other jurisdiction's law.
Passage: "It cannot be said that that Agreement, as such, leads directly to the performance of work in an industry." [50] Plain English: The CRA by itself does not create or cause someone to do work in NSW; it needs to be examined with the original employment arrangements.
Passage: "There was a single contract of employment constituted by reading together the Employment Agreement and the Compensation and Release Agreement." [57] Plain English: When you read the old employment deal and the CRA together, they amount to one employment contract for the purposes of the statute.
Passage: "Proceedings for an anti-suit injunction should not be brought in this Court in the first instance." [59] Plain English: If you want an anti-suit injunction, go to the Equity Division first; do not expect the Court of Appeal to grant it on short material.
A pre-existing employment agreement under which work is performed in New South Wales, followed by one or more documents (settlement, compensation, release or termination agreements) negotiated and concluded during the term of employment that materially reconfigure remuneration, vesting, put/call rights or post-cessation entitlements related to the NSW business. If those documents are read together they may be regarded as a variation of the employment contract attracting s106 jurisdiction [44]-[56], [57].
Cases where the supplementary document contains a foreign governing law clause but the substantive rights relate to the performance of work in a NSW industry. Old UGC indicates that a choice-of-law clause will not, by itself, preclude s106 jurisdiction where the statute supplies a NSW territorial nexus [32]-[40].
Claims under s106 asserting unfairness based on failure to restructure incentive entitlements or to give effect to post-cessation remuneration arrangements that are tied to the NSW operation; the Court will look to the substance and timing of the variation documents to determine whether they form part of the 'contract whereby work is performed' [53]-[56].
This judgment itself cites and aligns with recent NSW authorities such as Tryam Pty Ltd v Grainco [2003] and Solution 6 Holdings [2004] in elucidating the 'directly' test and how to treat multiple documents as constituting a single employment contract [31], [49]. The Court expressly followed Ex parte Richardson and Tryam on the territorial nexus point [31]-[34]. Practically, Old UGC is a clear authority in NSW appellate jurisprudence that statutes with explicit territorial language addressing work in the State will be applied despite foreign law clauses, and that courts will examine the true contractual texture when determining whether instruments fall within the statutory description.
Note: This deep dive does not catalogue post-2004 judicial treatment beyond the authorities cited in the judgment itself. Researchers should check subsequent cases for later affirmations, distinctions or limits.
Scope and limits of 'arrangement' as defined in s105: While Spigelman CJ observed that 'arrangements' do not have a private international law 'proper law' in the conventional sense and that the statute's reach extends to arrangements [35], the precise outer boundaries between stand-alone collateral agreements and variations that must be read into a single contract may require further case-by-case delineation. Old UGC provides a functional test focusing on substance and timing, but lower courts will need to apply that analysis to varied factual matrices.
Interaction with international comity and forum non conveniens: Old UGC affirms statutory territorial reach but does not fully address potential comity concerns where foreign proceedings involve overlapping subject matter; the Court refused to grant an anti-suit injunction and directed equitable relief to the Equity Division [59]-[61], leaving open the complex interplay when foreign courts and NSW courts both have competing claims.
Limits of choice-of-law efficacy: The decision makes clear that a choice-of-law clause is not dispositive for statutory jurisdiction tied to geographic performance. However, it leaves open how strongly worded or differently structured choice-of-law and forum-selection clauses (for instance, exclusive jurisdiction clauses in favour of a foreign forum) will fare where the contract both governs international aspects of employment and has close connections to NSW work. Old UGC signals the statute can trump such clauses for regulating employment in NSW, but future cases may need to define precise thresholds for when a foreign forum agreement displaces NSW statutory jurisdiction.
Remedies and cross-border enforcement: While s106 empowers the Commission to vary or void contracts and make monetary orders, Old UGC does not explore the enforcement mechanics of NSW remedies against foreign parties or assets. Practical enforcement against entities and judgments across borders remains an area for development consistent with international litigation realities.
Concluding note: Old UGC is an important NSW appellate authority emphasising statutory purpose and the territorial location of industry work in determining jurisdiction under s106. It is particularly relevant to practitioners advising on cross-border employment terminations, incentive restructures, and dispute-avoidance drafting; parties should not assume that a foreign governing law clause will protect them from NSW statutory regulation where the contractual arrangements pertain to work performed in NSW.
CITATION : Old UGC Inc & Ors v Industrial Relations Commission of NSW & Anor [2004] NSWCA 197 HEARING DATE(S) : 17/03/04 JUDGMENT DATE : 21 July 2004
JUDGMENT OF : Spigelman CJ at 1; Mason P at 63; Handley JA at 64 DECISION : Application dismissed with costs.
CATCHWORDS : INDUSTRIAL LAW - Industrial Relations Commission - jurisdiction - unfair contract - compensation and release agreement - contract governed by foreign law - territorial nexus of unfair contracts jurisdiction - where compensation and release agreement a variation of pre-existing employment contract - Commission jurisdiction correctly exercised - Industrial Relations Act 1996 ss 105, 106 Industrial Relations Act 1996 ss 105, 106, 179 LEGISLATION CITED : Interpretation Act 1897 s 17 Interpretation Act 1987 s 12 Barcelo v Electrolytic Zinc Co of Australasia Limited (1932) 48 CLR 391 Ex parte Richardson; re Hildred [1972] 2 NSWLR 423 Mitchforce Pty Ltd v Industrial Relations Commission of NSW (2003) 57 NSWLR 212 CASES CITED : Mynott v Barnard (1939) 62 CLR 68 Solution 6 Holdings Limited v Industrial Relations Commission of NSW [2004] NSWCA 200 Stevenson v Barham (1976) 136 CLR 190 Tryam Pty Ltd v Grainco Australia Limited [2003] NSWSC 812 Wanganui-Rangitikei Electric Power Board v Australian Mutual Provident Society (1934) 50 CLR 581 Old UGC Inc (First Claimant) UIH Asia/Pacific Communications Inc (Second Claimant) Austar United Communications Limited (ACN 087 695 707) (Third Claimant) PARTIES : Austar Entertainment Pty Ltd (ACN 068 104 530) (Fourth Claimant) CTV Pty Ltd (ACN 064 416 128) (Fifth Claimant) STV Pty Ltd (ACN 065 213 450) (Sixth Claimant) Industrial Relations Commission of NSW (First Opponent) Robert McRann (Second Opponent) FILE NUMBER(S) : CA 41069/03 COUNSEL : G Hatcher SC / Dr C Ward (First Claimant) J West QC / M Steele (Second Opponent) SOLICITORS : Acuiti Legal (First Claimant) Harmers Workplace Lawyers (Second Opponent)
LOWER COURT Industrial Relations Commission of NSW JURISDICTION : LOWER COURT 3104/2001 FILE NUMBER(S) : LOWER COURT Peterson J JUDICIAL OFFICER :
SPIGELMAN CJ MASON P HANDLEY JA
Wednesday 21 July 2004 OLD UGC Inc & ORS v INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES & ANOR
Robert McRann (the Second Opponent) is a US citizen. He was employed as Managing Director of the Australian affiliates of the First Claimant between 1995 and mid-1997. Following the termination of that employment, he was employed by the First Claimant's Netherlands affiliate. In anticipation of his transfer to Amsterdam, Mr McRann executed a Compensation and Release Agreement, containing a clause specifying the law of Colorado as the governing law of the contract. Various benefits were provided under this Agreement, including the restructuring of Mr McRann's remaining incentive interest into stock options in the event that the Australian affiliates of the First Claimant were publicly floated. Mr McRann instituted proceedings in both the United States District Court for the District of Colorado and the Industrial Relations Commission of NSW pursuant to s106 of the Industrial Relations Act 1996. A motion in the Colorado proceedings for an anti-suit injunction against Mr McRann in respect of the s106 proceedings was dismissed. The Claimants sought to have the s106 proceedings dismissed. Peterson J refused to dismiss the proceedings. The Claimants invoked the supervisory jurisdiction of the Court of Appeal, seeking an order in the nature of a writ of prohibition. The Claimants also sought relief in personam against Mr McRann in the form of an anti-suit injunction.
HELD (per Spigelman CJ, Mason P and Handley JA agreeing)
The principle that general words in a statute should be read down so as not to apply to contracts of which the proper law is another jurisdiction is inapplicable to s106 of the Industrial Relations Act 1996. If the industry in which the relevant work is performed is in and of NSW, the necessary territorial nexus for the operation of the section will exist. [32]-[34], [40]
Ex parte Richardson; re Hildred [1972] 2 NSWLR 423, Tryam Pty Ltd v Grainco Australia Limited [2003] NSWSC 812 followed; Barcelo v Electrolytic Zinc Co of Australasia Limited (1932) 48 CLR 391, Wanganui-Rangitikei Electric Power Board v Australian Mutual Provident Society (1934) 50 CLR 581, Mynott v Barnard (1939) 62 CLR 68 referred to.
The Compensation and Release Agreement did not, alone, lead directly to the performance of work in an industry. It did, however, operate as a variation of the pre-existing contract of employment, under which Mr McRann's rights extended beyond the expiry of his term of employment. There was a single contract of employment constituted by reading together the initial employment agreement and the Compensation and Release Agreement. Accordingly, the Commission has jurisdiction under s106. [50], [51], [57], [58]
Stevenson v Barham (1976) 136 CLR 190 applied, Mitchforce Pty Ltd v Industrial Relations Commission of NSW (2003) 57 NSWLR 212, Solution 6 Holdings Limited v Industrial Relations Commission of NSW [2004] NSWCA 200 referred to.
The character of an employment contract as a contract pursuant to which work is performed in an industry is not altered by the fact that an amendment takes effect at the time when employment is to cease, with respect to part of the remuneration package that was always intended to operate after cessation. [57]
Proceedings for an anti-suit injunction should be brought in the Equity Division at first instance. Insufficient evidence was before the Court of Appeal to enable it to properly assess the full range of discretionary matters arising in such a case. [59], [60]
Application dismissed with costs. IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 41069/03
SPIGELMAN CJ MASON P HANDLEY JA
Wednesday 21 July 2004 OLD UGC Inc & ORS v INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES & ANOR Judgment 1 SPIGELMAN CJ: Between 1995 and mid 1997 the Second Opponent, Robert McRann, was engaged as the Managing Director of the Australian affiliates of the First Claimant, now known as Old UGC Inc ("UGC", previously known as UnitedGlobalCom Inc and before that as United International Holdings Inc ("UIH")). UGC conducted pay television operations in Australia through a local affiliate. That employment was terminated on 31 July 1997. Thereafter, until 31 December 1997, the Second Opponent was employed by the affiliated company of the First Claimant in the Netherlands as Chief Operating Officer based in Amsterdam. 2 These proceedings are concerned with certain aspects of the termination arrangement between Mr McRann and UGC with respect to which Mr McRann asserts that the Industrial Relations Commission has jurisdiction to make orders under s106 of the Industrial Relations Act 1996 ("the Act"). 3 The summons instituting proceedings in this Court seeks two distinct kinds of relief. First, a declaration that the Industrial Relations Commission does not have jurisdiction to hear and determine the proceedings instituted by the Second Opponent and to restrain the Commission from proceeding to exercise any such jurisdiction. Alternatively, the Claimants seek an injunction restraining Mr McRann from continuing the proceedings. 4 Proceedings of the latter character are not based on the supervisory jurisdiction of the Court. They are first instance proceedings seeking relief in personam against the Second Opponent. The Relevant Contracts 5 By letter dated February 1995, UGC, under its former name, employed McRann as its employee, with a view to him being seconded on a full-time basis to manage the financing, construction and operation of the television businesses of its Australian affiliates. 6 The document entitled "Employment Letter Agreement" ("the Employment Agreement") is an offer of employment by UIH, a United States corporation, with a 'secondment' to UIH's Australian affiliates, also referred to as an "assignment". The contract commenced on 19 March 1995. It was not expressed to be for any fixed term but it expressly provided that the "assignment" to the Australian companies would be for a period of five years "subject to the terms of this agreement". Another provision permitted termination of the assignment for cause on six months notice. 7 Mr McRann's remuneration was to encompass a base salary and an annual bonus. He was also entitled to incentive compensation based on the value of UGC's then two Australian affiliates, CTV Pty Ltd and STV Pty Ltd ("CTV" and "STV"). Subsequently that business was conducted by Austar Entertainment Pty Ltd ("Austar Entertainment") and, after a public float, by Austar United Communications Limited ("Austar"). 8 The effect of this incentive compensation is summarised in the summons issued by Mr McRann in the Industrial Relations Commission in the following terms: "(d) The Applicant was to be entitled to incentive compensation, being 0.75% of the Residual Equity Value (as defined) of CTV and STV, such incentive to vest 20% immediately on commencement of employment and then monthly over the ensuing 48 months, so as to be fully vested by 7 March 2000 ("Incentive Interest"); (e) The Applicant would have the right, during a 12 month period beginning 7 March 2000, to require CTV and STV to purchase the Incentive Interest from him at a value to be determined by reference, inter alia , to the earnings and liabilities of CTV and STV at that time; (f) If CTV and STV went public or were sold or merged into a similar operation in Australia, then parties agreed in good faith that the Incentive Interest would be restructured into options (in the case of a public listing) or a comparable incentive arrangement. (g) The arrangement could be terminated only if the performance of the Applicant was unsatisfactory or if he was grossly negligent in the performance of his duties and then only on 6 months notice and on payment of a severance payment equal to 12 months salary." 9 This summary omits one feature of the scheme: the vested amount of Mr McRann's incentive interest would become payable if he were to resign, or at his option, upon termination, when he may either retain the amount of the interest vested or accelerate his put rights. 10 With effect from 31 July 1997 McRann entered into two further agreements. The first was called a Compensation and Release Agreement. The second was called a Termination of Employment Letter Agreement. Each agreement was executed by UIH on 30 June 1997 and by Mr McRann on 2 July 1997. 11 The Compensation and Release Agreement provided: "I. Purpose of the Agreement The purpose of this Agreement is to forever resolve any and all legal disputes between the Company and the Employee with respect to the Employment Letter Agreement between the Employee and UIH dated February 21, 1995 and any amendments thereto (the 'Existing Agreement'), and to provide the Employee with the compensation and benefits described herein to which Employee would not otherwise be entitled in exchange for Employee giving up any and all legal rights or claims which arising out of the Existing Agreement. II. Compensation and Benefits As consideration for entering into this Agreement, Employee shall be entitled to the following incentive compensation benefits for services provided to Austar Entertainment Pty Ltd., CTV Pty Limited and STV Pty Limited (together 'Austar'). 1. As of July 4, 1997, Employee will be deemed to have vested a total of 0.50% of the Residual Equity Value (as defined below) (the 'Incentive Interest'). 2. Austar agrees to purchase from Employee 50% of the Incentive Interest for a cash payment of US$387,500. Payment will be made on July 31, 1997. The Employee understands that all payments made by Austar (or the Company on Austar's behalf) under this Agreement may be subject to withholding for standard payroll deductions and federal and state taxes in the United States. 3. At anytime during the twenty-four (24) month period beginning on March 13, 1999, Employee may elect to require Austar to purchase the balance of the Incentive Interest (i.e. 0.25% of the Residual Equity Value, or the 'Remaining Incentive Interest'). At any time during the twelve (12) month period beginning March 13, 2001, Austar or the Company may elect to purchase the Remaining Incentive Interest from Employee. Either party will give written notice of its intent to sell or purchase the Remaining Incentive Interest from Employee. Either party will give written notice of its intent to sell or purchase the Remaining Incentive Interest as the case may be ('Notice Date'). There will be a minimum value for the Remaining Incentive Interest of US$387,500 and a maximum value of US$775,000 in the event the Remaining Incentive Interest is purchased by Austar or the Company at any time and for any reason. 4. For purposes of this Agreement, the 'Residual Equity Value' will be calculated as follows:- Step 1 : The assets of Austar will be valued at ten (10) times EBITDA for the twelve (12) months prior to the Notice Date ('Asset Value'). EBITDA will be calculated in accordance with U.S. GAAP. Step 2 : The Asset Value will be reduced by (a) Net Liabilities of Austar and (b) an amount which is equal to the total shareholder investment in or loans to Austar, plus a 12% compounded annual rate of return on such capital. 'Net Liabilities' refers to total long-term liabilities less net working capital of Austar. 5. If there is a Change of Control (as defined below), then for six (6) months thereafter the Residual Equity Value will be equal to the greater of (a) the Residual Equity Value calculated in Clause 4, and (b) the implied equity valuation of Austar derived from the pro rata gross proceeds to shareholders of Austar from such Change of Control event, less an amount which is equal to the total shareholder investment in or loans to Austar, plus a 12% compounded annual return on such capital. 6. If Austar goes public, then Employee and the Austar agree that, in good faith, the Remaining Incentive Interest will be restructured into stock options or any comparable incentive arrangement offered to then current employees of Austar. 7. A Change of Control event shall be defined as any sale or merger transaction involving Austar which results in UIH (or any affiliated company of UIH) owning less than a 50% economic interest in Austar. III. Release Employee gives up his right to bring any legal claims against the Company of any nature and related in any way, directly or indirectly, to his employment relationship with the Company pursuant to the Existing Agreement or the termination thereof, and his secondment to Austar. This release in favor of the Company is intended to be interpreted in the broadest possible manner, to include all actual or potential legal claims that Employee may have against the Company in relation to the Existing Agreement and his secondment to Austar. For avoidance of doubt, Employee also releases all claims against the Company's officers, directors, agents and employees. IV. Governing Law This Agreement shall be governed by the laws of the State of Colorado, and may be enforced in any court of competent jurisdiction. V. Signatures Employee acknowledges that he has read this Agreement in its entirety, understands that this is a legally binding document, and has been provided with an opportunity to consult with a lawyer before executing it below."
12 The Termination of Employment Letter Agreement provided: "Re Termination of Employment Letter Agreement Dear Bob: In anticipation of your transfer to Amsterdam, you and United International Holdings, Inc. ('UIH') hereby mutually agree to terminate your Employment Letter Agreement dated February 21, 1995 (the 'Existing Agreement'). This letter and the attached Compensation and Release Agreement ('CRA') set forth the terms and conditions of the termination of the Existing Agreement. You acknowledge that the terms and conditions of your new assignment with A2000 are contained in a separate agreement. The Existing Agreement and your secondment to Austar Entertainment Pty. Ltd. and its affiliated companies will terminate on July 31, 1997. In exchange for executing the attached CRA, you will receive the compensation and benefits contained in the CRA and abide by all of the terms and conditions of such CRA. If the foregoing accurately sets forth the terms and conditions of our agreement, please countersign this letter and the attached CRA and return them to me." 13 In the Summons filed in the Commission, Mr McRann refers to the existence of an arrangement pursuant to which he would be transferred to the First Claimant's Dutch affiliate company called A-2000 NV. He asserts that the form of written agreement submitted to him to implement the arrangement to work with A-2000 NV was not in accordance with the arrangement. From July to November 1997, Mr McRann worked with A-2000 NV but on 27 November UIH purported to terminate that employment with effect from 31 December 1997.
The Industrial Relations Commission Proceedings 14 The proceedings instituted in the Industrial Relations Commission are directed to the Compensation and Release Agreement. In those proceedings Mr McRann asserts that that contract was, or became, unfair, harsh or unconscionable, on a number of grounds. Each ground is directed to the failure on the part of the Claimants to give Mr McRann the benefit of the incentive compensation by reason of the float on the Australian Stock Exchange of Austar, the successor to the UGC-affiliated pay television operations. 15 Mr McRann computes a strike price derived from the option agreement for Mr McRann's successor as Managing Director of UGC's Australian operations. He asserts that he would have exercised the options and sold them on a particular date. On this basis Mr McRann estimates that he would have obtained an additional benefit of about $10.5 million. 16 It is with respect to these proceedings that the Claimants seek to invoke this Court's supervisory jurisdiction, or, alternatively, an in personam jurisdiction against Mr McRann. 17 The proceedings are instituted under s106 of the Industrial Relations Act 1996 which draws on certain definitions in s105 of that Act: "105 Definitions In this Part: contract means any contract or arrangement, or any related condition or collateral arrangement, but does not include an industrial instrument. unfair contract means a contract: (a) that is unfair, harsh or unconscionable, or (b) that is against the public interest, or (c) that provides a total remuneration that is less than a person performing the work would receive as an employee performing the work, or (d) that is designed to, or does, avoid the provisions of an industrial instrument. 106 Power of the Commission to declare contracts void or varied (1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract. (2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason. (3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time. (4) In considering whether a contract is unfair because it is against the public interest, the matters to which the Commission is to have regard must include the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force. (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. (6) In making an order under this section, the Commission must take into account whether or not the applicant (or person on behalf of whom the application is made) took any action to mitigate loss." 18 In his Summons in the Commission, Mr McRann referred to cl 3 and cl 6 of chapter II of the Compensation and Release Agreement and then recited the events leading to the dispute as follows: "20. In around July 1999, CTV and STV 'went public' via the listing on the Australian Stock Exchange of Austar United. 21. In around July 1999, the Applicant's successor as Managing Director of CTV and STV, Mr John Porter, was granted options of over approximately 4,879,000 shares in Austar United, at a strike price of $1.80 per share. Those options were granted to Mr Porter consequent upon a restructuring of his incentive interest in 0.5% of the Residual Equity Value of CTV and STV. If applied to the Applicant's Remaining Incentive Interest, that basis for restructuring would result in the Applicant having his Remaining Incentive Interest restructured into options over approximately 2,439,500 shares in Austar United. 22. If the Applicant's Remaining Incentive Interest had been restructured into stock options in Austar United in around July 1999 on terms equivalent to those granted to Mr Porter, he would have been in a position to exercise those options and would have done so in around June 2000, at a time when Austar United shares were trading at approximately $6.10 a share, resulting in a profit to the Applicant on exercise of the options of $4.30 an option, or $10,489,850 in total. 23. Since July 1999, the Respondents have failed and refused to restructure the Applicant's Remaining Incentive Interest into stock options in Austar United in accordance with the terms of Clause 6 as aforesaid." 19 The basis for relief under s106 is asserted in the Summons under the heading "Grounds of Unfairness": "1. The Termination Agreement was or has become unfair, harsh and unconscionable in that: (a) It provided for the restructuring, in good faith, of the Applicant's Remaining Equity Interest into stock options and the Respondents who are parties to the Termination Agreement have failed and refused to undertake such a restructuring; (b) It provided for the restructuring of the Applicant's Remaining Incentive Interest into stock options in the Third Respondent in terms which were sufficiently non-specific as to allow the Respondents to seek to exploit that uncertainty by failing and refusing to honour their obligations thereunder; and (c) Pursuant to the Termination Agreement, the Applicant agreed to the termination of his valuable rights under the CTV/STV Arrangement. In return, the Applicant was promised certain rights under the Termination Agreement (including his rights under clause 6 of Chapter II to a restructuring of his Remaining Incentive Interest) and a long-term engagement to work at A-2000 NV on the terms of the A-2000 Arrangement. The Respondents have since, by their conduct in relation to the Termination Agreement and the A-2000 Arrangement, sought to keep for themselves the benefit of the termination of the CTV/STV Arrangement and to deny to the Applicant both the benefit of the A-2000 Arrangement and the benefit of any restructuring of his Remaining Incentive Interest into stock options as promised in the Termination Agreement. Such conduct on behalf of the Respondents is such as to have rendered the Termination Agreement unfair, harsh and unconscionable."
Issues in this Court 20 Three separate questions arise with respect to the supervisory jurisdiction of this Court. Issues arising in the action in personam against the Second Opponent are quite distinct. 21 First, the Claimants assert that s106 does not extend to contracts governed by the law of another jurisdiction, whether another State or Territory of Australia or an overseas jurisdiction. The Claimants rely on the express choice of law clause contained in the Compensation and Release Agreement to the effect that that contract will be governed by the law of Colorado. 22 Secondly, and in the alternative, the Claimants assert that the alleged contract or arrangement is not one under which work is performed in an industry. 23 The third issue that would arise with respect to the court's supervisory jurisdiction is the effect of the privative provision which relevantly provides: "179(1) … a decision or purported decision of the Commission …: (a) is final, and (b) may not be appealed against, reviewed, quashed or called in question by any court or tribunal (whether on an issue of fact, law, jurisdiction or otherwise). (2) A judgment or order that, but for this section, might be given or made in order to grant a relief or remedy (whether by order in the nature of prohibition, certiorari or mandamus, by injunction or declaration or otherwise) may not be given or made in relation to a decision or purported decision of the Commission …" 24 The Claimants assert that s179 should be read down so that it does not preclude relief in relation to an exorbitant assumption of jurisdiction by the Commission, which it submitted was demonstrated in this case. The contract or arrangement in the proceedings before the Commission is not, it was said, in any sense an agreement under which work is done and accordingly is not protected by s179. 25 During the course of oral submissions it was submitted, alternatively, that the judgment of Peterson J in the proceedings in the Commission, from which leave to appeal was refused by the Full Bench of the Commission, was not a "decision" within the meaning of s179. 26 The action in personam is based on an assertion that the proceedings in the Commission were an abuse of power by reason of their inconsistency with proceedings taken by Mr McRann in the United States District Court for the District of Colorado. On the basis of the equity said to arise by reason of those proceedings, the Claimants assert that the Court should grant an anti-suit injunction with respect to the institution of the s106 proceedings in the Commission.
The Proper Law Issue 27 Mr G Hatcher SC, who appeared for the Claimants, submitted that s106 does not extend beyond a contract governed by the law of New South Wales. He submitted that the interpretation of the Act should proceed on the basis of the principle that general words in a statute should be read down so as not to apply to contracts of which the proper law is another jurisdiction. 28 The Claimants relied on statements of the principle in Barcelo v Electrolytic Zinc Co of Australasia Limited (1932) 48 CLR 391 at 423 per Dixon J and Wanganui-Rangitikei Electric Power Board v Australian Mutual Provident Society (1934) 50 CLR 581 at 601 per Dixon J. In the latter his Honour said: "The rule is one of construction only, and it may have little or no place where some other restriction is supplied by context or subject matter. But, in the absence of any countervailing consideration, the principle is, I think, that general words should not be understood as extending to cases which, according to the rules of private international law administered in our Courts, are governed by foreign law."
I emphasise the reference to another "restriction" being "supplied by context or subject matter". 29 The Claimants also invoke the statement of principle by Latham CJ in Mynott v Barnard (1939) 62 CLR 68 at 79: "In special cases, in the absence of any other clear indication of the intention of parliament, the governing law of a contract may be selected as the best practicable means of determining the territorial application of a statute which is essentially a statute dealing with contracts."
The Claimants submit that Pt 9 of the Act is "a statute dealing with contracts". 30 Mr J West QC, who appeared for the Second Opponent, submitted that an alternative territorial nexus is established in the statute. It is location of the industry in New South Wales that provides the territorial nexus. Mr West QC further submitted that it is wrong to characterise the statute in the words of Latham CJ in Mynott v Barnard as a "statute dealing with contracts". He submitted that the section was not concerned with "contracts" but with the "fairness" of the terms and conditions under which work is performed an industry in and of New South Wales. 31 The relevant authorities have recently been summarised by Palmer J in Tryam Pty Ltd v Grainco Australia Limited [2003] NSWSC 812 at [36]-[121], an analysis with which I respectfully agree. 32 In my opinion, the Second Opponent's submissions in this respect should be accepted. The concern of the legislative scheme is not with the contracts as such. It is true that s106 is directed to contracts, as defined, but it is so directed out of a concern with the terms and conditions upon which work is performed in any industry in New South Wales. 33 The phrase "in and of New South Wales", derived from s17 of the Interpretation Act 1897 (now see s12(1)(b) of the Interpretation Act 1987), has generally been applied in the authorities as the relevant territorial restriction. (See Ex parte Richardson; re Hildred [1972] 2 NSWLR 423 esp at 433-434. This is a territorial nexus of a clear and comprehensive character which indicates that it is inappropriate to rely on the general principle of statutory construction. To use the words of Dixon J in Wanganui, this is a "restriction … supplied by context and subject matter". 34 Indeed, in my opinion, the legislative scheme is inconsistent with the application of the general principle that statutory intervention in contracts is intended to relate only to the contracts of which the proper law is, relevantly, New South Wales. There are a number of statutory indications to the contrary in this regard. 35 First is the extension, by the definition in s105, of the concept of "contract", with which the Act is concerned, beyond a contract as understood at common law to encompass an "arrangement". There is no such thing as the "proper law" of an arrangement. An arrangement is not necessarily enforceable. No doubt an "arrangement" may have more connections with one jurisdiction than another and, in that sense, can be said to have a certain location. However, that is quite distinct from suggesting that the body of law of that location applies to an "arrangement". There is no rule of private international law applicable to "arrangements". 36 Secondly, the concept of "unfair contracts" is of such breadth as to indicate that the legislative scheme was intended to apply to contracts, irrespective of the rules of private international law, which have particular effects within the jurisdiction. The definition of "unfair contract" in s105 is set out at par [17] above. 37 Setting aside (a) and (b) in the definition of "unfair contract" in s105, as being of general application, it is clear that jurisdiction over a contract which provides, in a New South Wales industry, remuneration less than a person would receive as an employee will extend to contracts irrespective of their proper law. The same conclusion applies to contracts which are designed to, or do in fact, avoid the provisions of an industrial instrument. 38 The final indication is the obligation under s106(4) of the Act upon the Commission to have regard to the effects that any contract (as defined) or series of contracts, may have on the system of apprenticeship and other methods of providing a sufficient and trained labour force. Again this industrial consideration would apply to contracts irrespective of their proper law. 39 It was not suggested that Mr McRann's employment with Austar Entertainment, CTV and STV was not work in a New South Wales industry. The position would have been different if the Second Opponent had instituted proceedings under s106 in the Commission with respect to the transfer of Mr McRann to the Dutch affiliate of the Claimants. However, the proceedings in the Commission do not touch upon that aspect of the arrangement or contract. The proceedings are concerned with rights related to his employment with the Australian affiliate. 40 The fact that the Compensation and Release Agreement has, as its proper law, the law of Colorado does not lead to the conclusion that the Commission has no jurisdiction. The Claimants' submissions in this respect should be rejected.
Performance of Work 41 The Claimants assert that the Compensation and Release Agreement must be a contract "whereby a person performs work" in an industry and that that Agreement does not satisfy the relevant test of "directly" leading to work in an industry. The Claimants submit that although the word "contract" is defined to include an arrangement or a related condition or a collateral arrangement, whatever the appropriate characterisation, the matter relied on must itself answer the description "whereby" a person performs work. No work of any character in an industry in and of New South Wales, it is submitted, is performed under the Compensation and Release Agreement. 42 The Second Opponent submits that the Compensation and Release Agreement falls within s106 on the basis that it forms part of an overall contract or arrangement for his employment in New South Wales; alternatively, that it was a condition related to his employment arrangements in New South Wales or, finally, that it was an arrangement collateral to the arrangement whereby he performed that work. 43 The Claimants accepted that there was in force a written employment agreement with a five year term, pursuant to which Mr McRann performed work in an industry in and of New South Wales between March 1995 and June 1997. It is the relationship between that contract, which did lead directly to work in an industry, and the Compensation and Release Agreement, which is in issue. 44 Mr West QC submitted that the Compensation and Release Agreement formed an integral part of an arrangement under which Mr McRann's employment in Australia was brought to an end. The incentive compensation component of his remuneration under his original agreement was restructured and replaced by the form in which it appears in the Compensation and Release Agreement. He submitted that what the agreement did was to have Mr McRann give up his accrued rights in relation to his employment up to that time and in the future, and transform them into rights in accordance with the terms of the Compensation and Release Agreement. 45 Mr West QC noted that the Compensation and Release Agreement was both negotiated and entered into during the term of his employment in New South Wales. Indeed, it brought an end to that engagement. Mr McRann continued to work for the balance of the month of July after the Compensation and Release Agreement was executed. 46 Mr West QC also submitted that the Compensation and Release Agreement was one part of a three part arrangement consisting of the Agreement itself, the termination of Mr McRann's existing Employment Agreement and the putting into place of a new Employment Agreement with A-2000 in Holland. He placed particular emphasis on the fact that the Agreement dealt with the disposition, both at the date of the Agreement and into the future, of the incentive interest in Austar which Mr McRann had acquired as a consequence of his engagement in New South Wales. 47 It was not suggested by Mr West QC that the performance of work in the Netherlands for A-2000 was sufficient to attract the jurisdiction of the Commission under s106. Primary reliance was placed upon the interrelationship between the provisions of the Employment Agreement, the Compensation and Employment Agreement and the parallel Termination of Employment Letter Agreement set out above. 48 The Claimants submitted that, however a contract is characterised, it must be a contract or arrangement whereby a person performs work and that the Compensation and Release Agreement was not such, nor part of any broader contract or arrangement. 49 In part the Claimants relied on the elements identified in Mitchforce Pty Ltd v Industrial Relations Commission of NSW (2003) 57 NSWLR 212 at [13], albeit not referring to [14]. For the reasons discussed in my judgment in Solution 6 Holdings Limited v Industrial Relations Commission of NSW [2004] NSWCA 200 at [54]-[58] my identification of these elements was not intended to propound some kind of an alternative test to that stated by the High Court in Stevenson v Barham (1976) 136 CLR 190 esp at 200, 201 and 202, but to elucidate the application of that test when determining what is encompassed in the word "directly" for purposes of establishing the requisite relationship between the contract, etc and the performance of work. 50 For the reasons I have set out in Solution 6 Holdings at [54]-[58], the words "whereby work is performed in an industry", qualify the word contract and do so irrespective of which element in the s105 definition of contract is applicable. For these reasons, the Second Opponent's reliance on the Compensation and Release Agreement as a stand alone contract, whether as a related condition or as a collateral contract, would not satisfy the relevant jurisdictional fact. It cannot be said that that Agreement, as such, leads directly to the performance of work in an industry. 51 As noted above, the Second Opponent also relies on the Compensation and Release Agreement as a modification of his pre-existing contract of employment, even though it was an agreement reached in the context of the termination of that employment. Although this way of approaching the case may not be pleaded, this Court would not prohibit proceedings in the Commission where jurisdiction can be established by an amendment asserting that undisputed facts have a particular legal effect. 52 I have set out in pars [6]-[12] above a summary of the original Employment Agreement and the terms of the Compensation and Release Agreement and the Termination of Employment Letter Agreement. 53 The incentive interest was an important component of Mr McRann's remuneration under the original Employment Agreement. It had the following relevant features: · It would vest progressively on a monthly basis and would be fully vested immediately before the expiration of the five year term. · Mr McRann's put option would extend for a period of about twelve months after the expiry of the term. · The call option of CTV and STV would commence at the expiry of the put option and be exercisable for a period of twelve months. · The vested amount is payable on resignation, without a put or call option. · If Mr McRann was terminated, the put option is exercisable by him at any time before expiry. 54 The critical features of this arrangement are reflected in the provisions of the Compensation and Release Agreement: · As at 4 July 1997, some three years before full vesting under the Employment Agreement, it was agreed that the 0.5 per cent of his ultimate 0.75 per cent interest had vested. · Fifty per cent of that vested interest would be purchased by Austar for an agreed price payable on 31 July 1997, the day Mr McRann would cease employment with Austar. (Whether this was equivalent to a put by Mr McRann or a call by Austar is not material.) · The remaining 0.25 per cent of the incentive interest was, in effect, deemed to be acquired by Mr McRann, notwithstanding the fact that he would not complete the five year term of his assignment. It was the subject of a put and call, together with the 50 per cent of interest not acquired on 31 July 1997. · His put option would be deferred for about two years, i.e. about one year before it could have been exercised under the Employment Agreement had he stayed in Australia and would last for two years rather than one. · The Austar call option would, as before, commence on the expiration of the put and last for twelve months. · The restructure of the incentive interest into options, upon a public float, was expressed in almost identical language in the two agreements. 55 When the Employment Agreement and the Compensation and Release Agreement are compared in this way, it appears clear that the latter is, in substance, a variation of the former in view of the circumstance that Mr McRann will be leaving to joining the UGC Dutch affiliate. 56 It is of significance that under the original Employment Agreement, Mr McRann's rights extended beyond the time of the expiry of his five year term. That his rights under the later Agreement also extend beyond the cessation of his employment with Austar, is not a distinguishing characteristic. 57 A contract of employment, being a contract "whereby work is performed in any industry" may be amended from time to time. The fact that it is comprised of more than one document does not affect its status as a single contract. It is not necessary, in this case, to invoke the concept of an "arrangement". In my opinion, there was a single contract of employment constituted by reading together the Employment Agreement and the Compensation and Release Agreement. That an amendment takes effect at the time when employment is to cease, with respect to part of the remuneration package that was always intended to operate after cessation, does not change the character of the contract. 58 In my opinion, the parts of the Compensation and Release Agreement relied upon are part of Mr McRann's contract of employment with Austar. Accordingly, the Commission has jurisdiction under s106.
Anti-Suit Injunction 59 Proceedings for an anti-suit injunction should not be brought in this Court in the first instance. Such proceedings should be brought in the Equity Division of the Supreme Court. 60 The evidence has been put before this Court in a quite perfunctory manner in the form of certain documents and judgments from Colorado. Even if the Court were minded to exercise a first instance jurisdiction in this regard, the material before the Court was not of a character that would enable the Court to properly assess the full range of discretionary matters that arise in such a case. 61 There have been a number of proceedings between these parties. It is undesirable that any more be instituted. Suffice to say, without determining the question, that the case advanced for an anti-suit injunction on the part of the Claimants appears to be based on very weak grounds. It is submitted that in some sense the s106 proceedings in the Commission are inconsistent with the proceedings taken in Colorado. The judge in Colorado, to whom the same proposition was advanced, rejected it. I can see no reason, when the Colorado Court has refused to issue an anti-suit injunction, why this Court should do so.
Orders 62 The Application should be dismissed with costs. 63 MASON P: I agree with Spigelman CJ. 64 HANDLEY JA: I agree with Spigelman CJ. **********
Last Modified: 07/26/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Old UGC Inc & Ors
Industrial Relations Commission of NSW & Anor
(1932) 48 CLR 391
(2003) 57 NSWLR 212
(1939) 62 CLR 68
(1976) 136 CLR 190
(1934) 50 CLR 581
Application dismissed with costs; no prohibition issued; no anti-suit injunction granted by the Court of Appeal [62].