Strathfield Group Ltd v Hall

Industrial Relations Commission (NSW)|2002-07-01|Before: Wright J, Peterson J, Kavanagh J, Mr J

Industrial Relations Commission of New South Wales in Court Session

CITATION : Strathfield Group Ltd v Hall [2002] NSWIRComm 373 APPELLANT: Strathfield Group Ltd PARTIES : RESPONDENTS: Steven Hall I World Pty Limited FILE NUMBER: IRC 7595 of 2001 CORAM: Wright J President; Peterson J; Kavanagh J Appeal - Interlocutory appeal - Appeal against dismissal of motion seeking to strike out part of summons - Leave to appeal - Conduct of parties relevant to question of leave - Interlocutory appeals - Appeal directed to finding of error not rehearing - No error of principle - Leave to appeal refused - Appeal dismissed.

CATCHWORDS : Unfair Contract - Arrangement - Power to vary in s 106(3) in context of an "arrangement" - Line of authority exemplified by Stone Microsystems (Aust) Pty Ltd v Kwong (1997) 42 NSWLR 160 considered - Once contract found to be unfair power to vary extends to any aspect of the arrangement whereby person performs work - No error of principle - Leave to appeal refused - Appeal dismissed.

Court and judges - Allegation of apprehended bias not made out - Principles to be applied. LEGISLATION CITED : Industrial Arbitration Act 1940 s 88F Industrial Relations Act 1996 s 105 s 106 Abboud v State of New South Wales (1999) 92 IR 32 Ace Business Brokers Pty Ltd v Phillips-Treby (2000) 100 IR 420 Bartolacci v Permanent Custodians (1992) 44 IR 388 Bartolacci v Permanent Custodians Ltd (No.2) (1992) 94 IR 122 Bell v Macquarie Bank Limited (No 4) (1999) 93 IR 191 Caltex Petroleum Pty Limited v Harmer (1999) 92 IR 264 Cash Converters Pty Limited v Yildiz (1999) 94 IR 474 Chamber of Manufactures of New South Wales v Australian Chamber of Manufactures, New South Wales Branch (1994) 56 IR 307 Custom Credit Corporation Ltd v Goldsmith [1976] AR (NSW) 98 De Simone Consulting Pty Ltd v Ison [2000] NSWIRComm 269 Dun and Bradstreet (Australia) Pty Ltd v Robbie (1999) 91 IR 150 Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 Euphoric Pty Limited v Ryledar Pty Limited and Anor (2002) 117 IR 1 Hall & Anor v Strathfield Group Ltd [2001] NSWIRComm 266 Howitt v Retec Limited (1992) 45 IR 245 In re Becker and Harry M Miller Attractions Pty Ltd (No.2) [1972] AR (NSW) 298 Integral Energy v Allen (2001) 107 IR 456 CASES CITED : Johnson v Johnson (2000) 201 CLR 488 Knowles v Anglican Church Property Trust (No.2) (1999) 95 IR 380 Kwong v Stone Microsystems (Aust) Pty Ltd (1996) 82 IR 255 Legal & General Assurance Society Limited v Stock (1993) 49 IR 464 Metrocall Inc v Electronic Tracking Systems Pty Limited (No 2) (2000) 102 IR 309 Nagle (T/as W D & J L Nagle & Sons) v Tilburg (1993) 51 IR 8 National Australia Bank Ltd v Cassino [2002] NSWIRComm 241 Parramatta City Council v Health and Building Surveyors Association (NSW) (1988) 26 IR 398 Re Laundry Employees (State) Award (No 2) (1993) 49 IR 91 Reich v Client Server Professionals of Australia Pty Ltd (Administrator Appointed) (2000) 49 NSWLR 551, 99 IR 69 Ridge Consolidated Pty Ltd v WorkCover Authority of New South Wales (Inspector Mauger) (2000) 100 IR 156 Smith v Craig Mostyn & Co Pty Limited (1984) 2 NSWLR 393 Social & Community Welfare Services (State) Award and Other Awards, Re (1984) 9 IR 305 Solicitors (State) Award, Re (1997) 72 IR 225 Stone Microsystems (Aust) Pty Ltd v Kwong (1997) 42 NSWLR 160 Vaughan v O'Meara (1989) 31 IR 21 Virtue v NSW Department of Education (1999) 92 IR 428 Western Sydney Area Health Service v Gibson (2001) 109 IR 359 WorkCover Authority of New South Wales (Inspector Dubois) v Concrete Constructions Group Limited [2000] NSWIRComm 65 HEARING DATES: 02/08/2002 DATE OF JUDGMENT: 12/20/2002

APPELLANT: Mr J J Graves SC and Mr W Watts of counsel Potts Latimer, Solicitors (Mr Ashley Reed) LEGAL REPRESENTATIVES: RESPONDENTS: Mr P M Kite SC and Mr J Keasing of counsel Gells, Lawyers (Mr Peter Gell)

INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION

CORAM: WRIGHT J, President PETERSON J KAVANAGH J

STRATHFIELD GROUP LIMITED v STEVEN HALL AND ANOTHER Application for leave to appeal and appeal against an interlocutory decision of Justice Marks given on 31 October 2001 in Matter No. IRC 4353 of 2000

JUDGMENT OF THE COURT [2002] NSWIRComm 373

1 This matter concerns an application by Strathfield Group Limited (the appellant) for leave to appeal and, if leave be granted, an appeal against an interlocutory decision of Marks J given on 31 October 2001: Hall & Anor v Strathfield Group Ltd [2001] NSWIRComm 266. The interlocutory decision dismissed a motion brought by the appellant in proceedings seeking relief from a contract alleged to be unfair pursuant to s 106 of the Industrial Relations Act 1996 commenced by Steven Hall (the first respondent). The appellant's notice of motion sought to strike out certain aspects of the summons for relief on the ground that the orders sought by the second respondent "[could] not be supported by reference to s 106 or any other section of the Industrial Relations Act". 2 The first respondent was previously employed in a business known as "E World", owned by I World Technologies Pty Ltd (the second respondent), specialising in handheld computers. The second respondent was the trustee of a unit trust which operated the business. In addition to being an employee, Mr Hall was one of two shareholders and directors of the second respondent. Mr Hall's family trust (Crestband Pty Limited) also owned units in the trust. 3 The respondents' claim under s 106 of the statute arose out of the sale of E World by the second respondent to the appellant on 24 August 1999. The business was to be sold as a 'going concern'; that is, the arrangements involved the sale of the business itself and all former staff would undertake service agreements with the new proprietor. The first respondent was to be engaged by the new owners in the position of National Manager, Sales and Marketing. 4 Two contracts were relevant to these proceedings. The first provided for the sale of the business; the second was the appellant's executive service contract. 5 The respondents' summons for relief sought variations to both the sale of business agreement and the executive service agreement. As to the sale of business agreement, the summons sought to vary the amount of money representing goodwill of the existing business so as to increase the amount representing goodwill from $150,000 to $2,670,000. The relief sought in relation to the service agreement was for the deletion of provisions providing for post employment restraints of trade and an order for the payment of $139,000 representing employment entitlements of the first respondent. 6 There were some initial difficulties with compliance by the appellant with the directions made in the appeal. Eventually, however, all submissions were filed. The appellant's submissions made no reference to any challenge being brought to established authority or sought leave to challenge any previous Full Bench decision. Submissions for the respondents were filed and shortly thereafter the appellants forwarded a letter to the Court advising that they would not be filing submissions in reply. The letter included the following: We advise that as disposition of the appeal turns on the proper application of uncontroversial binding legal principle to facts, uncontested for the purposes of this Appeal, no reply is necessary from the appellant to the respondent's written submissions.

On this basis the appeal was listed for a short hearing. 7 Upon the hearing of the matter, without having made the other parties to the appeal or the Court aware of its intentions, senior counsel for the appellant sought to argue that the line of authority on which Marks J's decision rested, was wrong. The line of authority, as will be observed later in this decision, is of long standing and is, in our view, well settled. We consider this approach unsatisfactory. In an appropriate case, an approach of this kind may be relevant to the question of leave to appeal, however, for reasons that will appear later in this judgment, we consider that leave to appeal in these proceedings ought be refused in any event. 8 Before considering the judgment at first instance, it is convenient to set out some of the relevant provisions in the sale of business agreement and the service agreement. 9 Turning firstly to the sale of business agreement, the first clause to which we were referred was clause 6 entitled "Exclusion of pre-contractual and other representations", which is what may be referred to as an "entire agreement clause". It provided that the sale of business agreement "constitutes the entire agreement between the Vendor and the Purchaser relating to the sale of business" and that the agreement "supplants and supersedes any previous written or oral negotiations or preliminary agreements between the parties" and purported to disclaim any "collateral or other agreement" to the sale of business agreement. It also declared "the parties are not bound by any warranty, representation, collateral agreement, or implied term, under the general law or imposed by legislation unless" it was provided for in the agreement or could not be excluded at law by the agreement of the parties.

10 Clause 9 of the sale of business agreement provided for the payment of $150,000 upon completion and an ongoing payment, as to the goodwill of the existing business. The continuing payment was to continue for three years following completion and was calculated on the basis of the success of the business over that period. The clause expressly acknowledged that E World was being sold "on a going concern basis". 11 For present purposes, the clause of the sale of business agreement most heavily relied upon by the respondents was clause 22, which provided for the manner in which the directors and employees of E World would be treated throughout the sale of business arrangement, in the following terms: 22 Employees

22.1.1 The Vendor acknowledges that it is fundamental to the completion of this Agreement that service agreements be entered into with each of the Directors and each of the Software Engineers. [NOTE: the "Software Engineers" are individually identified in the definitional provisions, in particular, clause 1.1.18]

22.1.2 If any one or more of such parties fail to enter into an agreement in a form approved by the Purchaser then the Purchaser may at its option rescind this Agreement.

22.1.3 The Directors service agreements shall provide, amongst other things, that: a) The term shall be 2 years with a further option of 1 year - exercisable by either party by mutual consent; b) The agreement is terminable after the initial period on 6 months written notice by either party; c) A restraint of trade in the same terms as contained in this Agreement except that it will not be for more than 1 year beyond the restraint of trade contained in this Agreement; and d) The director acknowledges that the intellectual property in anything developed by him during the term of such agreement that has not been disposed of more than 2 months before the date hereof, belongs to the Vendor.

22.1.4 The Software Engineers service agreements shall provide, amongst other things, that: a) The term shall be 2 years with a further option of 1 year - exercisable by either party; b) The agreement is terminable after the initial period on 6 months written notice by the software engineer or 3 months by the Vendor; c) A restraint of trade in the same terms as contained in this Agreement except that it will not be for more than 1 year, and d) The software engineer acknowledges that the intellectual property in anything developed by him during the term of such agreement belongs to the Vendor.

22.2.1 The Vendor shall terminate the employment of all of the Vendor's employees in the business at the date of completion.

22.3.1 The Purchaser shall re-employ from the date of completion all of the employees whose particular are specified in Schedule 7.

22.3.2 In the event that any of the Directors or Software engineers do not accept employment with the Purchase by entering into a service agreement in the form approved by the Vendor, the Vendor may rescind this Agreement 12 The remaining provisions of clause 22 need not be set out in terms. It is sufficient to observe that those provisions require the "Vendor" to pay to the "Purchaser" an amount equivalent to the accrued value of salary, accrued long service leave, holiday pay and superannuation of the employees up to the date of completion and that the Vendor will indemnify the Purchaser for all claims arising out of the employment of those persons prior to the completion of the sale of business agreement. 13 As for the service agreement, it provided under the heading "Background" that the first respondent would commence as "National Manager, Sales and Marketing, E World" on "the date of contract settlement". Notably, there is no provision in the service agreement which defined "the date of contract settlement". However, a definition of the term appears in the business sale agreement at clause 24 by reference to item 16 in Schedule 1 to the agreement (stipulated therein as being 3pm on 31 August 1999). 14 The entirety of the provisions under the section of the service agreement entitled "Background" are instructive. They were: 1. The Executive will commence as National manager, Sales and Marketing, E World with the Company on the date of contract settlement.

The parties wish to set out the arrangements under which the Executive will carry out his appointment as National Manager Sales and Marketing, E World.

The Executive will commence with the company as the result of the acquisition of the business (E World) previously owned and operated by the Executive in order to utilize his skills and abilities in this business. The Decision Subject of the Appeal 15 Marks J came to three conclusions each of which was separately, in his Honour's view, sufficient to dismiss the appellant's motion. Those findings were:

It was arguable that the business sale agreement was itself an agreement whereby work was performed in an industry;

It was arguable that the sale of business agreement was a collateral agreement, within the meaning of s 105 of the Act, to the executive service agreement.

It was arguable that the two contracts, the sale of business agreement and the executive service agreement, constituted a single arrangement within the meaning of s 105 of the Act. 16 These findings are subject to challenge on appeal, as was the authority on which his Honour's decision was based. Further, the appellant contended that statements made by Marks J at the conclusion of his judgment would cause a fair minded observer to entertain a reasonable apprehension that his Honour did not bring an impartial and unprejudiced mind to the determination of the proceedings. 17 The appellants contentions at first instance were, in essence:

The second applicant, being merely a corporation with a separate legal personality, was not capable of performing work in an industry. Therefore the contract was not one within the purview of s 105.

The business sale agreement was not an agreement whereby any person performed work in an industry. The agreement was for the sale of a business. The executive service agreement was the contract whereby a person performed work in an industry.

The relief sought by the second respondent does not have the necessary nexus with a contract as defined whereby a person performs work in an industry. Section 106 of the Act therefore has no operation. Reference to the objects of the Act ought dispel any doubt as to the alleged remedial nature of the orders available under s 106.

The sale agreement was not a collateral agreement within the meaning of s 105 of the Act. Clause 6 of the business sale agreement expressly stated that there were no collateral agreements. The respondents were estopped from contending otherwise. The appellant contended that the business sale agreement was not a 'collateral agreement' to the service agreement. Further, it was not part of some arrangement within the meaning of s 105 of the Act. 18 His Honour approached the determination of the notice of motion by applying the principles found in the judgment of the President in Virtue v NSW Department of Education (1999) 92 IR 428 (at 447 - 448), noting that the principles there set out were a convenient summary of the principles established by the Full Bench in Nagle (T/as W D & J L Nagle & Sons) v Tilburg (1993) 51 IR 8. Marks J emphasised that "it is important to proceed cautiously with respect to the factual material, particularly to the extent that that material is to be considered in connection with questions of jurisdiction" given that the proceedings were at "a very early stage" and that no detailed affidavit evidence had yet been filed. 19 Having recognised the basis on which he would approach the application, Marks J identified the motion confined its challenge to the relief sought in relation to the sale of business agreement and turned to deal individually with the contentions on the motion. 20 The first contention was dealt with shortly by reference to the judgment of Glynn J in Vaughan v O'Meara (1989) 31 IR 21 and the authorities cited therein. His Honour considered that the respondents' claim in this respect was arguable and that it was, therefore, not open to him to strike the relevant provisions from the summons. 21 As to the second contention, his Honour observed: One way of distinguishing the type of transaction which does not fall within s 106 and that which does is by looking to the intention and purpose of the parties in terms of the carrying out of work. In Production Spray Painting , which was concerned with the sale of a business, although the vendor may have assumed that someone would have performed work in carrying on the business which was being sold, there was no such requirement by the vendor and therefore no contractual requirement that any work be carried out. …In these proceedings, as submitted by Mr Kite SC who appeared for the applicants to resist the notice of motion, it is arguable that clause 22 of the Sale of Business Agreement did not only contemplate but required that the first applicant perform work in the business which was being acquired by the purchaser. The entry into the Service Agreement was said to be fundamental to the completion of the Agreement and a failure to do so would give the Purchaser at its option the right to rescind. Clause 22.1.3 provided that the Directors' Service Agreements shall provide for a term of two years with a further option of one year. (emphasis added) 22 His Honour stressed that these observations were made purely for the purposes of determining the interlocutory application, and concluded: Based upon the provisions of clause 22 of the sale Agreement in conjunction with my understanding of the factual circumstances surrounding these proceedings, I am not satisfied that it is appropriate to accede to the submission of Mr Watts that the Sale Agreement cannot be regarded as a contract or part of a contract or arrangement whereby work is performed in any industry. 23 Turning to the third of the contentions advanced, Marks J held: … The submission seeks to characterise the adjustment of the amount of goodwill paid as being a remedy which is unrelated to, or does not have the necessary nexus with a contract as defined whereby a person performs work in an industry. In my opinion such an approach is not permissible. It is necessary, when considering matters of this kind to address the powers and jurisdiction of the Court and the manner in which remedies may be formulated and assessed to determine whether the processes are appropriate and permitted. Whilst the end result may appear to be unrelated to the philosophical approach of the powers and jurisdiction of the Court, if all of the processes are conducted within jurisdiction, and are otherwise appropriate, then the result cannot be attacked in this way. In any event merely because an attack is made on the amount of goodwill paid in conjunction with the sale of a business does not take a matter outside of the normal purview of s 106 proceedings. Proceedings of this kind were commonly encountered in connection with the sale to persons of trucks in work, involving the payment of goodwill. It was a common feature of those proceedings that the goodwill payment was attacked. It is possible to characterise the factual circumstances which have given rise to the allegations made in these proceedings in a similar way. In a simplistic sense, the first applicant in conjunction with another person conducted a business utilising a trust structure. They were approached to sell that business on the basis that they would continue to work for it. They allege that the business was operated by the purchaser in a manner which created relevant unfairness. In circumstances of this kind it matters not whether the person applying for relief under s 106 of the Act is the purchaser or the vendor; in appropriate circumstances either party to a transaction may feel wronged and may make allegations of unfairness. Provided that there is a contract as defined in s 105 which is found to be an unfair contract by reason of the combination of the definition contained within s 105 and the operation of s 106(2), then this is sufficient to confer jurisdiction and power on this Court to make orders under s 106. 24 His Honour concluded that the appellant's contentions failed as it was arguable the relief sought was within the purview of s 106. 25 Finally, turning to the contention that the business sale agreement was not collateral to the service agreement, his Honour rejected the argument that clause 6 of the sale of business agreement prohibited reliance upon the service agreement as the service agreement was expressly contemplated, indeed it was "fundamental" according to clause 22 of that agreement. It was not excluded by the entire agreement clause. Clause 22 provided the "necessary nexus" between the two agreements to permit a finding of collateral arrangements: Bartolacci v Permanent Custodians (1992) 44 IR 388, approved on appeal in Bartolacci v Permanent Custodians Ltd (No.2) (1992) 94 IR 122. In any event, the case was said not to be sufficiently advanced to permit a proper finding to be made in this regard. 26 His Honour considered that the respondent's contention that the sale of business agreement and the service agreement together constituted a single "arrangement" within the definition of s 105 of the Act was consistent with the approach adopted by Hungerford J in Kwong v Stone Microsystems (Aust) Pty Ltd (1996) 82 IR 255, approved on appeal in Stone Microsystems (Aust) Pty Ltd v Kwong (1997) 42 NSWLR 160, and that it was arguable the circumstances of the present case fell within that line of authority. 27 Finally, in concluding his judgment, Marks J made some observations which are the subject of complaint on appeal. The observations related to an exchange which occurred between himself and counsel for the appellant at the conclusion of the hearing on the motion. The relevant passages from his Honour's judgment were in the following terms: [42] Before concluding I wish to reproduce an exchange which occurred between Mr Watts and me at the conclusion of the hearing on 18 October last. "HIS HONOUR: I should indicate I will endeavour to hand down my reasons as soon as possible but it is more likely than not that the application that you make, Mr Watts, will fail. I only indicate that so that the parties can contemplate timetabling the matter, leading onto eventual hearing and I would hope, the computer system not failing, that I should be able to hand down a decision next week, but in fairness to the parties and because I do not want to see time passing by, particularly with the Christmas vacation coming up, I think you should contemplate some timetabling to get on to the matter, if there can be some discussions between the parties in the interim - - - WATTS: I think my instructions will be to tackle that decision if it is adverse to us, so we will be resisting progressing this case strenuously, as long and as hard as we can. I just indicate that to my friend." [43] The exchange which I have set out above is one which causes me some concern in terms of the case management of these proceedings. If the respondent appeals this decision then the proceedings may be delayed significantly. Whilst it is obviously the right of the respondent to appeal any decision, including an interlocutory decision, I am concerned that the respondent may have anticipated instructions to its legal representatives which are in the nature of stalling the proceedings. So much, it seems to me, can be gleaned from what was said by Mr Watts its counsel and this is a conclusion which one could reasonably make in circumstances where a party indicates that it will appeal a decision without having considered the reasons for judgment of the judicial officer. [44] In these circumstances I intend progressing the matter by fixing it for pre hearing directions so that a timetable can be set leading up to the preparation of the case for final hearing. If the respondent wishes to delay setting such a timetable, it will be necessary for it to do so by seeking a stay from the Appeal Bench. [45] The parties will be notified of a pre hearing directions shortly. 28 The appellant contended that this passage gave rise to a reasonable apprehension of bias.

Submissions 29 Mr Graves SC, who appeared with Mr Watts of counsel for the appellant, submitted that leave to appeal should be granted for three reasons, which were, in short:

(a) That there is an "insistent demand" of our legal system that justice not only be done but be seen to be done, and that it cannot be asserted with any confidence that the decision of Marks J conforms to that demand;

(b) There is another "insistent demand" that actions which are doomed to fail should either not be brought or should be summarily dismissed. The second respondent has no cause of action against the appellant, and the Commission no jurisdiction to make any order under s 106 in relation to the sale of business agreement; and

(c) It is generally desirable that objections to jurisdiction be determined as early as circumstances conveniently admit. The appellant should not be put at risk as to costs or put to the trouble of having to defend claims that have no chance of success. 30 It should be noted that the appellant did not specifically submit that the appeal required the Full Bench to reconsider any question of legal principle. As noted earlier, in its letter to the Court, the appellant foreshadowed that it was not necessary to reply to the respondents' written submissions as the "disposition of the appeal turns on the proper application of uncontroversial binding legal principle to facts". 31 The challenge to the relevant authorities which was ultimately argued may be summarised in this way:

(1) The line of authority exemplified by Bartolacci and Kwong was wrong in that it determined that there is power within the section to vary a contract which does not itself provide for the performance of work. That is, where a contract is found to be a collateral contract within the meaning of s 105, that collateral contract itself must provide for the performance of work if that contract is going to be capable of variation under s 106. The reality of the circumstances before the court involved the sale of a continuing business. The employees of such a business, as a fundamental part of the asset being sold, must necessarily be contemplated in the sale of business agreement. The sale of business contract will, for this reason, contain provisions that "have an employment flavour". However, the question which must be asked is, 'under which contract is the work performed'. Mr Graves contended that in these circumstances, the relevant agreement providing for the performance of work was the service agreement. It was "tortuous in the extreme" to permit attack on the sale of business agreement as, on his submission, it was beyond the competence of the section. (2) Whilst the definition within s 105 plainly contemplates that an 'arrangement' whereby a person performs work in an industry will fall within the purview of s 106, the line of authority, typified by Kwong, is wrong in that it considers such an arrangement can consist of a series of contracts which includes one specifically for the performance of work in an industry. In this case, the work of the first respondent was being performed not pursuant to the broad arrangements involving the sale of the business, but specifically pursuant to the terms of the service agreement only. In these circumstances it is wrong to look to some broader notion of an "arrangement". (3) In a practical sense it was conceded that the two contracts were connected. Further, it was conceded that there was nothing which would prevent more than one contract leading to the performance of work. However, when looking at the arrangements in relation to the operation of the section, there was no "necessary connection, condition or link" as was identified by Hungerford J in Bartolacci, leading to the performance of work in an industry. Here, as in Kwong, there was a work contract, and other separate contracts which did not directly provide for the performance of work. For the Court to adopt some other approach was an "absurdity" and amounted to a circumvention by the Commission of the authority of the Court of Appeal in Production Spray Painting. The impugned line of authority, in so far as it permits contracts to be varied which do not provide directly for the performance of work in an industry, is contrary to the authority of Production Spray Painting and therefore wrong. 32 Mr Kite SC, who appeared with Mr J Keasing of counsel for the respondents, submitted that leave should be refused, as the impugned decision was of an interlocutory nature and involved the application of well established and well understood principles. In short, there was no error of principle warranting the granting of leave to appeal: Dun and Bradstreet (Australia) Pty Ltd v Robbie (1999) 91 IR 150 at 151. 33 Senior counsel submitted that the appellant adopted the wrong construction of the section when asking whether each component of an "arrangement" itself led directly to the performance of work in a relevant industry: Custom Credit Corporation Ltd v Goldsmith [1976] AR (NSW) 98 at 131, Smith v Craig Mostyn & Co Pty Limited (1984) 2 NSWLR 393 at 399C, Bartolacci v Permanent Custodians Limited (1992) 44 IR 388 at 394 - 395, and Kwong v Stone Microsystems (Aust) Pty Ltd (1996) 82 IR 255 at 309 - 310. Both collectively, as constituting an "arrangement", and individually, the sale of business agreement and the service agreement led to the performance of work in an industry and were therefore a "contract" as contemplated by s 105. 34 On Mr Kite's submission, for the two agreements to constitute an "arrangement" as contemplated by s 105, there needed to be a sufficient connection between the various contracts which led to the performance of work: Kwong v Stone Microsystems. Such a connection was manifestly clear, having regard to clause 22 of the sale of business agreement. Further, when one has regard to the clauses of the service agreement under the heading "Background", the intentions of the parties to these transactions was abundantly clear. The two agreements were, it was submitted, on their face, inextricably linked. Whilst each was an enforceable contract in its own right, they each formed part of an arrangement whereby E World would be sold as an ongoing business. 35 Such a construction is supported by the nature of the payments for goodwill on an ongoing basis, calculated as they were by reference to business performance. The transactions relevant to this case were not a mere "straight out sale" as in the case of Production Spray Painting. On Mr Kite's submission, the appellant's challenge to the relevant line of authority was premature - leave to appeal should be refused. Consideration 36 Appeals to the Full Bench of this Commission are not of right but require the grant of leave: s 188(1). The principles surrounding the granting of leave are well settled: see De Simone Consulting Pty Ltd v Ison [2000] NSWIRComm 269 referring to Knowles v Anglican Church Property Trust (No.2) (1999) 95 IR 380. It is also well settled that leave will not lightly be granted. Further, interlocutory appeals in this Court and in courts of general jurisdiction, are to be discouraged: Re Social & Community Welfare Services (State) Award and Other Awards (1984) 9 IR 305; Parramatta City Council v Health and Building Surveyors Association (NSW) (1988) 26 IR 398 at 401 - 402; Re Laundry Employees (State) Award (No 2) (1993) 49 IR 91 at 103; Chamber of Manufactures of New South Wales v Australian Chamber of Manufactures, New South Wales Branch (1994) 56 IR 307 at 310 - 311; Caltex Petroleum Pty Limited v Harmer (1999) 92 IR 264; Bell v Macquarie Bank Limited (No 4) (1999) 93 IR 191; Metrocall Inc v Electronic Tracking Systems Pty Limited (No 2) (2000) 102 IR 309; Integral Energy v Allen (2001) 107 IR 456; Ridge Consolidated Pty Ltd v WorkCover Authority of New South Wales (Inspector Mauger) (2000) 100 IR 156, and more recently in National Australia Bank Ltd v Cassino [2002] NSWIRComm 241. As was stated by the Full Bench in Integral Energy v Allen : [13] In Caltex Petroleum Pty Limited v Harmer (1999) 92 IR 264 the Full Bench (Wright J, President, Walton J, Vice-President and Hungerford J) observed that "[t]he predecessors of this Court and Commission, in line with the approach of the ordinary courts, have generally deprecated and discouraged such interlocutory appeals." Leave will rarely be granted if the interlocutory decision is of a procedural nature: Metrocall Inc v Electronic Tracking Systems Pty Limited (No 2) (2000) 102 IR 309. Moreover, the raising of a jurisdictional issue does not, of itself, establish a basis for the grant of leave: Knowles v Anglican Church Property Trust (No 2) (1999) 95 IR 380 at 381.

Leave to appeal in these proceedings should be refused. Our reasons may be stated in relatively short form. 37 First, his Honour applied the appropriate test in determining whether the summons should be struck out: see Nagle (t/as W D and J L Nagle & Sons) v Tilburg (1993) 51 IR 8 and Virtue v NSW Department of Education (1999) 92 IR 428, cited with approval by the Full Bench in Western Sydney Area Health Service v Gibson (2001) 109 IR 359 and Euphoric Pty Limited v Ryledar Pty Limited and Anor (2002) 117 IR 1. 38 Second, his Honour's application of those principles was unexceptional. As senior counsel for the appellant conceded in submission, Marks J's judgment was in accordance with authoritative judgments of the Full Bench including Stone Microsystems (Aust) Pty Ltd v Kwong (1997) 42 NSWLR 160; (1997) 85 IR 237 and Bartolacci v Permanent Custodians Limited (No 2) (1992) 94 IR 122. These decisions were binding on his Honour, sitting as a trial judge. 39 Third, we are satisfied that the line of authority on which his Honour's judgment relied is correct. It is well settled that an "arrangement" within the definition of s 105 of the Act may be constituted by more than one "contract" in the more general sense: Becker v Harry M Miller Attractions Pty Ltd (No.2) [1972] AR (NSW) 298; Custom Credit v Goldsmith [1976] AR (NSW) 98; Howitt v Retec Limited (1992) 45 IR 245; Legal & General Assurance Society Limited v Stock (1993) 49 IR 464; Stone Microsystems (Aust) Pty Ltd v Kwong (1997) 42 NSWLR 160; (1997) 85 IR 237; Bell v Macquarie Bank Limited (No 4) (1999) 93 IR 191; Cash Converters Pty Limited v Yildiz (1999) 94 IR 474; Reich v Client Server Professionals of Australia Pty Ltd (Administrator Appointed) (2000) 49 NSWLR 551; 99 IR 69.

40 Further, these authorities make it clear that the power to afford relief under s 106(3) extends to the whole of the arrangement, once that arrangement is found to be relevantly unfair within the meaning of the statute. As was held by the Full Bench in Bell v Macquarie Bank Limited (No 4) at 206: [J]urisdiction of the Court to declare void, or vary, a contract or arrangement extends to a related arrangement which is collateral to the primary contract or arrangement under which work may be performed. 41 We consider that the challenged authorities are not open to attack in the manner sought by the appellant. We consider that his Honour was plainly correct in his finding that the relief sought was competent; or at least was not so clearly unavailable as to warrant being struck out on a preliminary basis. Further, we consider it appropriate to express our opinion that it would have been difficult, given the express terms found in clause 22 of the sale of business agreement and the provisions under the heading "Background" in the service agreement, for his Honour to have come to an alternative conclusion. This is particularly so where the proceedings are at an early stage and the cases brought by the respective parties have not, in either a substantive or an evidentiary sense, crystallised. 42 In these circumstances, to challenge the judgment on appeal in language which would suggest that the findings at first instance were, to use the words of the appellant's counsel, "difficult if not impossible" to comprehend, or that for his Honour to found an arrangement in the circumstances of these proceedings was an "absurdity" or that it was "tortuous in the extreme" was to engage in rhetoric rather than analysis. 43 One further matter, briefly touched upon in the submissions of the appellant, should be mentioned. The argument for the appellant sought to impose some temporal notion or limitation in the construction of the word "performs" as it appears in s 105 of the Act. That is, the appellant contended whilst there may have been pre-contractual discussions and those discussions may be represented in part by the recognition of employees (including the first respondent) in the sale of business agreement, the section only permits challenge to the contract which provided the terms under which the first respondent worked. It was submitted that by posing the test in the "past tense", that is, 'led to the performance of work', the Commission had "tripped itself up". 44 We consider that this argument, attempting as it does to place some form of temporal limitation on the agreements (written or otherwise) which are available for consideration as leading to the performance of work, is flawed and has been recognised as such for a considerable time. Indeed, in re Becker and Harry M Miller Attractions Pty Ltd (No.2) [1972] AR (NSW) 298, the Court in determining the first Full Bench consideration of s 88F under the Industrial Arbitration Act 1940, having recognised that "there is no logical reason why more than one contract cannot be part of the direct route to work" and that "the realities as distinct from mere forms are the target of the section", said (at 310): "We reject the further submission that because the section is expressed in the present tense it relates only to cases where a person is at the time the application is made actually performing work in an industry. This submission gives to the work "performs" the meaning of "is performing" and therefore it was submitted that the section has no application to contracts which have been concluded or completed. We agree with Mr McHugh's submission for the applicant that the words "whereby a person performs work in any industry" do not have a temporal connotation but are merely adjectival or descriptive. In other words these words simply describe the class of contracts or arrangements to which the section applies. Having started in the present tense, it was natural for he draftsman to continue in the same vein. Of course the door could have been bolted on argument by spelling out the words into "has performed, is performing or will perform". But this was unnecessary if our view is right that the intention was descriptive not restrictive. After all if "is performing" was meant, this could have been said. We are fortified in this view by the absurd and indeed disquieting results which would flow from a need for the person to be actually performing the work on the day (perhaps at the moment) when the notice of motion is handed over the counter at the Registry. To give the work "performs" the interpretation submitted by Mr Smyth would mean that not only completed contracts would be outside the section but also existing contracts which provide for work to be performed in the future. Having regard to the mischief to be rectified in this legislation, this interpretation would impose real fetters on its efficiency" We consider that these observations are as applicable to the current legislation as they were then, some 30 years ago. 45 It is well settled that in appeal proceedings the Full Bench of this Court is not engaged in a rehearing of the proceedings at first instance, but is focussed upon the correction of error: Re Solicitors (State) Award (1997) 72 IR 225, Stone Microsystems (Australia) Pty Ltd v Kwong (1997) 42 NSWLR 160, Abboud v State of New South Wales (1999) 92 IR 32 and Ace Business Brokers Pty Ltd v Phillips-Treby (2000) 100 IR 420. We are not satisfied that there has been any error demonstrated in his Honour's decision that would warrant the grant of leave to appeal in the public interest. We then turn to deal with the allegations of apprehended bias. 46 The appellant submitted that "it might reasonably be expected by a fair-minded person that Marks J might not have resolved [the appellant's] challenge to the Summons for Relief … with a fair and unprejudiced mind". The apprehension of bias is said to arise out of the exchanges between the appellant's counsel and his Honour at the conclusion of the hearing on the notice of motion as set out in his Honour's reasons (at [42] - [45]). The exchanges between counsel and his Honour at a directions hearing on 12 November 2001 were also relied on. 47 The submissions of senior counsel may be summarised in the following way:

(a) Marks J, without reasonable justification and without providing the appellant an opportunity to respond, found the appellant "guilty of attempting to deliberately frustrate the administration of justice by holding up the progress of IRC 4353 of 2000 by the bringing of the application, the subject of his Honour's decision and by any other means the [appellant] found at its disposal";

(b) His Honour thereby denied the appellant procedural fairness by breaching the rules identified by the Privy Council in Mahon v Air New Zealand [1984] 1 AC 804 at 820 - 821;

(c) There was a "real possibility" that by the time his Honour came to form his decision on the notice of motion his Honour had "adversely prejudged" the appellant's credit. 48 The possibility of adverse prejudgement was "significantly heightened" on the appellant's contention, in view of his Honour's peremptory rejection "without a scintilla of evidence", of an express denial of inappropriate motive or conduct by the appellant's solicitor at a direction hearing on 12 November 2001. 49 The respondents submit that the test for apprehended bias is whether "a fair-minded observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide": Johnson v Johnson (2000) 201 CLR 488 at 492. The reasonableness of such an apprehension must be considered in the context of ordinary judicial practice, the conventions of which are not frozen in time: Johnson v Johnson (at 493). On Mr Kite's submission, Marks J's comments were made only "in terms of case management", and were no more than an indication of a determination to move the matter forward as expeditiously as possible. On the respondents' submission, his Honour was under a statutory duty to act as quickly as possible (s 162(2)(a) of the Act), and, typically of modern litigation, is "confronted by the need for the efficient and expeditious administration of justice". His Honour did not find the appellant "guilty of attempting to deliberately frustrate the administration of justice". There was no denial of procedural fairness, and there was no basis to suggest that his Honour had aversely prejudged the appellant's credit. In any event, in the respondents' submission, credit was not a relevant issue on the notice of motion. 50 Finally, with respect to the discussion with the appellant's solicitor on 12 November 2001, Mr Kite contended his Honour had simply noted his impression of the appellant's attitude did not accord with the benign position advanced by the appellant's solicitor. The appellant's interpretation of his Honour's conduct on that day was "a gross over-reaction to a proper cautionary attitude by a judicial officer with a duty 'to act as quickly as is practicable' in terms of s 162(2)(a)". 51 The test of apprehended bias was stated recently by Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ in Johnson v Johnson (2000) 201 CLR 488 at 492 in this way: It has been established by a series of decisions of this Court that the test to be applied in Australia in determining whether a judge is disqualified by reason of the appearance of bias (which, in the present case, was said to take the form of prejudgment) is whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide. (eg Re Lusink; Ex parte Shaw (1980) 55 ALJR 12; 32 ALR 47; Livesey v New South Wales Bar Association (1983) 151 CLR 288; Vakauta v Kelly (1989) 167 CLR 568; Webb v The Queen (1994) 181 CLR 41. 52 The test of apprehended bias is "based upon the need for public confidence in the administration of justice". The Court also emphasised (at 493) that: … the observer is taken to be reasonable; and the person being observed is "a professional judge whose training, tradition and oath or affirmation require [the judge] to discard the irrelevant, the immaterial and the prejudicial". ( Vakauta v Kelly (1988) 13 NSWLR 502 at 527 per McHugh JA, adopted in (1989) 167 CLR 568 at 584-585 per Toohey J.)

Whilst the fictional observer, by reference to whom the test is formulated, is not to be assumed to have a detailed knowledge of the law, or of the character or ability of a particular judge ( Webb v The Queen (1994) 181 CLR 41 at 73 per Deane J), the reasonableness of any suggested apprehension of bias is to be considered in the context of ordinary judicial practice. The rules and conventions governing such practice are not frozen in time. They develop to take account of the exigencies of modern litigation. At the trial level, modern judges, responding to a need for more active case management, intervene in the conduct of cases to an extent that may surprise a person who came to court expecting a judge to remain, until the moment of pronouncement of judgment, as inscrutable as the Sphinx. 53 The circumstances in which a judge will be required to disqualify himself or herself were considered by Wright J, President, in WorkCover Authority of New South Wales (Inspector Dubois) v Concrete Constructions Group Limited [2000] NSWIRComm 65. His Honour set out (at [15]) a summary of the principles derived from the relevant cases and from an article by Professor Allars - "Procedural Fairness: Disqualification Required by the Bias Rule" (1999) 4 The Judicial Review 269. The principles emphasise that: The mere claim that there is an appearance of bias does not establish that a reasonable apprehension exists, as this is a matter which must be determined objectively. Reasonable apprehension of bias must usually be firmly established. The ground of disqualification is a reasonable apprehension that the judicial officer will not decide the case impartially or without prejudice, rather than that he will decide the case adversely or favourably to one party or the other. 54 It may be noted that the authorities on "reasonable apprehension" have often arisen in circumstances where a party has made an application that the judge disqualify himself or herself during the course of the trial, or at least before judgment is delivered. However, in certain circumstances, it may be appropriate to entertain an application for apprehended bias on a basis which only becomes known after the judgment has been delivered; see, for example: Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337. 55 We reject the appellant's contention that his Honour's remarks could create in the mind of the fictional "fair-minded lay observer" a reasonable apprehension that "an impartial and unprejudiced mind" had not been brought to the resolution of the proceedings. As the High Court emphasised in Johnson v Johnson, the reasonableness of judicial conduct is to be considered in the context of "the exigencies of modern litigation", including the "need for more active case management". In our view, Marks J's comments were an expression of his concerns at the statements of the appellant's counsel in terms of "case management" and to that extent only. They were not, in our view, a finding against the appellant's credit. 56 It should be emphasised that the observations of Mr Watts, the subject of comment by his Honour in his decision, were made before any final decision had been made by the trail judge and before any reasons for decision had been provided. The actual comment made by counsel at first instance was that, should his Honour's decision be adverse to the appellant, it would be "resisting progressing this case strenuously, as long and as hard as we can". Such an approach provides a basis for the Court to conclude that the advocate may be elevating his obligations to his client above those owed to the Court. We consider that it was open to his Honour to make the observations he did. 57 In any event, his Honour's observations as to the potential success of the motion were made at the conclusion of the hearing, after having fully heard both parties on the motion. There was nothing inappropriate in his Honour expressing some preliminary view of the matter and suggesting that the parties consider the most expeditious means by which the matter could be progressed. 58 The appellant has failed to make out a proper basis on which to grant leave to appeal. Leave to appeal is refused. 59 The Commission orders:

The appellants are to pay the costs of the respondents of both the interlocutory proceedings at first instance and the appeal in amounts as agreed or, in the absence of agreement, as assessed. _____________________

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