Sylvan Buildings Pty Ltd v AG&S Building Systems Pty Ltd and another

Sylvan Buildings Pty Ltd v AG&S Building Systems Pty Ltd and another - [2007] NSWIRComm 4 - NSWIRComm 2007 case summary — Zoe

[13]

1 The present proceedings concern an application by way of amended notice of motion filed by the first and second respondents on 15 November 2005. 2 On 3 March 2005 the applicant (Sylvan) commenced proceedings under s 106 of the Industrial Relations Act 1996 seeking relief and orders in relation to the distribution rights to a software concept granted to it sometime in 2002 by the first respondent (AG&S). 3 On 18 October 2005 I dismissed a notice of motion filed by the respondents on 5 May 2005 which had sought a dismissal of the proceedings on the basis that the summons for relief had been filed out of time: Sylvan Buildings Pty Ltd v AG&S Building Systems Pty Ltd and another [2005] NSWIRComm 368. 4 In the judgment of 18 October 2005 I briefly recounted the relevant factual background set out in the summons (at [3] to [6]). For convenience those facts are reproduced here. 5 The applicant has a business constructing and selling construction kits, carports, domestic garages, industrial sheds and concrete slabs. The respondents owned the licence to a system, referred to as Multibuild which was a materials ordering and pricing system and an associated computer software programme. Multibuild selected and ordered products such as sheds, garages, carports and other similar products. The software allowed the distributor or retailer of the product to remotely design the products to customer specifications which were shown in "real time" to the customer at the distributor's or retailer's premises. Once a customer selected a design, a company order was generated and forwarded by AG&S to the authorised supplier. The supplier then delivered the product to the customer. The products were all in kit form and could be assembled by the customer with or without the assistance of a tradesperson. 6 In 2001 the applicant acquired rights to the Multibuild concept and distribution rights from AG&S. Five written agreements were entered into between the applicant and AG&S. Each agreement granted distribution rights to the applicant in an "agreed territory". The term of each agreement was 99 years. The parties also entered into an arrangement whereby the applicant was required to source products from an authorised supplier, chosen and approved by AG&S. The nominated supplier was Strammit Pty Ltd. 7 During 2003, a competitor, Ranbuild Pty Ltd entered the market. The applicant advised AG&S that it would not breach its agreements with AG&S by entering into an agreement with Ranbuild. 8 Between October 2003 and February 2004 the three computers connected to the Multibuild system at the applicant's Shepparton site were randomly and without warning disconnected. Reconnection followed telephone discussions between the second respondent and the applicant. Then in early February to March 2004, the applicants became aware that AG&S had sold part of the Shepparton territory to another entity "A. C. Sheds". Subsequently, correspondence was received by the applicants from the solicitors acting for AG&S advising that the agreements with the applicant had been terminated. 9 The present notice of motion seeks an order that the proceedings be dismissed on the ground that, "the Commission does not have the power to make the orders sought in the summons". No further particulars of this ground were provided in the notice of motion. Instead the Court was informed that the basis for the order sought was that the "agreements between Sylvan and AG&S do not constitute agreements or arrangements whereby Sylvan performs work in an industry within the meaning of s 106(1)"; and, "... the relief sought by Sylvan does not have a close relationship with the performance of work in an industry". A second ground relied upon in the notice of motion was that the summons discloses no cause of action under the Act against the second respondent (Mr McFadden). The respondents concede that if the Court decides the first ground relied upon in the notice of motion in their favour, the second ground does not fall to be decided. 10 The orders sought in the amended notice of motion are set out in full below:

[16]

In the alternative, the Applicant pay the Second Respondent's costs of the proceedings. 11 I should emphasise at this point that the contracts alleged to be unfair are the five distribution agreements entered into between Sylvan and AG&S during either 2001 or 2002. One of the distribution agreements was tendered as an exhibit by the respondents on the basis that it "characterises" the agreements between the parties. Both parties confined their submissions to the agreement which was tendered into evidence. This agreement was referred to as the "Shepparton agreement" and was executed on 3 April 2001, although the part of the agreement headed "Schedules" bears the date 28 March 2002. According to the affidavit of the second respondent sworn on 22 February 2006, the agreements were all signed on 3 April 2002 and, the year "2001", where it appears on the execution pages of the agreements, is incorrect. Sylvan maintained in oral submissions that the Shepparton agreement was identical to the other agreements except for the actual territory specified and the specified territorial reach. I therefore intend to approach the matter on the basis that the contracts alleged to be unfair comprise the distribution agreements alone, and that the Shepparton agreement, which was the only distribution agreement tendered in the proceedings, is representative of the other agreements. 12 In submissions the respondents relied on a number of cases to make good their primary submission that the agreements do not constitute contracts whereby Sylvan performed work in an industry under s 106(1). Particular reliance was placed on the Court of Appeal decision of McDonalds Australia Holdings Ltd v Industrial Relations Commission of New South Wales (2005) 144 IR 219. In that decision the majority, Mason P and Handley JA held that a series of transactions comprising leases and licences were not collectively or separately contracts, whereby one of the opponents, Mr McLaughlin performed work in any industry. According to the facts set out in the judgment McDonalds authorised McLaughlin's Family Restaurants Pty Ltd (MFR) and Mr McLaughlin, pursuant to the licence and lease agreements to operate from McDonalds Restaurants in New South Wales. Spigelman CJ, found that the agreements fell within s 106(1) because he was bound to follow the authority of Stevenson v Barham (1976-1977) 136 CLR 190. His Honour said (at [51]): ...the literalist test adopted in Stevenson v Barham , which this Court must apply, prevents the Court from concluding that the role performed by a proprietor of a business as such is not encompassed by the statutory formulation of 'performance of work in an industry. 13 Handley JA, with whom Mason P agreed found that the agreements fell outside the meaning of s 106(1). In so finding his Honour distinguished the factual circumstances from those found in Majik Markets Pty Ltd v Brake and Service Centre Drummoyne Pty Ltd and others (1991) 28 NSWLR 443, and Caltex Oil (Australia) Pty Ltd v Feenan [1981] 1 NSWLR 169. In both those cases the requisite jurisdiction under s 106(1) was found to exist. The major distinguishing feature for Handley JA appears to be the size of the workforce of the working proprietor's company. By contrast in relation to the factual circumstances in Caltex v Feenan and Majik Markets his Honour said:

[26]

[58] The fact that the relationship between the applicants and the respondents is akin to a franchise arrangement is not determinative of whether the relevant jurisdictional fact exists but it does suggest that the nature of the relationship lies closer to the class of ongoing arrangements that have been held to attract the provisions of s 106 and its predecessors than arms length, one-off commercial transactions which have not. 22 In relation to the second proposition Sylvan contends that the impugned agreements imposed an ongoing obligation for the performance of work and gave AG&S considerable control over many significant aspects of that work. The respondents had a great interest in how the work was done and on what terms: see Euphoric Pty Limited v Ryledar Pty Limited and Anor (2002) 117 IR 1 at [40]. 23 According to Sylvan the respondents' interest in the performance of work under the agreements can be demonstrated by reference to a number of provisions in the agreements. AG&S for example was the owner of the Multibuild concept and merely granted the right to use to Sylvan. Moreover the agreements contained provisions for the "division of profits/remission of periodic licence fees". Further Sylvan, as the distributor was working for the benefit of AG&S as owner by increasing the goodwill of the brand and remitting licence fees. Clause 3(a) of the agreements, by way of example, provides that Sylvan must, "actively and diligently promote the sale of the Products". Other provisions, says Sylvan, strongly contemplate employment. Clause 3(f) contemplates salaries and wages being paid and workcover expenses. Under clause 3(r) Sylvan's covenant to be of good character contemplates quality staff. Training is contemplated and was provided under annexure 1(c) of the schedules to the agreements. According to the affidavit of Bryan Norris sworn on 3 February 2006 Sylvan's staff were dedicated solely to the sale of AG&S products and associated tasks such as customer liaison, site management and delivery. Continuous improvement in staff performance was also contemplated by a weekly newsletter issue by AG&S and annual conferences organised by AG&S. 24 Sylvan contends that the agreements illustrate that the relationship between the parties was not at arms length and the provisions of the agreements demonstrated that AG&S was in a position of practical quasi control. Sylvan relies on the following provisions contained in the agreements which it says point to the level of control of the business relationship by AG&S:

[46]

What, I consider, flows from the majority's judgment in Mitchforce (No 2) in respect of contracts such as a lease is that unless the terms of the lease, expressly or by implication, require the performance of work in an industry or it could be said that a purpose of the lease was the performance of work, the bare terms of the lease will not establish the necessary jurisdictional fact because it could not be said the lease leads directly to the performance of work. Even if it could be said the terms of the lease "contemplate" the performance of work it will not be sufficient to attract jurisdiction: see Mitchforce v IRC at [49]. 35 The above analysis of Fish and Mitchforce (No 2) reveals two things. First, the finding in Mitchforce (No 2) that in order to attract jurisdiction under s 106 a contract "must directly (under or pursuant to its terms) provide for the performance of work in any industry", was not "swept aside" (to use the respondent's terminology) by the decision in Fish. Certainly the majority in Fish cautioned against putting a gloss on the section when construing its meaning. According to the majority in Fish however the original reference by Mason and Jacobs JJ in Stevenson v Barham to a transaction which "leads directly to a person working in any industry" was intended to, "mark a limit upon the Commission's jurisdiction", bearing in mind the "intractable" language of s 88F of the Industrial Arbitration Act 1940 (a predecessor section to s 106), and, the perceived difficulties such language may pose in marking the ambit of the Commission's jurisdiction. Secondly, it is necessary to recognise the context in which the majority observations and findings were made in Fish. In that judgment two contracts were under consideration, the share purchase agreement and the employment contract entered into by Mr Fish. The original proceedings brought under s 106 in the Commission in Court Session (as it then was) sought orders in relation only to the share purchase agreement, not in relation to the employment contract. The latter contract was a contract whereby work was performed. The former, did not constitute, either as a whole or as to its particular provisions, a contract whereby work was performed: see Fish at [43]. 36 Before leaving this issue I should add that the High Court in Fish was not called upon to consider s 106(2A) of the Act which was introduced on 9 December 2005 by the Industrial Relations Amendment Act 2005. Section 106(2A) provides:

[53]

43 The recitals in the Shepparton agreement described AG&S as the owner of the computer software programme (Multibuild) as well as plans, engineering drawings, designs, a materials ordering system and pricing concept (referred to collectively as the "the concept"), for the design, costs and listing of components for sheds garages barns, carports, and "like products" (the products). Under the recitals Sylvan, was nominated as the sole distributor to use the concept within a nominated territory and sell the products. 44 Under clause 1 and schedule 4 of the agreement Sylvan paid a fee of $1,100 inclusive of GST for distribution rights and access to the concept. In consideration for this fee AG&S granted a non-exclusive right to establish a sales site with the nominated territory for the promotion of the products. AG&S also agreed to exclusively supply Sylvan within the nominated territory except for reserving its right to establish other distributorships within the territory if Sylvan failed to achieve a turnover of $10,000 per month exclusive of GST (per Schedule 5 of the agreement and Annexure 1(b)). In the event that another distributorship was established by AG&S within the nominated territory (and the agreement was not terminated) then the expected turnover of $10,000 per month would be reduced to nil. 45 Clause 2 provided for technical advice and "other services" to be provided by AG&S to Sylvan in relation to the designs and plans used in the concept and to provide assistance in the use of the concept to generate sales. The provision of this advice and services was contingent upon Sylvan having received a minimum of two days training with AG&S in the use of the concept. Training fees were set out in annexure 1(c). Fees for training on the use of the computer programme were set at $250 per day for up to four persons. All flight and accommodation costs, if any, associated with the training were to be borne by Sylvan. AG&S house videos cost $100 for the first copy and thereafter $10 per copy including postage, or $7 per unit if collected directly from the AG&S office. Under clause 2(a)(ii) Sylvan acknowledged that:

[56]

The Distributor covenants and agrees with AG&S that the Distributor will assume sole and entire responsibility for the generality of the day to day conduct of the Distributorship and all expenses relating thereto in particular but without limiting the generality, product advertising, office and commercial premises rental and all operating expenses including salaries/wages/commissions to employees/agents, superannuation, Workcover or similar legally required Worker's Compensation Insurance, National or Local taxation, all insurance and stationary and other costs however incurred and indemnify and save harmless AG&S from any and all claims, liabilities, losses, expenses, responsibility, and damages by reason of any claim, proceedings, action liability or injury arising out of the Distributor's management of the Distributorship or as a result of the Distributor's relations with his customers and other third parties or because of any breach of this Agreement by the Distributor. 49 Clause 3(i) dealt with the standard of conduct by Sylvan in relation to the concept. Under the clause Sylvan agreed to "observe and maintain the standards in the use of the concept as set out in Annexure 3 and elsewhere in this Agreement". Annexure 3 set out the recommended methods, standards and procedures for conducting the distributorship. Sylvan agreed to follow the procedures set out in the annexure. The procedures set out dealt largely with the cost of products, various associated charges, methods of placing orders and payments and terms of payment. Under annexure 3(k) it was agreed that Sylvan "need not guarantee any particular hours of trading nor can AG&S insist on any hours of trading". Under clause 3(i)(ii) Sylvan acknowledged that AG&S had the right to modify some standards and procedures. Under clause 3(i)(iii) Sylvan agreed that if it failed to manage the distributorship in accordance with the standards and procedures set out in annexure 3 and elsewhere in the agreement this failure would be deemed in breach of the agreement and entitle AG&S to terminate the agreement. 50 Under clause 3(l) Sylvan, with the written approval of AG&S could establish sub-distributorships within its territory to facilitate it to sell the products. AG&S had to approve the location and any sub-distributorships established by Sylvan must use software authorised by AG&S and pay the commission designated in annexure 1(e) of the agreement and reasonable costs. 51 Under clause 3(a) Sylvan covenanted to "actively and diligently promote the sale of the products". 52 Under clause 3(p) headed "Independent Proprietor" Sylvan acknowledged that it may conduct the distributorship and its business generally as an independent proprietor. Sylvan also agreed under the clause that the parties "...are completely separate entities and are not partners, joint venturers or agents of the other in any sense and neither party has the power to obligate or bind the other party". 53 Clause 3(r) required Sylvan to "be of good character and not to indulge in unethical conduct and/or acts or moral turpitude during the term of the Agreement". 54 Under clause 3(w) headed "Sales Location", Sylvan acknowledged that although it could only have one sales location it could nominate other delivery sites (other than at the sales location) to assist in the servicing of any sub-distributorships established under clause 3(l). Under clause (x) Sylvan acknowledged that it could change the sales location of the distributorship but only with the written approval of AG&S. 55 Clause 3(hh) headed "Fiduciary Relationship" contained an acknowledgement by Sylvan that, "whilst he is an entity independent to AG&S that he is in a fiduciary relationship with AG&S". 56 Clause 5 provided for an arrangement under which Sylvan acknowledged that the benefits and obligations of the agreement were "freely assigned" by AG&S upon the giving of notice. Sylvan could not sell, assign, transfer or encumber the agreement, of any right or interest without the proper consent of AG&S although under the clause such consent "shall not be unreasonably withheld". 57 Clause 7 dealt with the termination of the agreement. In the event of a breach by Sylvan of any of the covenants and contained in clause 3, AG&S "in its absolute discretion" could terminate the agreement: clause 7(b). Under clause 7(h) the agreement could be terminated by Sylvan if Sylvan did not "commence the distributorship" on or within 14 days of the commencement date of the agreement. 58 Under clause 10(c) Sylvan acknowledged that AG&S did not guarantee to provide a rate of return on investment or profit or return on investment and profit or return on investment to Sylvan depended on its own efforts. 59 In my opinion it is clear from the recitals and clause 1 that under the agreements AG&S granted the right to Sylvan to use the concept and sell the products. Under the agreements Sylvan paid AG&S a fee for distributorship rights and access to the concept. A superficial reading of these provisions does not suggest that the agreements constituted contracts which led directly to the performance of work. 60 In Production Spray Painting & Panel Beating Pty Ltd v Newnham (1991) 27 NSWLR 644, Priestley and Handley JJA said at 657C-D:

[57]

It is not sufficient to establish jurisdiction that a contract "involves the provision of goods and services, with a consequent performance of work in an industry": Ex parte VG Haulage Services Pty Ltd (at 88) (our emphasis). The impugned contract, etc, therefore must directly, that is under or pursuant to its terms, provide for the performance of work in an industry. Accordingly the contrast drawn by this Court in Ex parte V G Haulage Services Pty Ltd and approved by the High Court in Stevenson v Barham is between a contract which leads directly to the performance of work in an industry on the one hand, and on the other a contract which does so only indirectly or in a remote or consequential manner. 61 Similarly, the agreements under present consideration which granted Sylvan the right to obtain direct access to and use the concept, and sell the products of AG&S, must directly under or pursuant to their terms, provide for the performance of work in an industry, in order to establish jurisdiction. 62 The affidavit of Mr Norris suggests that a number of the provisions in the agreements imposed requirements in relation to the operation of the sales locations including many of the provisions in clause 2, and clause 3. In submissions Sylvan contended that these provisions imposed an ongoing obligation for the performance of work and gave AG&S considerable control over significant aspects of the performance of that work. Moreover that the contemplation of employment is strongly in evidence in a number of these provisions. 63 Clause 2(a)(ii) contains acknowledgements by Sylvan that AG&S will not advise it on how to operate the distributorship; that AG&S is not responsible for or obliged to assist Sylvan with the management of the distributorship, and, that Sylvan is entitled to operate the distributorship in any manner without interference or restriction from AG&S subject only to "the express provisions of the agreement". 64 Contrary to Sylvan's contentions, the clause on its face imposes no express requirements on Sylvan in relation to the operation of the business, nor does it suggest any ongoing obligations which must be met, nor any controls on the part of AG&S in relation to the performance of the work or any significant aspects of that work. What the clause indicates is an agreement between the parties that Sylvan should operate the distributorship freely and independently of any restrictions, obligations or controls that may otherwise be imposed by AG&S, subject only to any express provisions contained elsewhere in the agreement. 65 Other provisions said by Sylvan to be indicative of the imposition of requirements, obligations and control include clause 3(c) which provided that Sylvan must purchase all goods and materials for the products from AG&S. Clause 3(i) was another such provision. This clause provided that Sylvan must observe and maintain the standards set out in annexure 3. Annexure 3 set out the recommended methods, standards and procedures for conducting the distributorship which Sylvan agreed to follow. Other provisions including clauses 3(b) (d) and (h) dealt with commissions payable, and the processing of orders. According to these provisions, orders would not be processed until commissions were paid into the bank account of AG&S. 66 In my opinion while these provisions imposed certain obligations on Sylvan they cannot be said to lead directly to the performance of work by either party. The obligation to purchase goods and materials for the products, for example, is directed to effecting one of the primary aims of the agreements, namely the purchase of the products for sale by Sylvan from AG&S. The requirement to observe certain methods, standards and procedures is concerned with instructions as to the various procedures required to be followed by Sylvan in relation to the use of the concept and sale of the products. It is not concerned with the performance of work. The processing of orders and the payment of commissions by Sylvan to AG&S does result in work being performed but it is not sufficient for a conclusion that the agreement led directly to the performance of work. The requirements in relation to the payment of commissions and the processing of orders are directed towards the continuing right to use the concept under the agreements and not to the performance of work. 67 Similar provisions were analysed in Euphoric v Ryledar where it was held that the impugned contract, a written contract for the sale of petroleum products, was not one under which work was performed. At [43] [45] [46] Schmidt J, with whom Wright J, President and Walton J, Vice-President agreed said:

[60]

[46] Similar conclusions flow in relation to clause 7.2, which was concerned with the hazards associated with petroleum products and the steps which the respondents were obliged to take in relation to the consequences of such hazards. These were undoubtedly important obligations under the contract, having in mind the statutory obligations resting upon both the appellant and the respondents in relation to safety risks and environmental matters. This was a contract with a life of 2 years, during which such products were to be supplied by the appellant. That such provision might be made in such an ongoing sale contract is not surprising, but it does not evidence the necessary jurisdictional fact - the performance of any work under the contract. 68 In oral submissions, counsel for Sylvan, Mr Catlin contended that the agreement "blows hot and cold" because it uses expressions which on their face seek to distance the relationship between AG&S and Sylvan but in reality, when the agreement is read as a whole, it exerts considerable control. Clause 1(a)(ii) for example granted Sylvan an exclusive right to establish a sales site but clause 1(b) provided that that exclusivity was lost if Sylvan failed to achieve a turnover of $10,000 per month. According to Mr Catlin the value of the right is in the exclusivity. Mr Catlin also relied on clause 3(hh) (the "fiduciary clause") as indicative of the "hot and cold" nature of the agreement, that is, in the face of a number of provisions which seek to emphasise the independence of the relationship between the parties, clause 3(hh) is indicative of a close relationship, one of trust and honesty. 69 In my view a significant number of clauses in the agreement clearly exhibit a business relationship that is intended to be independent and at "arms length". To some of these provisions I have already referred. In relation to the provision relating to turnover there was no evidence available which would enable the Court to infer that a loss of exclusivity may lead to a diminution of the right. What the agreement provided was that if Sylvan failed to achieve its turnover then AG&S reserved its right to establish further distributorships within the nominated territory and that in the event this occurred the agreement remained valid and the expected turnover would be reduced to nil: clause 1(c). In other words if the right was lost because of the failure to achieve the expected turnover Sylvan still continued to operate in the nominated territory but as a non-exclusive distributorship without the necessity to generate any turnover. 70 Other provisions in the agreement which in my view emphasise the independence of the relationships between the parties include the training provisions. Under clause 2(i) Sylvan was required to receive a minimum of two days training in the use of the concept as a pre-condition to receiving technical assistance from AG&S. The training costs however had to be met by Sylvan as per the rates set out in annexure 1(c). Under clause 3(l) Sylvan was entitled to establish its own sub-distributorships within a nominated territory, with the written approval of AG&S. Under clause 3(p) Sylvan agreed that the parties are "completely separate entities...". Clause 5 entitled Sylvan to sell, assign or transfer the business generated by the distributorship, with the consent of AG&S. All benefits and obligations under the agreement were "freely assignable" to any third party. This provision in its broad terms suggests that any goodwill generated by Sylvan as a result of the operation of the distributorship was assignable, and again, emphasised the independence of the relationship. Under clause 10(c) all profits or return on investment made by Sylvan were said to "depend upon his own effort". Under clause 2(b) Sylvan acknowledged that all stationery and other documents used by it in, "the running of the concept" must expressly note that it is entirely independent from AG&S. 71 Clause 3(f) (the indemnity clause) according to Mr Catlin strongly contemplated employment because of its references to salaries and wages being paid and workcover expenses. According to counsel appearing for the respondents, Mr Sirtes, the provision is indicative of the independence of the relationship between the parties since under it Sylvan agreed to indemnify AG&S against any claims or losses etc arising out of its management of the distributorship or as a result of customer or third party relations. Clause 3(f) provided that Sylvan will assume "sole and entire responsibility for the generality of the day to day conduct of the distributorship and all expenses relating thereto...", including the payment of salaries, wages and insurance. I agree with the respondents' contention that the provision emphasised the independence of the relationship between the parties. On the clear terms of the provision, wages and salaries and other work related expenses were to be borne solely by Sylvan in relation to its own staff and the operation of its business. The reference to such matters as the payment of wages and salaries are matters "in house" and solely within the province of Sylvan's operations. 72 As to the fiduciary clause I do not agree that it demonstrates a close relationship between the parties which in turn is indicative of an employment relationship between the parties. In Gough v Gilmour (No 11) in the passages referred to earlier in this judgment Boland J characterised an "unusually close (business) relationship" between the parties to an agreement as one commonly associated with franchise agreements. Sylvan relies on this judgment to support its contention that the agreement with AG&S was akin to a franchise because it demonstrated in its terms, in particular the fiduciary clause, a close relationship between the parties. Sylvan also relied on the observations of Handley JA in Majik Markets at 464-465). These observations have also been earlier referred to. The impugned agreements in that decision were franchises for the conduct of a retail business on the franchisor's land, selling motor fuel purchased by the franchisees from the franchisor. A decisive factor in the finding in Majik Markets that the application under s 106 was within jurisdiction because the agreements led to the performance of work was that the form of agreement required the franchisees or their employees, "...to work in the business both in consequence of the agreements and in fulfilment of them. The form of agreement required the franchisee to perform work in the retail industry either personally or through employees and therefore it leads directly to the performance of work in that industry": (at 464-465). In Production Spray Painting after analysing the majority judgment in Stevenson v Barham, Priestly and Handley JJA said (at 654E):

[62]

The majority conclusion that a contract which leads directly to a person working in an industry is within the section must be understood with reference to the facts of that case. The contract was one under which the share-farmer would do or provide work for the benefit of the farm owner. In our opinion the majority judgments in Stevenson v Barham , properly understood, do not directly support any wider proposition. 73 It is the critical factor in these decisions that in order for an agreement to fall within s 106 it must lead directly to a party performing work or employing others to perform the work. The impugned agreements in these proceedings however, for reasons outlined above cannot be so characterised. They did not either as a whole or in their particular terms require or lead directly to the performance of work. Rather they are agreements which granted the right to use the Multibuild concept and to sell the products. Naturally enough the obligations imposed under the various provisions of the agreements resulted indirectly in work being performed. Those obligations were directed towards ensuring that the Multibuild concept was used and the products sold in accordance with the terms of the agreements. They were not directed towards work being performed: see Euphoric v Ryledar at [42]. 74 Returning to Sylvan's submission that the close relationship between the parties, demonstrated in particular by the presence of the fiduciary clause in the agreements, I note that Boland J in Gough v Gilmour (No 11) found that although a close relationship (his Honour said "unusually close") may be indicative of a franchise arrangement the fact that a relationship between parties to a contract may be akin to a franchise is not determinative of whether the relevant jurisdictional fact exists, that is, whether the relationship is one whereby work is performed. 75 Having come to the conclusion that the distribution agreements between Sylvan and AG&S as a whole or as to any of the particular provisions did not lead directly to the performance of work it becomes unnecessary for me to decide whether the relief sought in the summons was closely connected to the performance of work in an industry: see Spigelman CJ in McDonalds at [78]. 76 Orders 1 and 3 in the amended notice of motion are therefore granted. In my earlier judgment in which the respondents' notice of motion sought that the proceedings be dismissed on the ground that the summons had been filed out of time, I dismissed the motion and reserved costs (at [28]). I therefore intend to make a further order in these proceedings that the respondents pay the applicant's (Sylvan's) costs of that notice of motion. Orders

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Judgment (65 paragraphs)

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Cases Cited (13)

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