Transport Workers' Union of New South Wales v Toll Transport Pty Ltd

Judgment 1On 30 March 2012 the Court delivered judgment in Transport Workers Union of New South Wales v Toll Transport (No 2) [2012] NSWIRComm 25 ("TWU v Toll (No 2"). In that judgment the Court held that the contracts of the owner/drivers were unfair, harsh and unconscionable, that the owner/drivers should be restored to the financial position obtaining prior to the payment of a premium/goodwill for the work with a truck with adjustments for the change in money values, and, that the applicant draft orders reflecting the decision of the Court. 2In due course the parties supplied proposed orders in draft form and on 1 June 2012 the parties addressed oral submissions to the competing orders sought. Further written submissions were received from the respondents in late June. 3There was no issue that orders were required declaring unfair the contracts between the owner/drivers and the respondents. The contracts for owner/drivers who had left their engagement with the respondents were to be declared void ab initio save as to the payment of any monies pursuant to the contracts but an issue arose as to what provision should be made for owner/drivers still engaged by the respondents. The following matters were also in contest: the amount of the money order that should be made that was just and reasonable in all the circumstances that restored the drivers to the position they were in immediately prior to purchasing the truck with work and which recognised the changing value of money over the period of the contract; whether costs should be granted to the applicants in relation to the hearing before Staff J; and, whether interest should be made payable from the date of filing the application (17 May 2005) or from the date of judgment (30 March 2012). 4A major issue was the amount of the money order to be made and how it might be calculated having regard to the fact that the Court had determined that, in recognition of arguments put forward by the respondents, the system of selling a truck in work with a substantial component of goodwill should not be continued and that the most appropriate approach in the circumstances of this case was to attempt to restore the owner/drivers to the position they had prior to investing in a truck with work and the payment of "goodwill." Figures were available to the Court that allowed the identification of the amounts actually paid in goodwill by the owner/drivers (except for Mr Whitten) but the issue arose as how to properly reflect the change in money value from the time when those sums for "goodwill" were paid until the filing of the proceedings and at what stage it would be appropriate for the payment of interest to commence on the money amounts so ordered. 5In the earlier judgment of Staff J his Honour had determined that the money amounts ordered should reflect the position at the time that the arrangements were entered for the performance of work with a truck and the payment of goodwill and that amount had to also reflect the change in money value since that time. Although those orders were set aside for other reasons, the Court as presently constituted formed the view that there was merit in that method and that it appeared to reflect the general approach of the Full Bench in Myer Stores Ltd t/as Grace Bros v Stoward and others (1994) 55 IR 21. The court, having arrived at that position, requested the assistance of the parties as to the mechanism that might be adopted to properly reflect the change in money value in the amount finally awarded to each of the owner/drivers and suggested two possibilities, namely, the application of the CPI from the date of purchase/and or a payment of interest in accordance with the provisions of the Supreme Court Act 1970 or the Uniform Civil Procedure Rules 2005. 6In further oral argument senior counsel for the applicant contended that the appropriate approach was to apply the interest rates available under the Supreme Court Act or the Uniform Civil Procedure Rules and that the application of such rates should apply from the date of filing the application calculated up to the date of judgment. That argument was put forward on a largely theoretical basis as encompassing an appropriate approach but was not accompanied by any calculations that demonstrated the actual money amounts that would thereby be payable to each of the owner/drivers. 7The respondents contended that this was an appropriate case for interest to be paid from the date of judgment only: this approach appeared to leave unaltered the money amounts actually paid at the time of purchase of the run with work and the payment of goodwill, being sums paid during the late 1980s to the mid-1990s and unadjusted for changes in money values since that time. The respondents also argued that a distinction should be made in relation to those owner/drivers still engaged by the respondents. It was submitted that the amounts identified by the Court in its March judgment should not become payable to these drivers until they terminated their engagement with the respondents. It was submitted that the previous scheme recognised that the ability to sell a truck with work, including the payment of "goodwill" crystallised only at the point of sale. The other owner/drivers had terminated their engagement and so their rights had crystallised at that time. 8A central plank in the argument for the respondents was the assertion that in [119] of the TWU v Toll (No 2) judgment it was stated that the contracts of the remaining owner/drivers should be varied to specify a right to sell a truck with work subject only to Toll's satisfaction that the new driver was capable of performing the work. Although, during the course of argument, the Court attempted to disabuse senior counsel for the respondents that this approach was not intended to have the effect of continuing the previous system that operated under Brambles' ownership and it was to be subject to an overall provision that would end the sale of trucks with work at a premium, the submission continued to be pressed in a sense that suggested that somehow the Court was bound by what was said in that paragraph of the judgment and had no ability to modify that approach in the making of final orders. That is an untenable proposition. 9The Court's judgment on liability was directed principally to whether or not there was unfairness in the contract. Once a determination was made that there was unfairness and that it was appropriate that the owner/drivers be compensated in some way, the Court identified several areas where the assistance of the parties was required having regard to the fact that, in the arguments, almost no attention had been paid to the form of consequential orders. It is to be observed that [119] of the liability judgment is immediately preceded by a sub-heading "Proposed Orders." The tenor of what followed under that sub-heading was the identification of issues that needed to be addressed having regard to the Court's decision that the drivers should be restored to the position they were in prior to purchasing their truck and paying the premium and that the premium required adjustment so as to reflect the changing value of money over the period that the contracts continued. 10In the course of that discussion the Court observed that it was appropriate for those owner/drivers who had already terminated their contracts to have those contracts voided ab initio with the usual saving clauses and that for those who continued their engagement with the respondents, their contracts should be varied to recognise the right to sell a truck in work at a premium. That proposition regarding those still engaged by the respondents did not stand alone. It was to be subject to an overall provision that when the orders of the Court were finalised "Toll should no longer have a yard where an owner/driver has not been compensated in relation to 'goodwill', all claims in that regard having been determined." That is the last sentence in [119]. 11It was never the intention of the Court that continuing owner/drivers would not immediately be paid compensation or that the payment of compensation would somehow be deferred and that Toll could avoid the results of its unfair conduct by permitting those owner/drivers to sell their vehicle at a premium or if not approved, then to pay back only the sum of the original premium paid. The clear intention of the Court in the liability judgment was that in relation to those owner/drivers still engaged by the respondents, while they might be recognised to have a right to sell their trucks in work at a premium that right would be extinguished by the immediate payment of the money amounts to be determined by the Court. The respondents, therefore, obtain no support for their submissions from the Court's discussion under the sub-heading "Proposed Orders" and in particular from [119]. 12It is appropriate to deal next with the respondents' submissions regarding the treatment of owner/drivers still engaged by the respondents. While it is undoubtedly true that the scheme operated with the support and consent of Brambles allowing owner/drivers to sell their truck with work with the payment of so-called "goodwill", that very scheme had been frustrated by the respondents after their purchase of the business from Brambles. It was the practice of the respondents that, in their other operations, they would not recognise the payment of "goodwill" or enter into any arrangements where "goodwill" might be paid to the owner/drivers on the sale of their truck. The respondents, however, did not make this known to the owner/drivers when they made representations to the owner/drivers in an attempt to persuade them to continue their engagement with the respondents following the sale by Brambles. The Brambles' "system" ceased in 1996. 13In TWU v Toll (No 2) the Court pointed out that if the respondents wished to eliminate the "goodwill" system then it had to adopt an approach similar to that adopted in the Myer case and in effect, buy-out the owner/drivers or otherwise compensate them for the loss of the opportunity to now sell their truck with work, plus goodwill. It is in those circumstances that the Court cannot accept the respondents' argument in relation to the continuing owner/drivers that the right to any payment crystallises only when the trucks are sold. The fair entitlement to be paid compensation for being denied the ability to sell the truck with work and goodwill in fact arose at the point that the respondents bought the business from Brambles and from then on prohibited such sales with goodwill. The approach of the respondents, on one level, fails to recognise that the purpose of these orders is to compensate the owner/drivers for the unfairness of the arrangements imposed upon them by the respondents: therefore, the owner/drivers continuing their engagement with the respondents should be paid now and should not have those sums withheld until they actually terminate their engagement with the respondents. The respondents appeared to recognise that a consequence of their arguments would bring about a situation where the currently engaged owner/drivers should be entitled to now sell their vehicles with work plus goodwill, thus entrenching that system although that is a system they no longer wished to have apply to this work. 14In relation to the money order that should be made that is just in all the circumstances of this case, the Court commences with the amounts actually paid for goodwill by the owner/drivers. Those amounts are set out in par [27] of the TWU v Toll (No 2) judgment. The earliest that goodwill was paid was 1987 and the latest payments were made in 1995. The respondents acquired the business from Brambles in 1996. As already indicated the proceedings were filed in May 2005. 15Calculations were supplied to the Court indicating the effect of applying CPI increases from the date of purchase by each of the owner/drivers and the effect of applying interest rates applicable under the provisions of the Uniform Civil Procedure Rules. There is no dispute between the parties as to the accuracy of these mathematical calculations. The application of CPI to the original payment for "goodwill" made by each owner/driver resulted in that original amount being increased by between nearly 30 per cent for the more recently engaged owner/drivers and ranging up to nearly 80 per cent for the longest employed owner/driver. In assessing the appropriateness of giving full effect to CPI increases, the Court has taken into account the length of engagement for each owner/driver and has discerned three classes by reference to their longevity of engagement: the first class comprised of those drivers who had been employed for ten years and there were three in this class; the second class comprised of drivers engaged for between thirteen and fifteen years and there were three owner/drivers in this class; and the third class encompassed drivers engaged for between sixteen and eighteen years and again, there were three owner/drivers in this class. 16In this exercise the Court is not engaged in a precise or mathematical calculation but rather is engaged in the task of assessing an appropriate figure to be applied to the original sum paid for "goodwill" so that some regard is had to the change in the value of money. If the drivers had been able to sell their trucks in 1996 or had to be bought out by the respondents a similar calculation would then have been applied. In making this assessment the Court has to keep firmly in mind that its obligation is to make a money order that is just in all the circumstances of the case. That consideration leads to a concern that the simple mathematical application of CPI increases over the relevant periods may result in a figure that is too high and therefore unjustified. There is no obvious alternative approach and so the Court has made its own assessment (against this background) of what adjustments should be made to the original payment of goodwill that pays some regard to the change in money value. 17In the assessment of the Court this element of the calculation of an appropriate money order would be met by a more modest approach that applies a 10 per cent increase to the original amount paid for "goodwill" by class one owner/drivers, with 15 per cent applied to class two owner/drivers and 20 per cent applied to the third class. The amounts so calculated result in the following sums being payable: (i) Class One (owner/drivers employed for ten years): Mr Whitten: $47,920 Mr Felice: $73,700 Mr Ferreira:$60,500 (ii)Class Two (drivers engaged between 13 and 15 years): Mr D'angelo:$49,500 Mr Kouverianos:$64,975 Mr Kennett: $48,300 (iii)Class Three (drivers engaged between 16 and 18 years): Mr Lamacchia:$21,600 Mr Novak:$30,000 Mr Marcinasko:$48,000 In arriving at these figures the Court has also taken into account the effect of its determination in relation to the question of interest. That matter is dealt with at [19]. 18In TWU v Toll (No 2) the Court accepted that the position of Mr Whitten was somewhat different. The applicant's submissions operated on the calculations made by Staff J in relation to Mr Whitten which had him credited with a goodwill value of $43,562. The respondents did not put any argument against that approach and in all the circumstances the Court is prepared to frame its money order in favour of Mr Whitten on that basis. 19The Court's attention was then drawn to a number of well known authorities regarding the payment of interest in making money orders in s 106 proceedings. In the general law the purpose of awarding interest is to allow a successful party to be properly compensated for the identified loss (eg. see Falkner v Bourke (1990) 19 NSWLR 574) The relevant authorities in this Court were conveniently discussed by the Full Bench in Aboud v State of New South Wales (Department of School Education) (No 2) (2000) 99 IR 299. The discussion in Aboud draws a distinction between cases with a commercial flavour or involving representations where the money order is designed to restore the applicant to their position prior to entering the contract or arrangement. This is such a case. The evidence shows that the owner/drivers were engaged in a small business venture and under Brambles' ownership they were allowed to potentially increase their investment by selling their truck with work, plus goodwill. They were encouraged to continue their engagement with Toll upon its purchase of the Brambles business but, unfairly, the respondents failed to inform the owner/drivers that they would no longer be able enjoy the benefit of the Brambles' approach and would be prohibited from selling their truck with work together with a goodwill premium. In that situation it is just in all the circumstances of the case that the adjusted investment figure paid for goodwill should be subject to interest from the date of filing of the application in 2005 until the date of judgment in 2012. 20The next significant issue was the respondents' submission that the costs order should not include the hearing before Staff J. In summary, the respondents' position was that they had largely succeeded on the appeal and his Honour's orders had been vacated. The Full Bench remitter, however, required the new proceedings to be conducted on the basis of the evidence before Staff J and that approach permitted the remitter hearing to be significantly shortened. The further relevant factor is that both parties changed their position on the critical question of whether cl 11 of the Determination was part of the contract of engagement for each owner/driver. While it is correct that some submissions were put in the alternative, the focus of the case led Staff J to conclude that, because of the respondents' firm policy of prohibiting the sale of a vehicle with work and with goodwill, they would not have entered into any contract which contained such a provision. The Full Bench concluded differently and the remitter was therefore heard on the basis that cl 11 of the agreement was part of each contract of engagement. In those circumstances there is no fault to be apportioned on any approach to an appropriate cost order and the costs of the proceedings before Staff J should appropriately be borne by the respondents. This conclusion is supported by the authorities cited in Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 for the proposition that costs of the first trial are often ordered to follow the event in the new trial. 21One further matter should be mentioned as to costs. The Court raised with the parties the question of whether the costs of the proceedings before Staff J had either been determined by the Full Bench or was a matter properly still before the Full Bench. From authorities cited by the parties the Court is satisfied that there is jurisdiction to deal with the costs issue of the proceedings before Staff J. 22The orders that the Court will make follow the format of orders proposed by the applicant as modified by the reasons appearing above. Unfortunately, the parties were not able to agree on a method whereby continuing owner/drivers would be paid or be entitled to be paid the sums proposed by the Court nor could they agree on a provision ensuring that the owner/drivers would not be able to retain or seek to exercise a right to sell their truck with work at a premium. Although the respondents had indicated their opposition to that system continuing and their desire to be free from it (a proposition that found favour with the Court and influenced the Court's approach to the making of a money order), in submissions on the appropriate orders the respondents appear to have altered their position and proposed a variation to the contracts of continuing drivers that preserved the ability for drivers to introduce new drivers when wishing to terminate their contracts but disentitling the driver to any payments from the company arising from the termination and further providing that if the company did not wish to engage a new lorry owner/driver it was only then that the company would pay the money orders determined by the Court. It might be the respondents' position that if that approach was not adopted, it would prefer a provision that removed from the contract the right of the remaining drivers to approach the company and introduce a new driver and any arrangements between the previous driver and the new driver that might flow therefrom. The primary position of the respondents on this issue has been dealt with above. 23In those circumstances the Court will adopt the proposal put forward by the applicant to add a new provision to the continuing contracts to operate following the payment of the moneys contained in the Court's orders. In essence, that provision removes any right of continuing owner/drivers to sell a truck with work or introduce proposed new drivers and provides a detailed release to the respondents from any future claims in relation to the sale of a truck with work. It is perhaps unusual for a detailed release of that nature to become part of the orders of the Court but in the absence of any other proposal, that is a practical course to follow in this case. Having regard to its representative capacity the Court adopts the variation proposed by the TWU on the understanding that the individual drivers consent to that course. 24In concluding this judgment the Court wishes to note that, as urged by the respondents in their written submissions, it has been guided by the judgment of the Full Bench in Eagle Boys Dial-a-Pizza v Clifford (2003) 125 IR 35 at 5 and has firmly kept in mind that the orders made, including those varying the contract, should not travel beyond what is required to ensure a just result between the parties having regard to the circumstances before the Court. The claim of the owner/drivers arose in somewhat unusual circumstances. Some of the complexities faced in making an order, firstly, restoring the parties to their initial financial position and then ensuring that compensatory orders addressed the true nature of the loss suffered, arise from the fact that the respondents were successful in resisting an approach that would attempt to value the loss at the time of the respondents' purchase of the business from Brambles. An assessment of the loss made at that time would inevitably involve very much larger sums of money than the sums paid in the late 1980s to mid-1990s by way of "goodwill." Success in that argument by the respondents, however, cannot result in money orders that do not attempt to address the real loss of the owner/drivers.

ORDERS 25The Court makes the following orders: (1)The contracts between the owner/drivers or former owner/drivers listed below and Toll Transport Pty Limited and Toll Holdings Pty Limited whereby the owner/drivers performed work in the transport industry were and are unfair: Francis Whitten; Leonard Felice (t/as L & N Felice); Dominic Lamacchia (t/as D & E Lamacchia); James Novak (whose business was incorporated in 2002 as Transco Holdings Pty Ltd); R & B Marcinasko Pty Ltd; WL Kennett (t/as WL & LM Kennett); Nick Kouverianos (t/as N & N Kouverianos); Victor D'Angelo; Carlos Ferreira (t/as C & D Ferreira). (2)The contracts between the former owner/drivers listed below and the respondents are hereby declared void ab initio save as to the payment of any monies pursuant to the said contracts: Francis Whitten; Leonard Felice (t/as L & N Felice); James Novak (whose business was incorporated in 2002 as Transco Holdings Pty Ltd); Nick Kouverianos (t/as N & N Kouverianos); Carlos Ferreira (t/as C & D Ferreira). (3)The contracts between the owner/drivers listed below and the respondents are varied to: (a)require the payment of money in the amounts set out in orders 4 and below to the following owner/drivers: Dominic Lamacchia (t/as D & E Lamacchia); R & B Marcinasko Pty Ltd; W L Kennett (t/as WL & LM Kennett); Victor D'Angelo. (b)add a new provision, to operate from the payment of the moneys in accordance with the variation in (a), as follows: (i)the rights of the Lorry Owner Driver under clause 11 with respect to sale of vehicles shall cease; (ii)no Lorry Owner Driver shall have any right to sell a truck with work, or with an introduction to work, or with goodwill, or with a right to introduce a new Lorry Owner Driver to the Company upon the termination of his contract; (iii)the Lorry Owner Driver releases and discharges the Company from all claims, actions, suits, causes of action, liability, demands, rights, proceedings, damages and costs whatsoever (whether at common law, in equity or, to the extent permitted, under any statute) which the Lorry Owner Driver now has or would at any time have had but for this contractual provision in any way connected with his former rights under clause 11 or the purchase or sale of a truck with work or with an introduction to work or with goodwill or with a right to introduce and new Lorry Owner Drivers to the Company upon termination of his contract. (4)Toll Transport Pty Ltd and Toll Holdings Pty Ltd are jointly and severally liable to pay the following persons the following amounts: Francis Whitten: $47,920 Leonard Felice: $73,700 Dominic Lamacchia: $21,600 James Novak: $30,000 R & B Marcinasko Pty Ltd: $48,000 Wayne Kennett: $48,000 Nick Kouverianos: $64,975 Victor D'Angelo: $49,500 Carlos Ferreira: $60,500 (5)Toll Transport Pty Ltd and Toll Holdings Pty Ltd are jointly and severally liable to pay interest on the amounts specified in order 4 from the date of filing of the application at the rate under the Civil Procedure Act 2005 and the Uniform Civil Procedure Rules 2005 calculated up to the date of these orders. (6)The amounts set out in orders 4 and 5 are to be paid 28 days after the date the Court makes these orders. (7)Toll Transport Pty Ltd and Toll Holdings Pty Ltd are jointly and severally liable to pay the applicant's costs on a party/party basis, as agreed or assessed. This order shall include the costs of the proceedings before his Honour, Justice Staff, but does not affect the costs order made by the Full Court on 30 July 2010 or the costs order made by his Honour, Justice Haylen, on 3 June 2011. (8)The parties have leave to relist the matter to deal with any unintended consequence or unforeseen difficulty that may arise from the present form of the orders. 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. Decision last updated: 04 July 2012