Tranter v Shaan Holdings Pty Ltd t/as Shaan Eyeworks and anor [2005] NSWIRComm 95 | Case summary

"29. The contract of employment was unfair because it permitted the Respondents to procure a termination of the contract without paying the Applicant a proper redundancy or severance payment, commensurate with his age, tenure and status. 30. The contract of employment was unfair because it operated to permit the Respondents to procure a termination of the contract for economic, technical or structural reasons without acknowledging or accpeting that the cessation of employment amounted to a redundancy. 31. The contract of employment became unfair because of the conduct of the Respondents in significantly reducing the Applicant's remuneration package to a level that was likely to be, and in fact was, unacceptable to the Applicant, and thus procuring a termination of the contract of employment without a proper and appropriate redundancy or severance payment. 32. The contract of employment was unfair, in that it failed to specify the means of remuneration or the work to be performed to receive same. 33. The Respondents were able to take advantage of the lack of a formal written contract to deny the existence of terms and conditions which would prevent them unilaterally changing of the Applicant's base salary, and the commission component of his remuneration. 34. The contract of employment was unfair, in that it failed to specify or limit the sales areas the Applicant was expected to service in order to earn the agreed remuneration. 35. The contract of employment was unfair, in that it failed to specify or limit the hours of work to be performed to receive the agreed remuneration. 36. The Contract of employment was or became unfair, because it permitted the Respondents to make changes to the Applicant's remuneration package, and/or terminate the Applicant, based wholly or partly upon considerations of unsatisfactory performance and misconduct, without giving the Applicant any or adequate opportunity to respond to such considerations ". 3 The respondents have sought, by notice of motion, to have the summons dismissed on the basis that this court lacks jurisdiction and power under s 106 of the Act to deal with the proceedings. 4 The submissions made on behalf of the respondents were based on the recent judgment of the New South Wales Court of Appeal in Sydney Water Corporation Limited v Industrial Relations Commission of New South Wales [2004] NSWCA 436. 5 In order to put the discussion which follows in context I set out hereunder the provisions of s 106 of the Act: 106 Power of the Commission to declare contracts void or varied (1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract. (2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason. (3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time. (4) In considering whether a contract is unfair because it is against the public interest, the matters to which the Commission is to have regard must include the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force. (5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case. (6) In making an order under this section, the Commission must take into account whether or not the applicant (or person on behalf of whom the application is made) took any action to mitigate loss. 6 The principal judgment in Sydney Water was that of the President, Mason P. Without endeavouring to detract in any way from the analysis of Mason P, I shall attempt to distil from his Honour's judgment the fundamental proposition for which it stands. In order to enliven jurisdiction under s 106 it is necessary to make a finding that the contract in question is unfair. That unfairness must be manifested in the contract, either by reference to its terms or by reference to that which is omitted from the contract, so as to create the relevant unfairness. The ascertainment of the unfairness is by reference to the conduct of the parties. It follows that, in the circumstances where the conduct of the parties complained of as creating the relevant unfairness is conduct which is in breach of a term or provision of the contract but which term or provision is not itself unfair, there can be no relevant unfairness so as to found jurisdiction and power. That is, breach per se of a contract cannot be the foundation of a claim under s 106. 7 For the purpose of these proceedings it is necessary to focus on the allegations made in the summons that the contract of employment was unfair because of what it failed to include within its terms. At paragraph [25] of Sydney Water, Mason P said that "…But it is the 'contract' that is to be held unfair, and not the conduct, in the final analysis. Unfairness may of course stem from what the contract fails to provide, for example as regards termination procedures". And at paragraph [33] his Honour said; "Absence of proscription in the relevant particular meant that a party was at liberty to act unfairly without the general law's sanctions for breach of contract. A contract may 'permit' certain conduct either by sanctioning it expressly or by failing to prohibit it. In either circumstance the other party has no contractual remedy to prevent that conduct. Either type of 'permission' may properly lead to an appropriate remedy in the Commission, if the Commission finds that the contract is unfair…". 8 Hodgson and McColl JJA agreed with the reasoning of Mason P to which I have referred. 9 In the context of these proceedings the respondents submitted that, in essence, the factual circumstances surrounding the termination of employment were such that the conduct of the respondents amounted to a repudiation of the contract of employment and that the applicant did no more nor less than exercise his entitlement to terminate the contract by rescinding it. The respondents relied on fundamental principles in contract law, exemplified by the recent decision of the New South Wales Court of Appeal in Tokyo Network Computing Pty Ltd v Tanaka [2004] NSWCA 263. 10 Before dealing with the particular submissions with respect to these proceedings I should first set out the basis upon which the respondents' motion should be dealt with. There are two possible bases. They each have at their heart the discharge by the respondents of the burden which falls upon them when seeking the dismissal of proceedings for lack of jurisdiction. The relevant principles are conveniently summarised in the decision of a Full Bench of a predecessor to this Court in Nagle v Tilburg (1995) 51 IR 8. Put another way, it has to be "plain that the invocation of the jurisdiction impugned is wholly misconceived or, upon analysis, lacks an arguable legal foundation" (see Kirby P (as his Honour then was) in the New South Wales Court of Appeal in Majik Markets Pty Ltd v Brake and Service Centre Drummoyne Pty Ltd (1991) 28 NSWLR 443 at 446). Having regard to this fundamental principle, the first approach is to take the allegations contained in the amended summons at their highest in favour of the applicant. The alternative approach is to ascertain whether this is the "appropriate" time at which to consider the matter by reference to the state of the proceedings. In many cases it is only when all of the relevant facts are available to the court, as adduced during the substantive hearing, that an appropriate determination may be made. 11 I am content to adopt the former approach, namely by assuming the factual matters set out in the amended summons at their highest in favour of the applicant. As will be seen, however, the state of the proceedings will have some bearing in dealing with one of the arguments advanced in support of the respondents' case. 12 It was a primary position of the respondents that it was possible to strip away the allegations of unfairness contained in the amended summons, the details of which I have previously set out, because, in essence, this was a case confined to the applicant's response to a breach by the first respondent of his contract of employment. Accordingly, allegations of unfairness by reason of failure to specify the means of remuneration and the limitation of sales areas and provisions dealing with redundancy and the like were designed to avoid the application of the principle established by Sydney Water and should be disregarded. Indeed, in Sydney Water Mason P rejected an attempt by the applicant in the substantive proceedings from which that appeal was brought to frame his claim on the basis of a finding that the contract of employment was or became unfair "because it lacked stipulations for fair pre-dismissal investigative procedures or because it deprived a legitimately dismissed employee of appropriate entitlements" (at paragraph [53]). However, this was not the basis upon which the proceedings had been conducted at first instance by the applicant and was not the basis upon which the applicant had sought leave to appeal to a Full Bench of this Court. 13 The position in Sydney Water is relevantly distinguishable from that which applies in these proceedings. In Sydney Water, the substantive proceedings had been concluded and judgment had been delivered dismissing the applicant's claim. Accordingly, all of the relevant evidence had been adduced by the parties. The Court of Appeal was aware of the basis upon which the proceedings had been conducted by the parties at first instance and the submissions made by counsel on their behalf. This is not the position in these proceedings where, although most of the affidavit material appears to have been filed, none of it has been admitted into evidence and the substantive hearing has not commenced. In these circumstances the respondents face a considerable hurdle in submitting that the Court should not permit the applicant to base the proceedings on allegations of unfairness by reference to particular matters said not to be dealt with in the underlying contract of employment. 14 The situation is compounded by a letter furnishing particulars written by Freehills, the respondents' solicitors, dated 11 March 2005 addressed to the applicant's solicitor. That letter seeks to characterise discussions between the applicant and the second respondent as being an attempt to negotiate a revised remuneration package and the letter denied that that conduct was in breach of the applicant's contract of employment. On this basis, it may be difficult for the respondents to rely upon an assertion that these proceedings are in effect confined to the pursuit of a remedy for breach of the contract of employment simpliciter. Furthermore, the respondents, in a Reply document, asserted that they were entitled to change the basis of the applicant's remuneration without being in breach of the contract of employment. Accordingly, I reject the submission of the respondents that these proceedings can only be characterised as proceedings for the enforcement of remedies consequent upon a breach of contract. To do so would deny the applicant the ability to rely upon the respondents' position that there was, in fact, no breach by the first respondent of the contract of employment. 15 Some of the allegations of unfairness contained within the amended summons are directed to conduct arising from a failure of the contract of employment to deal with certain matters. I instance paragraphs B29, 32, 34 and 35, the provisions of which I have earlier set out. It would, in my opinion, be virtually impossible to determine whether the respondents had discharged the burden which falls upon them for the purpose of this interlocutory application without examining all of the relevant factual material in some detail. Once a detailed consideration of the evidentiary material is contemplated this is indicative that the "appropriate" time at which such a matter should be considered is during the course of the substantive hearing. Expressed in the alternative mode, taking the allegations contained in these paragraphs at their highest in favour of the applicant, it cannot be said with the required certainty appropriate for the interlocutory nature of these proceedings that they are necessarily confined to proceedings which involve a breach of contract simpliciter. By way of example, paragraph B29 alleges that the contract was silent about, and was not intended to deal with, the question of redundancy and, presumably, severance payments consequent upon redundancy. 16 With respect to the remaining allegations of unfairness, it is impossible at this stage of the proceedings to determine positively that they are confined to allegations of breach of the contract and do not involve any of the permissible allegations of unfairness of the kind referred to by Mason P in Sydney Water. Again, this results in the conclusion that this is not the "appropriate" time at which to consider these matters. 17 For the above reasons the respondents' notice of motion must fail. There seems no reason why costs should not follow the event. 18 I make the following orders: 1. The respondents' notice of motion is dismissed. 2. The respondents are to pay the applicant's costs of the notice of motion assessed in default of agreement.

Tranter v Shaan Holdings Pty Ltd t/as Shaan Eyeworks and anor

At a glance

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Decision date

Before

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Judgment (12 paragraphs)

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Cases Cited (4)