Consideration
31The question required to be answered in order to determine whether the Court has jurisdiction pursuant to s 106 of the IR Act is what was the contract or arrangement pursuant to which the persons performed work. In order to determine this question, it is necessary to consider whether the statutory preconditions of s 106 have been met. The preconditions may be stated as follows:
(a) is the contract or arrangement one whereby a person performs work in an industry; or
(b) is the contract or arrangement one that does not relate to the performance of work but:
(i) is collateral to a contract whereby the person performs work in an industry;
(ii) the performance of work is a significant purpose of the contractual arrangements made by the parties.
32These proceedings arise from a sale of business pursuant to which three discreet transactions arose. They were:
(a) a contract for sale of the business between the applicants on the one part, and the respondents on the other part pursuant to which the respondents agreed to sell the wholesale bakery business known as R & D Goods, as well as Elba Grissini for a total purchase price of $180,000;
(b) a chattel mortgage that secured an amount of $80,000. This was required, as the applicant's only paid an amount of $100,000 with the remaining $80,000 paid by way of vendor finance. It was that vendor finance that was secured by operation of the chattel mortgage;
(c) a lease agreement under which, the applicants agreed to lease the premises at 10-12 Childs Road, Chipping Norton. These are the premises that the business was operating from at the time of the sale.
33It is beyond doubt that the enactment of s 106(2A) of the IR Act does not, in its operation, render the authorities of Fish and Batterham redundant. In Sin Yong Yim v Industrial Relations Commission of NSW [2007] NSWCA 77; (2007) 162 IR 62, Spigelman CJ explained the rationale that underpinned the introduction of s 106(2A) of the IR Act at [70], [71]:
[70] The new s106(2A) was directed to this Court's reasoning that the context of the legislative scheme confined the power under s106(1) to aspects of a contract or arrangement which are "closely relate[d] to the performance of work" ( Solution 6 supra at [80] and [83]) or which relate in some reasonably direct manner to the performance of work (at [87]). The reformulation of the test in Solution 6 in the High Court differs from this formulation.
[71] Clearly s106(2A) is a new element which must be included in the context to which the High Court had regard when interpreting the reference to the performance of work as "the hinge" of the jurisdiction.
34Later, in Caterpillar , Spigelman CJ went further, observing at [145] - [147]:
[145] Subsequent to the decisions in this Court which led to the trilogy of cases in the High Court, the New South Wales Parliament amended s 106 by the insertion of subsection (2A). The subsection was not applicable to the cases considered by the High Court in those judgments.
[146] Part of the reasoning in the joint judgment in Fish referred to the fact that what may be declared void or varied pursuant to s 106(1) is the arrangement in accordance with which a person performs work. The addition of subsection (2A) confers a power to declare void or vary a related condition or collateral arrangement, even though it does not relate to the performance by a person of work in an industry.
[147] Nevertheless, by express provision in par (a) subsection (2A) applies only if the contract or arrangement to which the condition is related or the arrangement is collateral "is a contract whereby the person performs work in an industry". Accordingly, it remains accurate to say, as the High Court joint judgment said at [18] and [41] of Fish and [22] of Old UGC, performance of work in an industry is "the hinge about which s 106 turns". Section 106(2A)(a) reaffirms that proposition.
35The High Court in Fish (at [18]) noted that "The Act is concerned with matters industrial." After referring to the objects of the IR Act set out in s 3 of the IR Act , the High Court noted that s 106 was within Ch 2 of the IR Act which was titled "Employment".
36In Caterpillar , the Court inferred that the High Court in Fish regarded the unfair contract provisions of Pt 9 of Ch 2 of the IR Act as serving the object of the IR Act observing at [96]:
... "providing a framework for the conduct of industrial relations that is fair and just". Indeed, it is difficult to see any other object of the Act that is served by the unfair contract provisions of Pt 9 of Ch 2. It is pertinent to note that the focus of the relevant "unfairness" is as part of a "framework for the conduct of industrial relations".
37The applicant sought to distinguish the factual background of both Yim v Industrial Relations Commission of NSW and Caterpillar from this matter. However, it is the principles that emerge from these judgments of the Court of Appeal that I am bound to apply.
38It would be to fall into error to determine the questions that I have earlier set out by only looking at the entire commercial arrangement, determine whether the performance of work will be required to facilitate any part of it and upon such a finding, declare that there is jurisdiction and examine whether the contract or arrangement is unfair.
39In my view, it is only at the stage of determining whether the performance of work is a significant purpose of the contractual arrangement for the purpose of s 106(2A)(b) of the IR Act that the entire contractual arrangement as a whole can be considered. This approach was adopted in Barataud v Chipperfield (No 3) [2006] NSWIRComm 249, where the Court observed at [36]:
Section 106(2A) empowers the Commission to declare void or vary any "related condition" or "collateral arrangement" to a contract whereby a person performs work in an industry, even if the related condition or collateral arrangement does not relate to the performance of work, so long as the performance of work is a significant purpose of the contractual arrangements made by the person. In our view, this latter condition requires a factual assessment of the contractual arrangements, viewed as a whole, to determine whether the performance of work could be described as a significant purpose. In this case, we are satisfied on Mr Barataud's evidence (as discussed below), that it was.
40In my view, it is critical that there is a requirement that there be an agreement between the parties pursuant to which work is done as part of an arrangement. Mr Tregenza submitted that the relationship between the vendor finance, the obligation to repay it, the contract for the sale of the business and the lease cannot be doubted. That is so, however, there was no obligation, enforceable or otherwise, that required the applicants to perform work in the business. Although the applicants relied upon cl 2 of the lease that required the premises to be used as a wholesale bakery, this to my mind was not a contractual obligation that the applicants perform the work. As Mr Folino-Gallo submitted, if that be the case, each mortgage agreement, pursuant to which work was to be done so as to service debt, would fall within the rubric of the IR Act ; each contract for the sale of a business that is related to an industry, would be within the purview of the Court's jurisdiction and each commercial lease in relation to a premises used for industrial purposes would be also within the Court's jurisdiction.
41The touchstone of s 106 has been that work is required to be performed. In my view, the delineation between such an arrangement and that of a commercial transaction could not be more clear than in the instant case.
42Although reliance was placed by the applicants upon both Caltex Oil (Australia) Pty Ltd and Majik Markets Pty Ltd , in my view, no analogy can be drawn between cases dealing with franchises and this case, which constitutes an at arms length business transaction for the facilitation of the sale of a business.
43Similarly, the reliance placed by the applicants on the judgment of Priestley and Handley JJA in Production Spray Painting & Panel Beating Pty Ltd gives little support to the applicants' case. Although their Honours found that s 88F, the predecessor to s 106, did not apply to contracts for the sale of business, the Court excluded from that exclusion, cases where the vendor continued to have an indirect interest in the business. However, their Honours found that the section did not apply to a contract for the sale of a business in which the purchasers intended to work as a working proprietor where the contract did not require the purchasers to work in the business or to employ others to do so; or the vendors did not retain an interest in the business after completion, or there was no contract under which the purchasers were to obtain goods or services from the vendors or associated persons.
44Each of these factors are applicable in this matter despite the fact that the vendors retained an interest in the land on which the business was conducted. I am not inclined to the view pressed by the applicants, that in answer to the requirement that there be a contract under which the purchasers were to obtain goods or services from the vendors or associated persons, this should be read to include a reference to the provision of the land by the lease. Nor am I inclined to the view that the vendor finance and lease amounted to a "relevant agreement or arrangement outside the contract of sale as meeting one of the further requirements outlined by their Honours."
45Similarly, I am unable to agree with the applicants' submission that the recent judgment of the Full Bench of this Court in Australian Co-operative Foods Limited v SW & JD Reilly & Sons Pty Limited [2010] NSWIRComm 110; (2010) 198 IR 195 at [113] - [114] which applied the test as to whether a party against whom relief was sought had a "real interest" (applying Majik Markets at 465). The Court rejected an application by the respondent to strike out the proceedings, finding it was premature to determine that there was a lack of a reasonably arguable case in respect of whether work was being performed by the applicant.
46In my view, this case is distinguishable from the issues under consideration in the above matter. In that case, Australian Co-operative Foods Limited entered into a supermarket delivery contract with SW & JD Reilly & Sons Pty Limited to deliver milk to supermarkets. This involved an ongoing relationship and a significant level of control over the contractors, whose relationship was analogous to that of a franchise arrangement. The demutualisation and takeover of Dairy Farmers Milk Co-operative by an international corporation occurred one month after the contract commenced. At issue was how the relationship between the parties (two corporations) played out in respect of the performance of work. It was held by the trial judge and confirmed on appeal that it was not the appropriate time to determine a notice of motion to strike out the summons.
47A challenge to this Court's decision that it did not have jurisdiction to hear the application was recently rejected by the Supreme Court of New South Wales, Court of Appeal: see Australian Co-operative Foods Ltd v SW & JD Reilly & Sons Pty Ltd [2011] NSWCA 148.
48The Court of Appeal (Basten JA, Giles and Hodgson JJA agreeing) observed at [49] - [51]:
[49] First, the initial inquiry required by the section is whether a person "performs work in any industry": at [18]. Read in isolation, that question lacks content. However, if it is understood as requiring identification of the relevant person, the relevant work and the relevant industry, it will provide an answer against which the next question can be determined. In the present case, the person was treated as Mr Stephen Reilly; the work included the driving of a delivery truck and related activities, such as loading, unloading and maintaining appropriate records. The industry was variously described as milk vending and transport of milk products for the purpose of sale. The precise description did not matter in the present case: narrower descriptions focused on the precise activities undertaken by Mr Reilly, whilst broader descriptions treated his operations as part of the broader industry in which Dairy Farmers was engaged.
[50] The second question is whether the contract which the applicant in the Commission seeks to have varied is in fact a contract whereby an identified person performs work in an industry. In the present case, the contract sought to be varied was the delivery contract. It follows that the jurisdiction of the Commission will not be engaged unless it can properly be said that the work Mr Stephen Reilly performed was performed pursuant to that contract: see Fish at [19] and [41].
[51] The third proposition derived from Fish concerns the operation of the expanded definition of "contract", which includes the phrase "or any related condition or collateral arrangement". If that definition is simply fed into the operative provision, it permits the Commission to make an order varying "any contract or arrangement, or any related condition or collateral arrangement, whereby a person performs work in any industry". As explained in Fish , to focus on related conditions or collateral arrangements, when, whatever the identifiable source, it is that which gives rise to the performance of work, risks losing sight of the need to identify the source of any obligation to perform work.
49In my view, and I find, there was no term in any of the three contracts that required the active or passive participation of the applicants to work in the business. It was completely open for the applicants to finance the business how they saw fit. This matter involved the sale of a business. It was a commercial arrangement. If the Court was to find jurisdiction it would invite all financial transactions pursuant to which a party must work to service a financial obligation to be amenable to review under s 106 of the IR Act.
50To my mind, the contracts or arrangements sought to be and declared void are not contracts or collateral arrangements with an "industrial flavour". As Spigelman CJ observed in Caterpillar (at [145]) after considering the addition of s 106(2A):
... it remains accurate to say, as the High Court joint judgment said at [18] and [41] of Fish and [22] of Old UGC, performance of work in an industry is "the hinge about which s 106 turns". Section 106(2A)(a) reaffirms that proposition.
51This was a commercial transaction despite the financial obligations arising from the contract or arrangement that ultimately resulted in the applicants being required, due to their financial circumstances, to work in an industry. This factor represents an insufficient connection as to warrant the Court's intervention pursuant to s 106 of the IR Act . Taking the evidence at its highest, I find that the test of lack of a reasonably arguable case as to jurisdiction has been made out.
52In view of the conclusions I have reached, this is the appropriate time to determine the respondents' motion. The summons is accordingly dismissed for want of jurisdiction.
53At the conclusion of the hearing, the applicants foreshadowed filing an amended summons. This was attached to further written submissions filed in the proceedings by the applicants. The respondents, subject to the Court finding that it had jurisdiction, did not object to the proposed amendment to the summons which seeks that a Deed of Charge also be declared void. In light of the conclusion that I have reached, it is unnecessary to determine the application to amend the summons.