24 Two days later, on 6 September 2002, the applicants were informed by letter that their tender had been unsuccessful. On the same day, the applicants separately received letters signed by Mr Krotky on behalf of the respondents. The letters informed the applicants of the following:
"As you are aware from our discussions on the 23rd August 2002 Trend Windows & Doors Ltd (TWD) is reviewing its transportation arrangement.
As a result our transportation and store operation in/from Sydney is planned to be contracted out to a single operator to meet our total warehouse and transport needs.
TWD is now in position to inform you that your transport arrangements with TWD will cease on 30th September 2002.
During discussions with the new transport/warehouse operator TWD has secured a commitment from them to negotiate with you continuing work.
TWD would like to take this opportunity to thank you for services that you provided to the company over the period of time and looking forward to seeing you in your new engagement."
25 Some two weeks later PRW wrote to both applicants offering them employment in an amount of $27,560 per annum plus superannuation. A condition of employment was that the applicants submit to a three month trial period of employment on a casual basis. The terms of the offer sent to Mr Zammitt under cover of letter dated 17 September 2002, are set out in full below:
"As the new transport contractors appointed to Trend Windows for the next five (5) years, we would like to take the opportunity to offer you a position with our company as a Driver.
In the past, you have proven to be a reliable contractor with Trend and we feel that the experience you have gained would be an asset to our company. As part of our company policy and by mutual agreement there is a three month trial period which you would be employed on a casual basis to assess your suitability to the position. This also affords you the opportunity to assess your suitability to the job and your future employment with PRW.
Should you decide to accept this offer we would require a full medical and an RTA printout on your licence. The package we are offering as an employee is $27560 per annum + superannuation. As indicated above, the commencing position is in a casual capacity and as per industry awards your wage is increased by 25% for this period with no annual leave or sick pay applicable.
We would need your discussion (sic) by this Friday 20th September so as we can finalise employee numbers prior to the commencement of the contract and we take this opportunity to extend our best wishes for your future should you choose not to accept."
26 The proposed salary was significantly less than both applicants had earned as owner-drivers engaged by the respondent. No arrangements were suggested in the correspondence in relation to Mr Zammitt's truck. The offer of employment did not include any reference to annual leave or sub-leave entitlements, in addition to the base salary.
27 Both applicants rejected the offers of employment. Mr Zammitt submitted a counter-offer of employment to PRW which was declined. Each applicant worked out their period of notice, a period of three weeks and three days.
The Contracts
28 The respondent conceded in written submissions that the contracts between it and each of the applicants were contracts whereby work was performed in an industry in New South Wales. The evidence tends to confirm this. Mr Zammitt commenced work for the respondent in October 1995 as an owner-driver transporting the respondent's products, namely its windows and doors. Mr Hill undertook similar work from some time in November 1995. Both applicants purchased their own trucks before entering into their respective engagements and both financed and arranged maintenance and repairs of their vehicles throughout the period of the engagements. The applicants operated throughout the terms of their engagement as independent contractors. This characterisation of the working relationship, although initially put in issue during the proceedings by the applicants, both of whom contended that they were employees of the respondent, later resolved itself, with the concession by the applicants that they had indeed been engaged by the respondent as independent contractors. There can be little doubt that the applicants operated as independent contractors. Each applicant, as earlier mentioned, purchased his own vehicle and assumed maintenance and repairs of the vehicle in order to perform the work. Each employed an offsider to assist with the work. Each ran his own business, deducting expenses from the gross profits made from payments generated by the respondent.
29 The contracts contained no express terms. The applicants' counsel, Mr Pierce contended in oral submissions that a term of each contract was that each applicant was guaranteed work, for an indeterminate or perpetual period by Mr Ciappara on behalf of the respondent. This guarantee of perpetual work is said to have been made when Mr Ciappara said to the applicants, "as long as there is work you will have a job" and; "as long as you do the right thing by the company you have a job here." Mr Ciappara agreed in his evidence that he said to the applicants, "as long as you do the right thing by the company you have a job here." This is a different statement from the earlier statement attributed to Mr Ciappara. The former statement suggests on its face that the ongoing engagements of the applicants would or could depend upon the respondent's operational requirements. Inherent in the words is a qualification, that is, any assurance of ongoing work is dependant upon the availability of the work. The latter statement could suggest an assurance of ongoing work subject to satisfactory performance for example. Earlier extracted in this judgment was the evidence of Mr Ciappara on the issue. He agreed that he told both applicants following their questions about a guarantee of work "as long as there is work you will have a job"; and, "as long as you do the right thing by the company and keep signage on the truck". He also said in evidence that he told Mr Zammitt, "as long as you do the right thing by the company you have a job".
30 The latter representation, which I find was said by Mr Ciappara to both applicants, indicates in my view a preparedness at that stage on the part of the respondent to provide secure work for an ongoing or indefinite period, contingent upon any conduct or performance issues on the part of each applicant which might otherwise affect the working relationship. It does not, in my view, amount to a promise of a "job for life." It falls for assessment in the context in which it was given, as well as by reference to commercial realities. These aspects will be elaborated upon shortly. I should add for completeness that I am unable to find on the state of the evidence that Mr Ciappara also said to the applicants that in the event of a downturn in work the "first on, last off " rule applied. The contingency in any event did not arise. Rather, the decision was made to accept PRW's proposal to operate the delivery runs to the exclusion of the other owner-drivers.
31 Other terms of the contracts, according to the applicants, were that each applicant would be paid on a monthly basis calculated by reference to the number of loads delivered; and, each applicant was to provide his own truck available to carry out deliveries.
Were the Contracts Unfair?
32 As I understand the instructions put on behalf of the applicants in relation to Mr Ciappara's representation concerning ongoing work, it is sought to elevate the meaning behind the words to a guarantee of perpetual work. If this was the intent behind the submission I cannot agree. Insofar as the applicants were concerned each of them had received a guarantee of work from Mr Ciappara. This was particularly important to them and critical to their respective decisions to outlay significant capital and resources in order to work for the respondent. Nevertheless, both applicants were aware to some extent of some of the risks associated with entering into the arrangements with the respondent. Mr Zammitt gave evidence that he obtained paperwork from Mr Frendo dealing with the profitability of the business and took it to his accountant for financial advice. Mr Hill discussed going into business with his father as well as with Mr Frendo. His father, he said, had worked for the respondent for many years. Mr Zammitt was also aware that a restructure of the respondent's business had occurred at an earlier time which had affected transportation arrangements and he appeared to agree in his evidence that it might, or could, occur again. He also knew that the respondent was one of the biggest manufactures of windows and operated in a competitive market. Mr Hill conceded that the respondent's customers operated in the building industry and that that industry was subject to fluctuations which could in turn affect the demand for his services as a truck driver for the respondent. He also agreed that if a downturn in work was severe enough, that the respondent might have to close its business. Mr Hill was also aware, as is apparent from his affidavit, that his engagement with the respondent arose in circumstances where the respondent was considering "(getting) rid of the current transport people." Mr Ciappara in his evidence said Mr Hill secured engagement as an owner-driver because of a restructure within the company following the departure of an owner-driver. Mr Zammitt conceded that while he was working for the respondent, it was, or would always be, interested in ways to reduce its costs, including its transportation costs.
33 These matters recognise commercial realities. No doubt, at the time, the respondent's assurances to the applicants of ongoing work, made via Mr Ciappara, were genuine; but underlying the assurances would have been the respondent's appreciation of changing operational requirements in the context of a competitive market and a prevailing interest in reducing costs. Neither of the applicants, on the evidence, can be said to have been unaware of these factors. In addition the contracts between the parties were in the nature of commercial agreements. There is authority for the proposition that there is no presumption of perpetuity of commercial agreements. In Crawford Fittings Co and Others v Sydney Valve & Fittings Pty Ltd and Another (1998) 14 NSWLR 438 at 443 and 444 McHugh JA observed:
In Martin-Baker Aircraft Co Ltd v Canadian Flight Equipment Ltd ,
McNair J said (at 577) that there is no presumption of permanency in the case of an indefinite commercial agreement but that if there is it is in favour of termination and not perpetuity. Buckley J has also expressed the view that there is no presumption either way: Re Spenborough Urban District Council's Agreement (at 150). To the same effect is the judgment of Lockhart J in State Bank of New South Wales v Commonwealth Savings Bank of Australia (1985) 6 FCR 524 at 554; 60 ALR 73 at 101. However, it is not easy to reconcile these statements with the principle that there is a general presumption against adding to a contract a term which the parties have not expressed: Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 at 137 per Lord Wright. In principle, the better view would seem to be that, although there is presumption against implying a term that an agreement is terminable, ordinarily the nature of a commercial agreement will lead to the conclusion that the parties must have intended it to be terminable on notice. This was the effect of the approach of the courts in Winter Garden; Martin-Baker; Spenborough and Decro-Wall.
34 The decision in Adrians Transport Pty Ltd and Anor v Pacific Dunlop Ltd (t/a Olex Cables) (unreported) per Hill J, Federal Court, 8 March, 1996 dealt with a factual background with some similarities to the present matters. The proceedings were for breach of contract following the termination of the first applicant's engagement on one week's notice. The breach was said to be of the implied term of reasonable notice. The facts in brief were that the first applicant (Adrians) entered into a contract with Olex to provide to it the services of carriers to transport cables. Adrians in turn contracted with owner-drivers to perform the carriage for Olex. The contract between Adrians and Olex contained no express terms providing for termination. The second applicant (Andrews) gave evidence of a conversation that he had with McFarlane, the administration manager of Olex, shortly before Andrews entered into the arrangement with Adrians to transport the cables for Olex. According to Andrews, McFarlane said to him, "while ever Olex is producing cables you'll have a job"; and, "[a]s long as you perform your duties properly, don't abuse any customers and don't steal anything everything should be fine".
35 It was in the context of those representations that Hill J observed that there is no presumption of perpetuity of commercial agreements (at [44]). The arrangements between Adrians and Olex had been extant for some two years. In the circumstances, his Honour found that the period of notice was unreasonable and that Olex was in breach of its contract with Adrians in failing to give reasonable notice of termination. His Honour found that a reasonable period of notice was in the order of three months. (I should add that the words attributed to McFarlane by Andrews do not appear to have influenced this finding.)
36 While I do not agree with the present applicants' submission that the representation made by Mr Ciappara conveyed a guarantee of perpetual work, I am of the view that based on the representation, the applicants had an expectation of long term work and that this in turn is a relevant consideration in assessing whether the circumstances of termination of the contracts rendered those contracts unfair. The expectation of long term work was fostered by the respondent and was critical to the applicants' respective decisions to outlay considerable expenditure in purchasing the trucks for use in their businesses. These matters are relevant to the circumstances of the applicants' termination, and, to the issue of whether, as a direct result of the respondent's conduct at the time of termination, the contracts became unfair.
37 This approach to the issue of unfairness of the impugned contracts under s 106 of the Act is both long-established and uncontroversial. In Incitec Ltd and Another v Industrial Court of New South Wales and Others (1992) 29 NSWLR 83; (1992) 45 IR 155, Gleeson CJ (Kirby P, Priestly JA concurring) affirmed (at 157, 158) Hill J's reasons in the Industrial Court of New South Wales in Barry and Ors v Incitec Limited & Anor (1991) 45 IR 143 where Hill J, in commenting on s 88F of the Industrial Arbitration Act 1940, the predecessor provision to s 106, said (at 146, 147):
On the other hand s 88F of the Act deals with the matter of what for present purposes may be briefly described as unfair contracts. It applies to a contract or arrangement between the particular persons who are party thereto. Unfairness may arise either from the terms of the contract itself, the surrounding circumstances, and/or from the manner of performance or operation of the contract. The section deals largely with private rights inter partes. Despite that a general and relevant industrial prescription governing benefits payable to employees in termination of employment situations may exist, unfairness in relation to a particular contract of employment may nevertheless arise in a situation of redundancy or termination of employment for reasons unrelated to or not relevant to the basis of award prescription of an objective and fair general standard of redundancy or severance benefits. It may arise simply in the special circumstances of and surrounding the particular contract.
38 The same passage was again approved by Kirby P (as he then was) in Walker v Industrial Court of New South Wales & Anor (1994) 53 IR 121 at 133, where his Honour immediately before citing the passage commented:
Whatever doubts may have existed earlier, it is now beyond argument that the "unfairness" referred to in s 88F(1)(b) IAA can arise, not only from positive provisions of the contract or arrangement which offend unfairness in the relevant sense, but also from the failure, on the part of the contract or arrangement, to provide in a way that such fairness requires.
39 In relation to s 106 the approach was more recently affirmed in Sydney Water Corporation Ltd and Another v Industrial Relations Commission of NSW and Another (2004) 61 NSWLR 661 at 668 per Mason P (Hodgson JA and McColl JA concurring):