Opal Group Holdings (Aust) Pty Ltd v Franklins Ltd [2002] NSWCA 169 (7 June 2002)

Last Updated: 11 June 2002

NEW SOUTH WALES COURT OF APPEAL

CITATION: OPAL GROUP HOLDINGS (AUST) PTY LTD v FRANKLINS LTD [2002] NSWCA 169

FILE NUMBER(S):

40733/01

HEARING DATE(S): 29 May 2002

JUDGMENT DATE: 07/06/2002

PARTIES:

Opal Group Holdings (Australia) Pty Ltd - Appellant

Franklins Limited - Respondent

JUDGMENT OF: Mason P Sheller JA Ipp AJA

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): ED 50145/00

LOWER COURT JUDICIAL OFFICER: Barrett J

COUNSEL:

M H Tobias QC/J Jagot - Appellant

D F Jackson QC/J R Clarke/J Steele - Respondent

SOLICITORS:

Bamford Hogg - Appellant

Clayton Utz - Respondent

CATCHWORDS:

CONTRACT - commercial contract for supply of casual employees - interpretation of "associates" - furtherance of a business common between the parties.

LEGISLATION CITED:

N/A

DECISION:

Appeal dismissed with costs.

JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40733/01

ED 50145/00

MASON P

SHELLER JA

IPP AJA

OPAL GROUP HOLDINGS (AUST) PTY LTD v FRANKLINS LTD

The plaintiff appealed from a decision of Barrett J given on 27 August 2001. The defendant was an operator of supermarkets at different places in Australia. Between 1993 and 2000, contracts were in force between the parties for the plaintiff to supply the defendant with the services of casual workers in the supermarket's distribution centres. At the expiration of the contractual arrangements, a new labour hire arrangement was entered into between the defendant and Forstaff Pty Ltd ("Forstaff"). Some people, who had previously been employed by the plaintiff and whose services had been supplied to the defendant, ceased working for the plaintiff and became employees of Forstaff.

The plaintiff claimed that the defendant became liable to make payments to them pursuant to the contracts between the parties. The plaintiff's entitlement depended on the meaning of the word "associate" in a document called the "Client Certificate", the terms of which the trial judge found were part of the relevant contracts.

Pursuant to the client certificate, the defendant was liable to the plaintiff for a "placement fee" for each casual employee of the plaintiff who subsequently became employed by the defendant, its subsidiaries or associates within six months after the termination of the employment relationship between the plaintiff and the casual employee. It was accepted that in this case the transferred casual employees were not employed by the defendant or a subsidiary of the defendant. At first instance and on appeal, it was argued that Forstaff was an associate of the defendant and therefore placement fees were payable. Barrett J found that the meaning of "associate" did not encompass the relationship between the defendant and Forstaff and therefore the defendant was not liable for the placement fees.

The only issue on appeal was the appropriate meaning to be given to the term "associates". The plaintiff argued that the term should be given its ordinary meaning. An associate of a person was said, in the relevant sense, to denote a relationship arising from the making of an arrangement between two or more people with a common objective and need not be characterised, as the trial Judge did, in terms of an imbalance of power or subordination of interests. The plaintiff contended that Forstaff and the defendant were acting in concert to achieve the particular purpose of acquiring the plaintiff's casual employees by Forstaff to be supplied to the defendant.

The defendant submitted that the meaning of "associates" must be determined by reference to the terms of the clause, the context and the purpose. Given that the only relationship between Forstaff and the defendant was the contractual arrangement they had entered into for the supply of casuals, the former could not be considered an associate of the latter.

HELD (per Sheller JA, Mason P and Ipp AJA concurring):

1. The appropriate question to ask was not whether Forstaff and the defendant had associated to engage the plaintiff's casual employees but whether an associate of the defendant had engaged the plaintiff's casual employees.

2. The client certificate served a sensible and understandable object. The parties chose simple language and attempted no embellishment so as to provide for every conceivable circumstance. "Associates" is not a technical or abstruse word though it is a word difficult to define in a way that completely covers but no more than covers the field.

3. The only relevant relationship between the defendant and Forstaff was a contractual one. Whatever may be the exact meaning of "associates" it does not extend to embrace independent contractors to a contract for the supply of a service.

4. It is often misleading when interpreting terms in commercial contracts to have regard to statutory definitions. Statutes do by definition mould the meaning of words for particular purposes.

5. In the context of the client certificate, the phrase "our associates or subsidiaries" referred to people or bodies associated in the furtherance of a business common between them and the defendant. Forstaff was not an associate of the defendant in the defendant's business nor was the defendant an associate of Forstaff in its business. They were parties to an arm's length contract for the supply of a service. The fact that they had a common interest in a contract for the supply of casual employees or in the way that contract was performed did not change them into associates within the meaning of the client certificate.

Cases cited:

Brambles holdings Ltd v Federal Commissioner of Taxation [1977] HCA 54; (1977) 138 CLR 467

Bank of Western Australia Ltd v Ocean Trawlers Pty Ltd (1995) 13 WAR 407

Securities Commission v Kiwi Co-operative Dairies Ltd [1995] 3 NZLR 26

Payne v Adelaide Steamship Co Ltd (1976) 14 ACLR 252

ORDERS

Appeal dismissed with costs.

**********

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40733/01

ED 50145/00

MASON P

SHELLER JA

IPP AJA

Friday, 7 June 2002

OPAL GROUP HOLDINGS (AUST) PTY LTD v FRANKLINS LTD

Judgment

1 MASON P: I agree with Sheller JA.

2 SHELLER JA:

Introduction

Opal Group Holdings (Australia) Pty Ltd (Opal) appeals from a decision of Barrett J given on 27 August 2001. The respondent, Franklins Limited (Franklins) was an operator of supermarkets at different places in Australia. For this purpose it maintained distribution centres consisting of warehouses into which goods were received from manufacturers and other suppliers for storage until dispatch to re-stock supermarkets. Opal was a labour hire contractor which supplied clients with casual labour. It employed people not to work for it in its own operations but to fulfil its contracts to provide the services of people suitable for particular work in a client's operations at the client's premises.

3 Between 1993 and April 2000 contracts were in force between Opal and Franklins for Opal to supply Franklins with the services of casual workers for Franklins' distribution centres. For this Franklins paid Opal.

4 In April 2000 these contractual arrangements ended. After a tendering process, on or about 1 April 2000 Franklins made a new labour hire arrangement with Forstaff Pty Ltd (Forstaff). Some people, who had previously been employed by Opal and whose services Opal had supplied to Franklins, ceased working for Opal and became employees of Forstaff. The services of some of these people were provided to Franklins at the same places and in the same positions they had worked as Opal casuals.

5 Opal claimed that Franklins became liable to make payments to Opal under the contracts between them. The amount claimed, and agreed if the contractual liability was made out, was $1,550,496.32.

Client Certificate

6 Opal's entitlement depended on the meaning of the word "associate" in a document called the "Client Certificate", the terms of which Barrett J found (and Franklins did not challenge this finding) were part of the relevant contracts between Opal and Franklins. Barrett J said that the client certificate provision was in or to the effect of the following form:

"It is hereby agreed that if Franklins, our associates or subsidiaries engage an Opal casual, whether permanently or for a limited period, and whether the offer is made during or at anytime within 6 months after the termination of this temporary engagement, we will notify Opal immediately, as a placement fee is payable at current rates. I/We also understand and accept that Opal will pay the Pay-Roll Tax applicable to this assignment in accordance with current practice, unless otherwise agreed between the parties."

In this certificate the first person plural and singular "our", "I" and "we" referred to Franklins.

7 Opal claimed Forstaff was an associate of Franklins within the meaning of the client certificate which accordingly obliged Franklins to pay the "placement fee" for each person who, immediately before Forstaff replaced Opal as supplier of casual labour to Franklins, was an Opal casual whose services were being supplied to Franklins and thereafter became a Forstaff employee whose services continued to be supplied to Franklins. It was not argued that Franklins itself or any subsidiary of Franklins engaged those persons in a way which triggered the obligation.

Hearing below and appeal

8 Opal applied by summons in the Commercial List for a declaration that the client certificate formed part of the terms of trade between the parties for the Opal supply to Franklins of persons described as "transferred casuals" and an order that the amount claimed was payable with interest. Other related or consequential declarations were also sought.

9 Barrett J made the declaration that the client certificate formed part of the terms of trade between the parties but otherwise dismissed the claim and ordered Opal to pay Franklins' costs. Opal appeals from that decision.

Notice of appeal

10 All but three of the original grounds in the notice of appeal as filed were directed to the meaning of "associates". Grounds 11, 15 and 16 were directed to findings of fact and were not argued. It is not necessary to set out these original grounds of appeal.

11 When the hearing of the appeal began, Mr Tobias QC, who appeared for Opal, sought leave to file in Court an amended notice of appeal which contained these additional grounds of appeal:

"20 The trial judge erred to the extent that the trial judge held that Forstaff was not the `associate' of Franklins for the purpose of the client certificate provision because Forstaff had already contracted to supply labour to Franklins, it being a matter for the individual Opal casuals whether they wished to be employed by Forstaff.

21(a) The trial judge erred in failing to hold that Franklins and Forstaff had agreed or arranged that, in the context of the labour supply contract, as many of Opal's casuals as possible should be taken over by Forstaff and be deployed by Forstaff in the same role as they had performed for Franklins when employed by Opal.

21(b) The trial judge erred in failing to hold that Franklins and Forstaff had agreed or arranged that, as many of Opal's casuals as possible should be taken over by Forstaff and be deployed by Forstaff in the same role as they had performed for Franklins when employed by Opal.

22 The trial judge erred in failing to hold that the agreement or arrangement referred to in paragraphs 21(a) and 21(b) was itself sufficient to constitute Forstaff as the `associate' of Franklins within the meaning of the Client Certificate.

23 The trial judge erred in failing to hold that each of Franklins and Forstaff had implemented the steps agreed or arranged to be implemented pursuant to the agreement or arrangement referred to in paragraphs 21(a) and 21(b), which steps, being so taken, were sufficient to constitute Forstaff as Franklin's `associate' within the meaning of the Client Certificate."

12 Mr Jackson QC, who appeared for Franklins, did not object to 20, but objected to the remaining additional grounds on the basis that they raised arguments not run at the trial.

Judgment at first instance

13 To assist in understanding the meaning of "associates" in the client certificate, Barrett J considered the possible intention behind the use of the word "subsidiaries" in the composite description in the client certificate. His Honour went on to make the following findings:

"20 .... Forstaff was awarded a labour supply contract by Franklins as a result of an invitation for tenders and thereby came to replace Opal. Some ten days before Forstaff was due to start at the distribution centres at Ingleburn and Somerton on 17 April 2000, a meeting of Opal casuals took place at each centre. The meetings were arranged by Franklins. Present at each meeting at Franklins' invitation were one or more members of Forstaff's staff, a member of Opal's staff and, in the case of Ingleburn, a representative of the National Union of Workers. The proceedings were essentially the same at each meeting. The Franklins manager in attendance informed those present that Forstaff had been awarded the casual labour supply contract for the centre in place of Opal and would be starting on a specified date. The Forstaff representative in attendance was then introduced and told those present something about Forstaff and its activities and plans.

21 Mr Pettitt was the senior Forstaff spokesperson at the Ingleburn meeting. According to Mr Chalmers, the Franklins manager at that meeting, the statements made by Mr Pettitt to the assembled casual workers were to the following effect:

`I'm David Pettitt from Forstaff and this is Steve Clancy, Assistant General Manager and Rick Senkowski our NSW Account Manager.

Forstaff have been around for quite a while. Unlike Opal, we supply to other sites such as Coles/Myer at Smeaton Grange. We also have a new office complex at Smeaton Grange. If you want to formally apply to Forstaff you should go to the Smeaton Grange Office. Given you all have experience in warehousing we would like to take your names and utilise that experience. We will look to implementing a fixed roster so that people know when they will be working.

We have company profiles to give to anyone who wants one and we have prepared a question and answer sheet for you all to look at.' "

14 Mr Pettitt deposed that after he had made his opening remarks, he was asked and answered the following questions:

"Opal employee: `Do I still get to work at Franklins?'

Me: `Yes, nothing has altered. You still remain working for Opal until the handover date. Once the handover date is set in concrete you can choose to work for Forstaff or stay with Opal.

Opal employee: `Is the pay the same?'

Me: `Yes, the pay is the same.'

Opal employee: `Can I transfer my superannuation?'

Me: `Yes.'

Opal employee: `Is there any other chance of work at other Forstaff sites?'

Me: `Yes. We have an existing contract for Grace Bros/Myer and various other sites in the area.' "

15 His Honour said that the following passage in Mr Pettitt's cross-examination explained matters further:

" `Q. Can you recollect whether, at that meeting at which you spoke, you said anything to the casual work force assembled to the effect that Forstaff would like to take their names or invite them to enrol or apply for positions? A. Yes. The general talk was directed to say that they were free to come and go as they pleased, but we, the supplier, was going to take over the contract in the future and they could apply for a job with Forstaff; the introduction into Forstaff would be made easier for them in as much as they would be given an interview time after the shift and we would be compassionate with their shift times, if you like, because our offices were open 24 hours a day, so - and then they would be treated primarily like everybody else.'

24 The Opal representative at the Ingleburn meeting, Mr Campbell, said nothing. This was in accordance with instructions given by his superiors.

25 Evidence of proceedings at the Somerton meeting was given by Mr Still of Franklins and Mr Debono of Opal. In substance, the events were the same as those at Ingleburn, with the Opal representative again remaining silent. Forstaff's phone number was displayed in large characters on a sheet of paper prepared by a member of the Franklins staff."

16 At trial, Opal submitted that Franklins

"should be regarded as having had a purpose of keeping Opal ignorant of the planned meetings (and of its loss of the contract to Forstaff) until it was too late for Opal to do anything by way of arranging other work for its Franklins casuals or otherwise securing its hold on them. In the result, it was submitted, Franklins actively facilitated Forstaff's bidding for the services of those casuals and this was in pursuance of a common objective of Franklins and Forstaff to see Forstaff obtain the services of those persons or, at least, as many of them as wished to apply for employment with Forstaff and met its criteria."

17 Barrett J accepted that Franklins took the steps it did knowing that Opal's opportunities to keep its casuals would thereby be reduced and that Franklins actively facilitated Forstaff's establishing contact with Opal casuals at the Franklins sites, knowing that Forstaff would use the contact to seek to interest those persons in applying for positions with Forstaff. His Honour said:

"But the evidence also shows that, at least at Ingleburn, some of the casuals welcomed the opportunity to leave Opal. Mr Campbell, Opal's silent representative at the Ingleburn meeting, said that there was some resentment from the casuals towards Opal and that a cheer went up when replacement of Opal by Forstaff was announced."

18 The central question was whether Forstaff was an "associate" of Franklins within the meaning of the client certificate. His Honour rightly concluded that the provision in the client certificate was an anti-avoidance provision. The primary intention was to cause the fee to become payable if employees of Opal were engaged by Franklins. That purpose could easily be defeated by arrangements which switched the employment by Franklins to employment by a subsidiary or associate of Franklins; compare Brambles Holdings Ltd v Federal Commissioner of Taxation [1977] HCA 54; (1977) 138 CLR 467 at 489-90. Barrett J said:

"The purpose of the clause, as I view it, was to prevent Franklins appropriating to itself, directly or through some contrivance, the benefit of Opal's profit by `cutting out the middle man', as it was put by Mr Clarke of counsel who appeared for Franklins. The meaning of `associates', used in conjunction with `subsidiaries', should be determined by reference to that purpose."

19 His Honour regarded it as dangerous to pay much attention to the use of the word "associate" in statutory definitions. By reference to several such definitions his Honour explained why. He noted, however, that the label "associated companies" was typically given in ordinary parlance to companies having some common human elements, ie "same directors" or one company carrying out its obligations by the use of the employees of another.

20 Barrett J said:

"The theme, it seems to me, is one of lack of arm's length relationship engendered by an established connection whereby the influence of one party is at work upon the will of the other (or the influence of a third party is at work upon the wills of both) or one party prefers the other's interests in its dealings."

21 He considered the same idea underlay the notion of "associate", ie the director of a company and the company, a bare trustee or nominee, one company owned 40 per cent by another. His Honour said:

"Some established and ongoing connection producing, to some degree, a susceptibility to influence or a subordination of independent interests or a coalition of interests seems to me to be inherent in the notion of `associate' in its ordinary sense."

22 He referred to Bank of Western Australia Ltd v Ocean Trawlers Pty Ltd (1995) 13 WAR 407 and quoted a passage in the judgment of Owen J at 432 in which his Honour considered a purposive approach to the meaning of the word "associate" appropriate. Barrett J said that according to this approach an associate was someone who is not "truly independent" and that the relevant independence was independence of will and interest rather than independence of action. He cited a passage from the judgment of the Court delivered by Blanchard J in Securities Commission v Kiwi Co-operative Dairies Ltd [1995] 3 NZLR 26 at 31-32 dealing, in the context of the expression "close business associates", with the idea that a person would only be a close associate for the relevant purpose if there was a connection or relationship which altered the balance which would prevail as between the parties in a context lacking the connection or relationship but otherwise identical. Barrett J said:

"In the present case, I suggest, the balance is related to pursuit by each party of its own interests for its own ends uninfluenced by the other; and that it is an upsetting of that balance which is the indicator of `associate' status."

23 His Honour referred to Payne v Adelaide Steamship Co Ltd (1976) 14 ACLR 252 and then said:

"40 The requirement (if I may put it so high) that there be some ongoing link entailing influence of one over the other or, at all events, some subordinating of independent interests is reinforced in the present case by the fact that the `associates' reference stands as an adjunct to the `subsidiaries' reference in a provision intended to prevent avoidance of the primary purpose directed at engagement by Franklins so that it extends also to engagement by others. It is inconceivable that that extension could catch everyone who has a contractual relationship with Franklins. It would not catch the lessor of its office premises or accountants who provide it with accountant advice or carriers who transport goods for it, where all those services are supplied on ordinary arm's length commercial terms. No one would describe any of these as an `associate' of Franklins. Why, then, should Forstaff be described as such an `associate'?"

24 Barrett J found that the employment of Opal casuals by Forstaff had no economic consequences for Franklins comparable with those which would have flowed had Franklins employed those persons itself or if they had been employed by a subsidiary of Franklins. His Honour said:

41 ... In entering into employment contracts with the persons who were previously employed by Opal, Forstaff was not seeking to enhance Franklins' interests. Nor was it subordinating its own interests to those of Franklins or acting under the influence of Franklins. Forstaff was engaging in a sensible commercial activity with an eye solely to what suited it and what would further its own separate commercial interests.

42 It makes no difference, in my assessment, that Franklins facilitated the establishment of contact between Forstaff management personnel and the Opal workforce at the Franklins sites. I am satisfied that Franklins did not thereby seek to obtain for itself the economic benefits flowing from employing persons currently employed by Opal. Forstaff had already assumed a contractual commitment to supply labour to Franklins. Mr Pettitt said in evidence that Forstaff would have supplied the labour necessary for the assignment whether or not the Opal operatives had joined it - if necessary, by `throwing people at it' and redeploying persons placed in warehouses of other Forstaff customers. Forstaff did not know if any of the Opal personnel would join its workforce. Whether anyone did so was, of course, entirely a matter for the individual."

25 Barrett J did not accept that a common intention or shared objective was enough to make one party an "associate" of the other in the sense relevant to the interpretation of the client certificate. There must be some relationship of influence or subordinating of separate interests - a "paler version", as it were, of the parent-subsidiary relationship based on control as such. By way of external check his Honour referred to the Australian Accountant Standard AASB 1016 which defined "associate" as meaning an investee "over which the investor has significant influence". Significant influence was defined as meaning the capacity of an entity to affect substantially (but not control) either, or both, of the financial and operating policies of another entity.

26 For these reasons, Barrett J concluded that Forstaff was not in the relevant sense and for the purposes of the client certificate provision an associate of Franklins. In the result, an event triggering a payment obligation on Franklins' part did not happen when Forstaff engaged persons who had previously been employed by Opal and whose services had been supplied by Opal to Franklins.

Submissions

27 Opal's submissions criticised the trial Judge for construing "associates" by reference to concepts of "common human element", "lack of arms length relationship engendered by established connection", "the influence of one party ... at work upon the will of the other" or both under the will of a third party, "one party's preference for the other's interests in its dealing", "some established and on-going connection producing ...a susceptibility to influence", "a subordination of independent interests", "a coalition of interests", concepts said to be derived from treating the word "associates" in the client certificate as an adjunct of "subsidiaries" and from the statutory meaning of "associated companies". Opal submitted that one need go no further than the dictionary definitions such as those in the Shorter Oxford Dictionary, 2nd ed, "joined in companionship, function or dignity", "one who is united to another by a community of interest, and shares with him in enterprise business or action" and in the Macquarie Dictionary, "a companion, partner or ally", "a partner in interest as in business or in an enterprise or action" and "a confederate, an accomplice, an ally".

28 Franklins submitted that the meaning of "associates" must be determined by reference to the terms of the clause, the context and the purpose. An associate may be a human being such as a human resources manager of Franklins if that person engaged Opal casuals. Forstaff was independent and not acting under the control or influence of Franklins. It had no structural or other legal relationship with Franklins other than the contract relationship. This was of the same type and for the same purpose as Opal's contract with Franklins. The primary purpose of the client certificate was to discourage Franklins from directly or indirectly engaging casual employees itself without paying the placement fee. It was pointed out the question was not whether Forstaff and Franklins had associated to engage Opal casuals but whether a Franklins associate had engaged Opal casuals.

29 Opal replied with what were described as key propositions. An associate of a person, was said, in the relevant sense, to denote a relationship arising from the making of an arrangement between two or more people with a common objective, pursuant to which steps are agreed or arranged to be taken to achieve that objective where those steps or some of them are taken. The relationship need not be characterised by any imbalance of power, subordination of interests, ownership or control. It need not exist outside the relationship for the pertinent common purpose. It may be limited in duration. The taking over of the Opal casuals and their deployment was in the interests of Franklins and Forstaff, those interests being mutual and inter-dependent.

30 The arrangement between Franklins and Forstaff was for their cooperation with the common objective of Forstaff taking over as many of the Opal casuals as possible - an express term of the arrangement - and Forstaff deploying the Opal casuals in Franklins' distribution centres in the same roles as they were deployed previously by Opal.

31 We were taken to evidence of the transition strategy recruitment which provided for Franklins to advise existing casuals of the termination of the current contract and of the new supplier and to invite existing casuals to apply for registration with Forstaff. Current high performers were to be identified. Forstaff's understanding was that there might be a number of existing casuals provided by the current supplier that Franklins would want to retain under the new supplier. "Once these casuals have been identified, interviewed and assessed through Forstaff the staff would be spoken to in regard to performance and behavioural expectations." This was proposed before any contract between Forstaff and Franklins had been made.

32 In the minutes of a meeting of 3 April 2000 between a representative of Forstaff and a representative of Franklins it was stated that Franklins currently had twenty-five staff provided by Opal with tenure due to finish on 12 May 2000. "If there is no exit clause, Franklins will retain the 25 Opal limited tenure staff until 12 May. It was agreed that if this occurs we must communicate to the staff that they will have a casual position with Forstaff at the end of the period." The Franklins representative was to speak with the Opal limited tenure staff by 10 April. The Forstaff representative advised Franklins that it would be wise to check obligations of notice to Opal. Franklins was keen to make the transition as quickly as possible to ensure the minimal disruption to productivity. It was agreed that the day for registration by Forstaff should take place at Campbellfield not at Somerton so as to reinforce Forstaff as the new employer. The Forstaff representative asked how many of the existing staff needed to be replaced and was advised that virtually all the existing Opal casuals were fine (maybe only one or two needed replacement). The Franklins representative was to provide Forstaff with a list of existing staff with performance data and any general history by 5 April.

33 Forstaff sent a letter prepared in draft by Franklins to the union representatives on 7 April 2000 stating that it anticipated that the transition process would include the opportunity for any employees of the current provider to apply for a position with Forstaff and that there would be no issues about providing continuity of employment for those employees who wished to apply. Forstaff was not interested in training new staff initially for engagement at the Ingleburn site. Existing casuals working at the Ingleburn site would be given priority over any other registered Forstaff employees for the available shifts.

34 Franklins identified Opal casuals to Forstaff and notified Opal of the scheduled meetings the day before. Forstaff did take over the vast majority of Opal casuals and deployed them at Franklins' distribution centres in their same roles.

35 Franklins operated as a discount retailer and needed to manage its costs closely. The Opal casuals were a significant cog in the Franklins distribution centre machine. Continued availability of a stable trained and efficient pool of casuals was a valuable and important component in the efficient management of Franklins. Having employees on the site consistently knowing their responsibilities was a much more attractive option to Franklins than having different people each day. Change would reduce productivity levels. The recruitment and training of a pool of casuals was expensive. The taking over of the Opal casuals in order to fulfil the mutual and inter-dependent interests of Franklins and Forstaff was arranged between them. There were defined steps for achieving this.

36 Opal submitted that there was an agreement between Franklins and Forstaff in respect of the supply of casual labour and also an arrangement in respect of Opal casuals which created a relationship between Franklins and Forstaff quite different from the relationship between Franklins and Opal. Franklins and Forstaff were not independent of each other in respect of the Opal casuals. It was submitted that a person may be an associate within the meaning of the client certificate provision for a limited purpose and a limited duration. The agreed actions were taken and were successful. Put another way, Opal submitted that Forstaff and Franklins were acting in concert to achieve the particular purpose of acquiring the Opal casuals by Forstaff to be supplied to Franklins. Relevantly, this activity took place in the context of the contract between Forstaff and Franklins for the supply of casual labour.

37 The Court was taken by Mr Jackson to the evidence of Mr Pettitt, the general manager of Forstaff, who referred to discussions with Franklins' personnel in March 2000. Mr Pettitt said that following those discussions "it was not my understanding and nor was it ever my understanding that the award of the tender to Forstaff was dependent upon Forstaff's securing the Opal employees to work for Forstaff." Having given an account of what on various occasions he said or heard said to Opal casuals at meetings that Franklins arranged, Mr Pettitt deposed:

"None of what I said to the employees as referred to in the preceding paragraph was required by Franklins to be said, and Forstaff did not have any arrangement or understanding with Franklins as to the form or effect of what I said. ... At no stage Forstaff entered into any agreement or arrangement with Franklins to take over the Opal casuals. The possibility that some of the Opal casuals may apply to work with Forstaff was understood, but was not a requirement of Forstaff or Franklins."

38 The last part of this sentence from the words "was understood, but" was admitted only as to the state of mind of Mr Pettitt. Mr Pettitt said:

"Forstaff notified Franklins that Forstaff would offer employment to some of the existing Opal casuals. The decision to do so was not taken by Franklins nor directed to Forstaff by Franklins."

39 The argument pressed by Mr Tobias, though put in several ways, was that the context of the client certificate delimited the meaning of "associates" so as to narrow its natural meaning in some ways and expand that meaning in other ways. The aim of the client certificate was to prevent Franklins joining or conspiring with some other party to poach Opal casuals from Opal and then supply them to Franklins to work for Franklins as casuals in the same tasks that Opal had previously provided them to Franklins to undertake. Mr Tobias submitted:

"There was clearly a scheme within the ordinary meaning of that expression whereby Franklins and Forstaff cooperated in order to poach these people, to take away Opal's pool and engage them by Forstaff for the benefit of Franklins."

This Court was asked to make a finding accordingly.

Discussion and disposition

40 The effect of the client certificate was that, if Franklins engaged an Opal casual during or at any time within six months after the termination of a temporary (or perhaps even permanent) engagement with Franklins, it would notify Opal and pay a placement fee. This requirement accorded generally with the arrangement under which Opal provided casuals to Franklins. The obligation was not conditional and one can understand why. Franklins had the benefit of the arrangement with Opal, by which effectively Opal maintained a pool of casuals available for Franklins' needs, often no doubt at short notice and perhaps in large numbers. Franklins had the benefit of flexibility in its employment arrangements. It did not have to go into the market place and look for casuals which may often have proved inconvenient, expensive and unreliable. That was the service Opal provided and the service Franklins wanted. The client certificate served a sensible and understandable object. It prevented Franklins misusing the Opal supply arrangement by separately directly or indirectly engaging Opal casuals to work for it without notifying Opal and without paying the placement fee. I do not think that conjuring up extreme examples assists in understanding this term. It was straightforward and workable. It was equally straightforward and workable in the case of Franklins' subsidiaries for like reasons. The parties chose simple language. They attempted no embellishment so as to provide for every conceivable circumstance. They kept the line between application and non-application of the client certificate bright.

41 "Associates" is not a technical or abstruse word though it is a word difficult, if not impossible, to define in a way that completely covers but no more than covers the field. Some examples of its meaning in the client certificate are obvious. Both directors and companies, which were not subsidiaries, but in which Franklins had a substantial shareholding, would be associates. Again the client certificate could be appropriately and consistently applied. A director of Franklins or such a company which engaged an Opal casual within six months after the termination of that casual's engagement with Franklins, would attract a placement fee. I see no reason to read this down, in the case of associates, to apply only to Opal casuals engaged to do the work for the associate that they had been doing for Franklins. I am inclined to think that the engagement of an Opal casual working at Franklins by a director to run the barbeque at the company picnic or to be the barman at a director's daughter's wedding would require payment of the placement fee. But that is not something we have to decide and if such a limitation is to be imposed it would be imposed on engagements of Opal casuals by Franklins and its subsidiaries as well as by its associates. In my opinion, the extent of the reach of the obligation to notify and pay in terms of what is meant by an Opal casual and what is meant by engagement must be the same in the case of engagement by Franklins and in the case of engagement by its associates or by its subsidiaries. One cannot mould the meaning of the word "associate" to make it inconsistent according to whether one was dealing with Franklins or with its associates simply to justify an outcome in this case. This is the Humpty Dumpty school of interpretation. "When I use a word it means just what I choose it to mean - neither more nor less"; Lewis Carroll, Through the Looking Glass, Chapter 5.

42 The only relevant relationship between Franklins and Forstaff was a contractual one from 1 April 2000 for the supply of a service. Whatever may be the exact meaning of "associates" it does not extend to embrace independent contractors to a contract for the supply of a service. The householder and the milkman are not associates because one buys milk from the other. The word "associates" appears in a commercial agreement for the supply of a service. Undoubtedly the client certificate was directed to business associates of Franklins. By that was meant people or companies engaged in a common business with Franklins. The client certificate is not talking of a human association contemplated by expressions such as "close friends". It is concerned with a business relationship united by a community of business interests.

43 Regard to statutory definitions may be misleading. Statutes do by definition mould the meaning of words for particular purposes such as regulating those who have a degree of control of a company. In the client certificate the parties were not concerned with whether the Opal casuals were to be used by Franklins or its associates or its subsidiaries for one purpose rather than another. The parties were concerned that if Franklins or its associates or its subsidiaries engaged an Opal casual during the period stipulated Opal was notified and a placement fee was paid.

44 It was correctly accepted that if Franklins had done no more than engage Forstaff to provide casual staff, Forstaff would not thereby have become an associate even if Opal casuals registered with Forstaff and were supplied by Forstaff to continue casual work they had already been doing as Opal casuals at Franklins. It should be noted that Opal withdrew any claim that in such a situation the Opal casuals should be treated as having been engaged directly by Franklins or, alternatively, by Forstaff as Franklins' agent.

45 Opal relied on the encouragement given by Franklins and Forstaff to Opal casuals to move over and join Forstaff as available casuals to be supplied to Franklins. This was enlarged in argument to suggest that there was a conspiracy to poach Opal casuals. Barrett J accepted that Franklins probably took the steps it did knowing that Opal's opportunities to keep its casuals would thereby be reduced and that Franklins actively facilitated Forstaff's establishing contact with Opal casuals at the Franklins sites, knowing that Forstaff would use the contact to seek to interest those persons in applying for positions with Forstaff. I think this is a fair summary of the evidence that Opal relied on.

46 In the absence of any definition of "associates", in my opinion, the word when used in the expression "Franklins, our associates or subsidiaries" is referring to people or bodies associated in the furtherance of a business common between them and Franklins. Forstaff was not an associate of Franklins in Franklins' business nor was Franklins an associate of Forstaff in its business. They were parties to an arms length contract for the supply of a service. No doubt they were engaged in furthering the objects of that contract by recruiting Opal casuals. The fact that they had a common interest in a contract for the supply of a service or in the way that contract was performed did not change them into associates within the meaning of the client certificate. The relationship remained the relationship of parties to an arms length contract for the supply of a service.

Orders

47 I propose that the appeal be dismissed with costs.

48 IPP AJA: I agree with Sheller JA.

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LAST UPDATED: 11/06/2002