Kenoss Contractors Pty Limited v Allied Constructions Pty Limited [2001] NSWIRComm 19 (19 February 2001)

Last Updated: 4 April 2001

NEW SOUTH WALES INDUSTRIAL RELATIONS COMMISSION

CITATION : Kenoss Contractors Pty Limited v Allied Constructions Pty Limited [2001] NSWIRComm 19

FILE NUMBER(S): IRC 509

HEARING DATE(S): 05/02/2001, 09/02/2001, 19/02/2001

EX TEMPORE DATE: 19/02/2001

PARTIES:

APPLICANT

Kenoss Contractors Pty Limited

RESPONDENT

Allied Constructions Pty Limited

JUDGMENT OF: Wright J President

LEGAL REPRESENTATIVES

APPLICANT

Mr M J Lawler of Counsel

Solicitors: Gillespie-Jones & Co

Fyshwick ACT

(Mr I Gillespie-Jones)

City Agent: Hemphill & Co

Solicitors

RESPONDENT

Mr R E Dubler of Counsel

Solicitors: Corrs Chambers Westgarth

(Mr R Regan)

CASES CITED: Cameron v Unilever Australia Limited (unreported, Cahill VP, 3 June 1997)

Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148

Darvall v N.Z. Securities Ltd (1990) 21 NSWLR 36

Dickins v Gibb Nominee Services Pty Ltd (1991) 43 IR 276

Elliott v Royal Motor Yacht Club of New South Wales, Newcastle Branch (1988) 42 IR 35

Ex Parte V G Haulage Services Pty Ltd; Re The Industrial Commission of New South Wales [1972] 2 NSWLR 81

Gibson v Western Sydney Area Health Service [2000] NSWIRComm 13

Jackson v Sterling Industries Ltd (1987) 162 CLR 622

Loupos v Basa t/a Robert R Andrews Real Estate (1995) 62 IR 397

Maharaj v 7 Eleven Stores Pty Limited (unreported, Peterson J, 4 April 1997)

Maiden v New Zealand Natural Pty Limited (unreported, Hungerford J, 20 June 1997)

Production Spray Painting & Panel Beating Pty Ltd v Newnham (1991) 27 NSWLR 644

Stevenson v Barham (1977) 136 CLR 190

TeleTech Interrnational Pty Ltd v Medical Benefits Fund of Australia Limited (No 1) (unreported, Maidment J, 28 September 1998)

TeleTech Interrnational Pty Ltd v Medical Benefits Fund of Australia Limited (No 2) (unreported, Maidment J, 30 September 1998)

LEGISLATION CITED: Industrial Relations Act 1996 s 106

JUDGMENT:

INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

IN COURT SESSION

CORAM: WRIGHT J, President

Monday 19 February 2001

Matter No IRC 509 of 2001

KENOSS CONTRACTORS PTY LIMITED v ALLIED CONSTRUCTIONS PTY LIMITED

Application pursuant to s 106 of the Industrial Relations Act 1996.

JUDGMENT

(Extempore)

[2001] NSWIRComm 19

1    On 5 February 2001 the applicant commenced proceedings pursuant to s 106 of the Industrial Relations Act 1996 and also, on that date, without demur from the respondent, was granted leave to file in Court a Notice of Motion seeking urgent interlocutory relief.

2    The substantive interlocutory relief sought is set out in paragraph 3 of the Motion in these terms:

Until a date specified by the Commission or until further order, the Respondent be restrained from calling on a National Australia Bank bank guarantee dated 11 April 2000 in the sum of $82,965 in favour of the Respondent and given on behalf of the Applicant.

Factual background

3    The factual background to the s 106 application and the present relief is as follows. Because of its complexity it is necessary to set it out in some detail to understand the issues for decision. In 1999 the respondent contracted to the New South Wales Department of Public Works and Services (DPWS) to design and construct the Moruya South Heads Sewerage Scheme and the applicant became its major subcontractor for the project. This occurred through a process which commenced as described in evidence in this way:

3. Allied engaged consulting engineers, Hyder, to redesign the sewerage scheme contained in the DPWS drawings with a view to achieving savings in the cost of construction. Hyder prepared that design ("the Hyder Design") and produced schedules headed "RETIC 7" that detailed the variations of that design from the conception design contained in the DPWS drawings ("the Hyder Schedules").

4. The cost savings in the Hyder Design were achieved by various means including:

(a) a reduction in the diameter of some pipes (resulting in less excavation)

(b) reduced trench depths for many pipes (resulting in less excavation)

(c) substitution of devices known as "Saif-Tees" for manholes (Saif-Tees being substantially less expensive to install than manholes)

(d) the elimination of scours from rising mains

(e) incorporation of "low lift" pump stations (resulting in less excavation)

5. In June 1999 Allied invited the Applicant ("Kenoss") to tender for a subcontract for the pipelaying and associated works involved in the Hyder Design. Allied provided Kenoss with DPWS drawings and the Hyder Schedules constituting the Hyder Design.

6. In about 16 June 1999, after having consulted with Allied, Kenoss submitted a tender to Allied based on the Hyder Design and the Hyder Schedules in the sum of $2.002 million.

7. The person at Kenoss who prepared the tender was Mr Bruce Ford, Kenoss' senior engineer and the person who was to be Kenoss' project manager for the project if Kenoss' tender was accepted.

8. Thereafter, Mr Ford had consultations with Mr Fred Brown of Allied on a reduced scope of works.

9. On about 11 August 1999 Mr Ford went overseas on holiday to Canada.

10. By letter dated 16 August 1999 Kenoss submitted to Allied a revised tender, prepared by Mr Ford prior to his departure, based on a reduced scope of works, in the sum of $1,607,813 which was subsequently revised to an amount of $1,659,313.00 ("the revised tender").

11. Allied submitted a `design and construct' tender for the Moruya South Heads Sewerage Scheme to the DPWS based on the Hyder Design which tender was subsequently accepted by the DPWS.

12. Allied and DPWS entered a contract ("the Main Contract") for the construction of the Moruya South Heads Sewerage Scheme based on the Hyder Design being Department of Public Works and Services Contract No. 9800433.

4    The situation then became complicated, according to the applicant, because of circumstances which arose during the absence overseas on leave of Mr Bruce Ford:

13. While Mr Ford was absent abroad, Allied wrote a series of letters seeking clarification as to whether particular matters were within the scope of the revised tender and held a meeting with Kenoss on 12 October 1999 to further address that issue.

14. A junior staff member within Kenoss, Mr Matt Houghton, responded to those letters and spoke at the meeting and erroneously indicated that matters were within ambit of the Kenoss tender.

15. Allied must have known, or must be taken to have known, that at least some [of] the matters agreed by Kenoss in that correspondence were being agreed in error and that the tender price submitted by Kenoss was not sufficient to cover the scope of work that was being agreed in the course of the correspondence and the meeting of 12 October 2000.

16. In about late November or early December 2000 Allied submitted a form of subcontract to Kenoss for execution. One of the junior staff members, Mr Ilmar Kalnins, executed the form of subcontract on behalf of Kenoss ("the Subcontract") and forwarded it to Allied.

17. The form of Subcontract as executed annexed the DPWS drawings but did not refer to the Hyder Design or annex the Hyder Schedules.

18. The principal areas in which the Subcontract contained a scope of works that was broader than the scope of works on which Mr Ford had based his revised tender were:

(a) survey with placement of survey pegs to enable Kenoss as pipelayer to set the levels;

(b) responsibility for locating services;

(c) the supply and placement of sand for side support and overlay of the pipes in the trenches;

(d) restoration of precise ground levels;

(e) trench compaction complying only with the requirements of a standard known as TR3;

(f) supply of metal bedding in wet areas

(g) supply geotextile fabric;

(h) total responsibility for traffic control;

19. On or about 13 December 1999 Allied executed that form of subcontract and returned it to Kenoss. Mr Ford returned to wok on 13 December 1999 and a few days later saw the executed subcontract and saw that it contained a scope of work far exceeding the scope of work on which original tender or the revised tender were based.

5    Mr Ford arranged for a meeting between the parties and on 11 January 2000 there was a meeting at the offices of Allied and Kenoss to discuss the mistakes made by the junior staff members and the fact that the subcontract as signed annexed only the DPWS drawings and incorrectly omitted reference to the Hyder Design and the Hyder Schedules. Also discussed was the inability of Kenoss to perform the subcontract for the subcontracted price.

6    During the meeting of 11 January 2000 it was agreed through Mr Brown that the subcontract should reflect what was priced, namely the Hyder Design and not the design in the DPWS drawings and that variations would be measured against the Hyder Design. It was also agreed that Allied would consider in good faith any improvements in the design becoming evident while construction was proceeding and suggested by Kenoss so as reduce the cost of construction. Allied said that it would consider making payment towards the cost of supplying sand for the side support and overlay of pipes and it was agreed that Allied would assume primary responsibility for locating services, with Kenoss supplying a backhoe for investigative excavation. A number of other matters of less significance but nevertheless important to the parties' arrangements, were also agreed. It also further represented that Allied would only exercise its rights under the Termination for Convenience Clause if the work was taken from Allied by the DPWS.

7    The applicant then commenced work on the project on 16 February 2000. The construction drawings provided to the applicant by the respondent at or about the time of the commencement were drawings of, and substantially embodied, Hyder Design and Hyder Schedules. It is then said:

26. On the first day of work Mr Andrew Burns, Allied's representative on site, agreed with Mr Ford that in relation to amendments to the design:

(a) Allied would issue and Kenoss would accept revisions of the design in the form of hand altered photocopies of the plans thereby releasing Allied from having to issue amended drawings for each change;

(b) the amendments would be taken by the parties as forming part of the construction drawings and a remeasure at the end of the contract would determine the overall variations either way;

(c) Allied would not require Kenoss to issue formal variation paper work for each and every revision or amendment.

("the Burns agreement").

Applicant's submissions

8    The applicant then relies upon what happened in relation to certain variations or alleged variations, and this is the first basis of unfairness which the applicant alleges. It says that during the course of the works the respondent issued field directions in the form of drawings etc. which varied or amended the construction drawings and the eight Hyder Schedules and these variations involved the applicant in substantial additional work, as particularised; notwithstanding the variations and directions required by the respondent, the respondent has refused to recognise any variation and has refused to grant an extension of time for any of them.

9    The applicant's evidence is that, although the respondent was to some extent then accommodating towards it in the early stages of the project consistent with the matters represented by and agreed with Mr Brown at the Wollongong meeting, tensions developed between the parties culminating in a meeting on 31 May 2000 at which the respondent indicated that it required the applicant to perform strictly in accordance with the subcontract. Further, that it was impractical at this stage for the applicant to do other than attempt to complete the subcontract in accordance with the requirements of the respondent.

10    The situation then became further complicated by a course of events which commenced on approximately 16 August 2000 and this is said to give rise to the second ground of unfairness. On that date the applicant carried out preliminary work on a part of the project referred to as "the South Head Road line" and the respondent directed the applicant not to carry out further work in that area "initially to permit dilapidation surveys required by DPWS ... and continuing after a dilapidation survey revealed a house susceptible to damage because of the poor state of its foundations". The applicant contended that, because of these developments, there should have been a suspension of the work under the subcontract. However, the respondent suspended the work on the basis that the applicant was the requesting party rather than, as the applicant submits, the respondent should be regarded as the requesting party.

11    Although the completion date specified in the subcontract was 2 September 2000, by that date the applicant did not receive any direction to proceed with the work on the South Head Road line until 10 October 2000 when the respondent directed the applicant to proceed in that area. However, according to the applicant, the blasting holes and the bench where that line was to be laid had become badly contaminated with raw sewage for reasons outside its control. It had not been known that the area was contaminated either at the time of the tender or otherwise and no provision was made in the tender or subcontract for work to be performed in contaminated ground. Certain correspondence ensued and on 10 November 2000 the respondent withdrew the South Head Road line work from the applicant and arranged for it to be carried out by another subcontractor which was prepared to work in the contaminated ground.

12    On 19 December 2000 the respondent issued a letter to the applicant indicating substantial completion of the subcontract works and the works were handed over to the DPWS on that day.

13    Subsequently, and since the only extension of time granted by the respondent to the applicant was an extension of ten days from 2 to 12 September 2000 on account of wet weather, the respondent made a claim against the applicant for liquidated damages under the subcontract in respect of the whole of the period 12 September to 19 December 2000 in the sum of $367,000, as calculated in accordance with the subcontract. The applicant submits that it is entitled to extensions of time arising out of, first, the variation; secondly, the respondent's direction to cease work on the South Head Road line; and thirdly, the inability of the applicant to continue working in that area after 10 October 2000 because of the contamination. Accordingly, it is submitted by the applicant that it had substantially completed its contract work well before 19 December 2000, a substantial proportion of the rectification work performed by the applicant at the end of the contract works related to leaks caused by defective material supplied by the respondent; and the respondent, to the best of the applicant's knowledge, has not been required to pay any liquidated damages for delay under the main contract with the DPWS.

14    Returning to the first ground of unfairness, the respondent has made certain claims for "negative variations" on the applicant arising from the fact that the applicant has carried out work less than that required under the subcontract; and part of the claims the respondent makes on the applicant relate to that situation. The applicant submits that situation raises the question of unfairness because it has carried out the work in substance under the original tender for the amount of the tender and the fact that it has done less work than required under the contract reflects the mistaken situation which occurred and represented the difference between the matters in the tender and the matters included in the subcontract. This, it is submitted, shows the substantial unfairness of the "negative variations". In summary on relevant financial matters the applicant deposes:

Financial matters

44. Kenoss' actual expenditure to date on the Subcontract is in excess of $1.9 million and Kenoss has outstanding liabilities of between $190,000 and $230,000 in relation to the Subcontract. These amounts doe not include any allowance for the cost of plant provided by an associated company, Kenoss Pty Limited, to Kenoss for use on the project. The cost of hire of that plant is in excess of $500,000.

45. Kenoss has received $1.343 million from Allied in relation to the works.

46. Notwithstanding the fact that the Subcontract price is $1.659 million, Allied claims (on the basis inter alia of negative variations and backcharges of approximately $250,000 and the liquidated damages claim of $367,000) that Kenoss is indebted to Allied in the sum of $344,888.

47. Allied has indicated its intention to call on a bank guarantee in the sum of $82,965 provided by the National Australia Bank to Allied on behalf of Kenoss in partial satisfaction of that alleged indebtedness.

48. The position for which Allied contends is one where, on a subcontract sum of $1.659 million and where actual expenditure by Kenoss exceeds $2.2 million and is in excess of $2.7 million when proper account is taken for the cost of plant, the total amount properly due to Kenoss on the Subcontract is only $0.988 million. (emphasis in original)

The applicant has more fully particularised the claims it makes and the bases of them.

15    As earlier noted, the particular relief the applicant seeks on an interlocutory basis arose from the expressed intention of the respondent to call on a bank guarantee given by the applicant to the respondent in April last year in the sum of $82,965 in the light of the dispute between the parties as to the claims for liquidated damages and the negative variations made by the respondent on the applicant.

16    It is relevant to record that just before 9 am on Monday 5 February 2001, which was prior to the time when the respondent, in terms of its earlier notification to the applicant and its view of its rights under the bank guarantee, was entitled to call on it, gave an undertaking to the following effect. That it would stay its hand until the Court determined the motion before it. The undertaking was subsequently modified in terms which have no material relevance. Further, the applicant accepted that, in order to obtain the interlocutory order it sought, it was necessary for it to give the usual undertaking as to damages and it gave that undertaking.

17    The applicant submits that it has a good arguable case; that damages will not be an adequate remedy and that the balance of convenience favours maintenance of the status quo pending the hearing of the proceedings. The applicant initially rested its claim for interlocutory relief on the power which is part of the Court's inherent powers as a superior court of record and the undoubted power of a superior court to grant an interlocutory order or injunction maintaining the status quo pending the hearing of the suit before it.

18    Although the applicant originally brought forward its case for the interim or interlocutory relief on the basis of the power of the Court to maintain the status quo, subsequently, in the light of the line of authority in this Court exemplified by the judgment of Peterson J in Gibson v Western Sydney Area Health Service [2000] NSWIRComm 13, the applicant accepted that, without more, it was unlikely to obtain the relief it sought. Accordingly, its case was then put forward on the basis that the evidence before the Court demonstrated that the applicant has only approximately $60,000 of its bank overdraft presently available to it and, if the bank guarantee is called on, its overdraft will be drawn down beyond the limit of credit available. Accordingly, the calling on the bank guarantee by the respondent would place the company in the position of technical insolvency. The consequent risk of insolvency falls within the formulation laid down in the relevant cases. There is accordingly an analogy with the basis upon which a Mareva order might be granted in that the risk of insolvency arising for the applicant has the potential to or would deprive the court of the capacity to make orders in the proceedings.

19    Further, in reliance upon the judgments of Maidment J in TeleTech International Pty Ltd v Medical Benefits Fund of Australia Limited (No 1) (unreported, 28 September 1998) and TeleTech International Pty Ltd v Medical Benefits Fund of Australia Limited (No 2) (unreported, 30 September 1998), it was submitted that, where there is, as in this case, a demonstrated potential adverse impact on employees, it was appropriate to make orders to effectuate the Court's jurisdiction to make orders; and also having regard to the fact that the protection of employees and their industrial rights could be seen as one of the primary bases or purposes of the enactment of s 106 of the Industrial Relations Act, and its predecessor provisions. In this case there was evidence that there were 20 employees whose livelihood depended upon the continuance of the operations of the company. Their employment was thus at risk from the situation presented to the applicant by the threatened action of the respondent. Indeed, they were the persons doing the work performed by the company.

20    The applicant's final basis for relief relied upon certain dicta of Watson J in Elliott v Royal Motor Yacht Club of New South Wales, Newcastle Branch (1988) 42 IR 35 at 36 where his Honour said:

What is sought, simply put, is an interlocutory order under s 88F. It is unnecessary to discuss as a matter of power the Mareva injunction cases which turn on the frustration of any proceedings before the Commission if such an order were not made. This, in my view, is a different situation where what the applicant is seeking is an interim order under s 88F(1) varying the contract pending determination of the application finally.

In my view there is jurisdiction to make such an interim order if a sufficient case is made out so that a preliminary finding can be made that there is unfairness - whereby the Commission is satisfied that there is sufficient foundation for some interim order to be made.

21    It was submitted that the Court in the circumstances of this case could grant interim relief rather than the interlocutory relief and, if it was prepared to do that, relief should be limited to interim relief at this stage.

Respondent's submissions

22    It is convenient to detail the respondent's submissions since that facilitates the elaboration of the Court's conclusions. The respondent made detailed submissions disputing that the Court could, or alternatively should, grant any of the relief sought by the applicant. The submissions commenced with the proposition that the Court could not be satisfied that there was a serious issue to be tried and that the difficulties which faced the applicant in obtaining the interlocutory or interim relief it sought could be summarised as follows:

1. As to the power to make the order sought -

(a) what is the correct principle? and

(b) is it met?

2. The Court must be satisfied:

(a) that there is a serious issue to be tried; and

(b) damages would not be an adequate remedy.

3. The Court must be satisfied that it has jurisdiction to make the order sought under s 106 of the Act.

4. There are serious doubts as to the adequacy of the undertaking given by the applicant as to damages.

5. The balance of convenience does not weigh in favour of the grant of the applicant's order as sought.

6. Just as there was no basis to grant interlocutory relief, there was no basis to grant interim relief.

It was submitted that all of these questions or issues should be answered against the applicant.

23    The respondent submits that the test developed in the relevant line of cases is whether an order is required so as to ensure that any final orders may not be frustrated, put at naught or rendered ineffective: Hungerford J in Darvall v N.Z. Securities Ltd (1990) 21 NSWLR 36 at 43; Schmidt J in Loupos v Basa t/a Robert R Andrews Real Estate (1995) 62 IR 397 at 401; Peterson J in Gibson v Western Sydney Area Health Service at [15]. Applying that test it could not be held that the respondent moving on the security represented a situation which met the applicable test; particularly so where, as here, practical completion of the contract sought to be impugned has occurred. The only substantive orders sought are variations of the contract and consequent payment of money where there is no suggestion that at the end of the proceedings those orders, if made, cannot be met by the respondent and be effective.

24    As to reliance on the judgments of Maidment J in TeleTech, the respondent submitted that the relevant parts of his Honour's judgments are "extremely difficult and ... wrong and inconsistent" with the judgments of Peterson J in Maharaj v 7 Eleven Stores Pty Limited (unreported, Peterson J, 4 April 1997) and Gibson v Western Sydney Area Health Service. Further and in particular, that the following passage in TeleTech (No 1) at 7:

The existence of jurisdiction to grant orders prolonging the life of the contract between the parties for another year is not contested. If, however, the 18 were to be retrenched prior to such final orders it is questionable whether or not they would gain any benefit from those orders. Thus it is possible that the final orders considered appropriate to the case might be frustrated or put at naught if the retrenchments occur.

For the above reasons I reach the view that the jurisdictional challenge should be rejected and the application for interlocutory injunctive relief should proceed.

is also inconsistent with the judgments of Peterson J. In any event, even if contrary to the respondent's primary submission that TeleTech is incorrect, the factual circumstances of this matter are so different that it should not be applied. In TeleTech, unlike the present case, there was a subsisting contract which his Honour held, if permitted to end, might lead to a situation where the employees who were employed under it and who may be the beneficiaries of any final relief, might have the benefit to them of the final orders frustrated in the absence of interlocutory orders.

25    As to whether there is a serious issue to be tried it was submitted that an analysis of the contract between the parties showed that there were adequate dispute resolution procedures under it which could deal with the applicant's complaints and should be allowed to do so. These involved referral to an expert and related procedures which could have been invoked months ago and, if the applicant had done so, would have led to a prompt resolution of the issues. An analysis of the relevant chronology also shows that the applicant could have, and therefore should have, moved for relief in November last year when the parties were relevantly in dispute. Its failure to do so represents delay such that relief should be denied to it on that ground alone.

26    The respondent also referred to what was said to be the inadequacy of the evidence before the Court; for example on the key issue now pressed by the applicant as to the potential for technical insolvency. The only evidence was statements in the summons filed as verified by affidavit by a solicitor on instructions. It was submitted that this of itself, but particularly when considered in the context of the precise evidence given, was not evidence which would ground either the submission made or the grant of the application otherwise.

27    As to balance of convenience, the respondent submits the considerations here point heavily in its favour and to the denial of relief. It submits that the evidence does not, on analysis, show any impending insolvency, likely termination of employees or damage to the applicant. The evidence relied on by the applicant is tenuous and does not make out any of these matters.

28    The respondent submitted that the Court could not find that there was jurisdiction under s 106 to deal with the substantive application, relying on Stevenson v Barham (1977) 136 CLR 190 as explained in Production Spray Painting & Panel Beating Pty Ltd v Newnham (1991) 27 NSWLR 644 at 649, 656 - 657. It was submitted that the contract here did not lead, in the sense considered in those cases, directly to the performance of work in an industry. Relevant features of the contract that point against jurisdiction in the present case include the size of the project and the way in which it is described. Further, there is insufficient correlation between the contract and the actual conditions of the performance of work by persons.

Applicant's submissions in reply

29    The applicant in reply took issue with the various submissions of the respondent. For example, it submitted that jurisdiction clearly existed when regard was had to the consideration of the High Court in Stevenson v Barham at 200 - 201. The respondent's reliance on size or scope of the contract is misplaced and an examination of the terms of the contract shows that it is one that leads directly to performance of work. The issue of the size or an issue of scope of the contract is, as a matter of principle, an issue only relevant to discretion and not to jurisdiction.

30    As to the evidentiary issues, balance of convenience and associated matters, it was denied that there was delay in any relevant sense and the Court should infer from the evidence before it and, if necessary, the circumstances attendant upon the bringing of the urgent application, that there exists a situation of potential insolvency of the applicant such as to ground the relief sought. The applicant also tendered further documents in reply which, although the subject of some detailed debate do not, on the view I take of the present application, require further reference.

Jurisdiction

31    The issues raised as to jurisdiction require consideration of certain of the terms of the contract and the two authorities referred to, Stevenson v Barham and Production Spray Painting. There was also debate as to the nature of the finding required where there was a direct attack on the jurisdiction of the Court to grant any relief.

32    As to the last issue, I consider there is no different approach required in that respect as there is to the general approach to be adopted to interlocutory or interim relief. That is, it is necessary for the applicant to show that there is a serious question to be tried and the balance of convenience favours the grant of the relief. Usually any jurisdictional issues are to be dealt with in the first area, although in some cases they may also be relevant to the second: see Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153 - 155, where it was held that in some, albeit rare, cases it will be relevant to assess the strength of a plaintiff's case in dealing with the balance of convenience.

33    It is appropriate to refer briefly to some aspects of the contract (exhibit PS1) which appear to be relevant to this issue. The first reference is in clause 3.0 of the contract entitled "Scope of the Works":

The scope of works for this subcontract is for the supply of supervision, labour, plant, materials and equipment for the following:

· Excavate, bed, lay, joint, backfill and compact, all pipework within the sewage collection and transfer system, including gravity mains and rising mains to the extent detailed on the drawings attached as Appendix A.

· Excavate, lay joint, place concrete, backfill of property sideline/riser junctions to within the property boundary as detailed on drawings attached as Appendix A.

· Excavate, construct, connect pipes, place concrete base, backfill, compact, shape base and testing of precast concrete manholes.

· Excavate, construct, connect pipes, place and compact base support material, backfill, compact, and testing of SAIF-T Access Fitting.

The balance of that paragraph sets out in greater detail particulars or specification of those works.

34    Clause 5.0 is entitled "Occupational Health and Safety" and commences:

The Subcontractor and its subcontractors will be

required to comply with and adhere strictly to all

legislative OHS&R regulations as well as all NSW

DWPS OH&S requirements and Allied constructions

Occupational Health and Safety Plan.

The balance of the clause specifies the responsibilities of the subcontractor and its subcontractors, including responsibility for complying with all statutory obligations with respect to occupational health and safety of the project and responsibility as to the safety of their employees, etc. Clause 7.0 is entitled, "Industrial Relations/Payment to employees" and includes certain references to obligations on the subcontractor in these terms:

As agreed, in an effort to minimise any industrial unrest on the project, the Subcontractor will make the following contributions for all employees on the project:

· C + BUS to meet award and industry accepted

standards

· Redundancy to meet award and industry accepted

standards

No illegal use of PPS, pyramid subcontracting or cash in hand payments will be allowed on the project.

No alteration to the subcontract value will occur as a result of any additional payments made by the Subcontractor, or enforced on the Subcontractor, by either a Site Allowance or as a result of industrial action.

35    The cases as to jurisdiction may be dealt with shortly. The relevant passages in the judgments are those in Stevenson v Barham at 200 - 201 where it is made clear that the reference to there being a necessary requirement of "an industrial colour or flavour" in cases such as Ex Parte V G Haulage Services Pty Ltd; Re The Industrial Commission of New South Wales [1972] 2 NSWLR 81 was a reference to transactions which directly lead to work in an industry and once that jurisdictional fact had been established it was a matter for the Commission's discretion as to the relief, if any, that would be granted.

36    I am prepared to deal with this issue in terms of whether there is a seriously arguable case (that is, a level somewhat higher than the usual overall test) in terms of the statement in Production Spray Painting & Panel Beating Pty Ltd v Newnham at 657:

It is not sufficient to establish jurisdiction that a contract "involves the provision of goods and services, with a consequent performance of work in an industry": Ex parte V G Haulage Services Pty Ltd (at 88) (our emphasis). The impugned contract, etc, therefore must directly, that is under or pursuant to its terms, provide for the performance of work in an industry.

The test is whether the contract must directly provide for the performance of work in an industry. The extracts cited earlier from the provisions of the contract, in my opinion do show jurisdiction at this level. The jurisdictional objections of the respondent to the grant of relief at this stage should therefore be rejected.

Consideration

37    There is now a developed line of authority as to the issue of the power of this Court to grant interlocutory or interim relief in proceedings initiated under s 106 of the Industrial Relations Act. The relevant authorities include Darvall v N.Z. Securities Ltd (1990) 21 NSWLR 36 at 41 - 43; Dickins v Gibb Nominee Services Pty Ltd (1991) 43 IR 276 at 277 - 279; Loupos v Basa t/a Robert R Andrews Real Estate (1995) 62 IR 397 at 401; Maharaj v 7-Eleven Stores Pty Limited (unreported, Peterson J, 4 April 1997); Cameron v Unilever Australia Limited (unreported, Cahill V-P, 3 June 1997); Maiden v New Zealand Natural Pty Limited (unreported, Hungerford J, 20 June 1997) and Gibson v Western Sydney Area Health Service.

38    It was accepted by both counsel the relevant principles are usefully set out in the judgment of Peterson J in Gibson v Western Sydney Area Health Service. It may therefore be appropriate to refer to his Honour's consideration of the issue, albeit omitting that part of the judgment which considers and extracts relevant passages from the judgment of the High Court in Jackson v Sterling Industries Ltd (1987) 162 CLR 622:

15 The circumstances in which this Court has jurisdiction to grant interlocutory relief have been considered on a number of occasions and may now be said to be quire circumscribed. In summary terms, the power is limited to the making of an order which is necessary to preserve the jurisdiction of the Court to hear and determine the issues in the matter, such that any order made will be capable of having practical, or actual, effect.

...

18 That the Industrial Commission of New South Wales had power, in relation to proceedings brought under s.88F of the Industrial Arbitration Act, 1940, to grant orders in the nature of Mareva injunctions was considered and so held by Cahill J. in Wheeler v. Selbon Pty. Ltd, trading as Parklands Nursery. [1984] 1 N.S.W.L.R. 557; 7 IR 383.

19 That question of power received further consideration, and support, in Dickins v. Gibb Nominee Services Pty. Ltd. & Anor [1991] 43 IR 276 at 277-279 per Maidment, Hungerford & Cullen JJ.

20 In Darvall v. N.Z. Securities Ltd. [1990] 39 IR 215, Hungerford J. said, after discussing the cases:

"Whether a particular interlocutory order is within the power of the Commission would seem then, on the authorities and in the absence of any explicit grant of power by the statute, to depend upon whether the making of the order is necessary to prevent the frustration of the Commission's due process; because otherwise, it would seem, the very nature of s.88F, properly construed, would be expanded. In other words, unless s.88F expressly or by implication empowers interlocutory relief to be granted, the Commission as a statutory court, albeit a superior court of record, would be exceeding its jurisdiction." (ibid at p.220)

21 and then at p.221 his Honour said:

"Thus, jurisdiction to make an order under s.88F can only arise when one or more of the grounds of relief contained in the section are made out; and that can only be, in my view, as part of the proceedings for final relief and not in any interlocutory sense. However, as earlier stated, the Commission is empowered, by reason of its constitution as a superior court of record, to make interlocutory orders in the protection of its process and so as to ensure that any final orders made may not be frustrated or put at naught."

22 In Maharaj, the applicants, as operators of a store franchise in respect of which they were under notice of termination, brought an action under s.106 of the Act in which they sought compensation but with the retention of the business an alternative remedy. In the course of judgment I said:

"In the present matter the relief primarily sought is effectively compensation although remaining in the business is an alternative remedy. The applicants have been attempting to sell the business. I do not consider the power of the court to grant relief is conditioned or shaped by the nature of the relief sought. The power, as in a mareva case, is to take such steps as are necessary step (sic) to ensure the court is not denuded of the capacity to make an effective order. While the applicants may be denied the opportunity to earn a living from the business at least pending the hearing of the substantive issues next month, a remedy by way of compensation is clearly available if the applicants succeed on the merits. The court's final orders are not, thus "frustrated or put at naught".

23 Approximately two months later Cahill V-P in Cameron & Ors v. Unilever Australia Limited & Anor. (unreported 3 June 1997 - Matter No. IRC97/1602) said:

"The interlocutory relief sought by the Notice of Motion now under consideration is that the respondents be temporarily restrained from directly distributing, or appointing any person to distribute, ice cream products in the applicants' geographical area, and from refusing to supply such products to the applicants on terms of trade presently applying.

The power of the Court to grant relief of that kind has been considered by the Court and its predecessors on a number of occasions. The most recent case referred to in the submissions of counsel today is Maharaj v. 7-Eleven Stores Pty Ltd decided by Peterson J. in this Court on 4 April 1997. I consider that case is substantially similar in nature to the case now before the Court and I respectfully agree with his Honour's decision in that case and the reasoning which led to that decision."

24 In the same month Hungerford J. delivered judgment in Edwin John Maiden and ors. v. New Zealand Natural Pty. Limited and anor. (unreported 20 June 1997 - Matter No. IRC97/109). After citing the above quoted passages from Maharaj , his Honour said:

"As to the present case, I find the reasoning of Peterson J. directly applicable in leading to the conclusion that in the circumstances here the Court lacks jurisdiction to grant the injunctions sought. True it is that the applicants seek, a variation of the franchise agreement so as to enable them to remain in business on fair and reasonable terms; the whole thrust of the interim relief is clearly directed to securing that position pending the determination by the Court of final orders. However, and like Peterson J., I do not think the power to make orders under s.106 "is conditioned or shaped by the nature of the relief sought". For instance, in Darvall I held that there was no basis for the application of general equitable principles for the granting of injunctions in relation to proceedings under s.88F of the then Industrial Arbitration Act 1940 (and, hence, s.106 of the Industrial Relations Act 1996) as the section conferred no rights to have any particular factual situation or set of circumstances created or maintained for the purpose of the determination of the proceedings. My reasoning in that respect was as follows [1990] 21 N.S.W.L.R. 36 at 41-43; [1990] 39 I.R. 215 at 219-221:

"Finally, in terms of the application of general equitable principles to the granting of injunctions in relation to proceedings under s.88F of the Industrial Arbitration Act, I respectfully agree with the judgment of McLelland J. in Bringmann v. Lend Lease Investments Pty. Ltd. (McLelland J., 4 December 1979, unreported), which relevantly states (at p.4):

"In my opinion, these considerations provide no legitimate basis for the grant by this court of injunctive relief. The principles of equity provide no jurisdiction for the grant of a final injunction to restrain acts which neither infringe some legal equitable or statutory right of the plaintiffs nor are otherwise unlawful.

Although s.88F, assuming the plaintiffs can bring their case within its jurisdictional limits, may be accepted as conferring on the plaintiffs a right to have their application determined, it does not confer upon them any rights to have any particular factual situation or set of circumstances created or maintained for the purpose of the determination of that application. Conversely, there is nothing in s.88F which operates to alter the legal position of a respondent to an application or to render unlawful any acts of his at any time before an order is made thereunder.

There is, in my opinion, no useful analogy between the circumstances of such a case as the present, on the one hand, and circumstances in which this court in proceedings before it will grant an interlocutory injunction in aid of or to protect a right to final relief which may ultimately be established in those proceedings, on the other hand."

One may, it seems to me, readily distinguish cases such as Dickins and Wheeler where jurisdiction to make a Mareva injunction was found to exist on the basis, consistent with the reasoning in Darvall (ibid at 50; at 227-228) and as was stated in Wheeler (supra at 557; at 384), that an interim injunction may be made as "an order designed to prevent an apprehended action on the part of the respondents which, if not prevented, would or may frustrate the due process of the court by denying a successful litigant the right to receive the amount of orders which the court considers just and reasonable in all the circumstances of the case".

In the case before me, the applicants have a clear remedy if they succeed in their substantive application for compensation by way of appropriate money orders in relation to the franchise fee, goodwill and loss of business opportunity if the Court were to grant either the primary relief of a variation to the franchise agreement or the alternative relief of avoiding it from its commencement. Therefore, the final orders which may be made in this matter would not be frustrated nor put at naught if the interim relief be declined. The motion for interlocutory injunctions must be dismissed for want of jurisdiction."

25 While the jurisdiction is not necessarily limited to orders equivalent to Mareva-type orders, the purpose of which is to prevent assets being disposed of or removed from the jurisdiction thus frustrating process, nevertheless this Court's jurisdiction seems to me to involve considerations of a similar kind. That is, the purpose and effect of the interlocutory order must not only be to ensure the potential effectiveness of, but be subsidiary to, the final relief.

39    Because of the way in which the present issue was argued, it is appropriate, prior to referring further to the application of the above judgment, to refer to those parts of the judgment of Maidment J in TeleTech (No 1) which were the subject of contention between the parties. The relevant passage, in its context, is in the following terms and is set out after his Honour cites important extracts from the judgments, respectively, of Hungerford J and Peterson J in Darvall and Maharaj:

I tend to the view that, as between the parties to the contract and to these proceedings, any unfairness could be adequately remedied by monetary damages. That, however, is not the end of the matter.

The power imparted by s.106 is that of varying or declaring an unfair contract void. A contract which is against the public interest is an unfair contract (s.105(b)). Thus matters going beyond the interests of the immediate parties to a contract are susceptible of consideration in s.106 proceedings. In the present case the 18 employees who face retrenchment are not parties to the impugned contract. Nor are they parties to these proceedings and, not being parties to the impugned contract, are probably incapable of being so. The question arises as to the whether or not their predicament is relevant to the ultimate form of orders appropriate to the applicant's case, if it be made out.

The High Court of Australia, in the joint judgment of Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ in Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 72 ALJR 873 at 891, considered matters relevant to the granting of interlocutory injunctions and said:

The principle in Wood v Sutcliff was approved by Cumming-Bruce LJ in Miller v Jackson:

"Courts of equity will not ordinarily and without special necessity interfere by injunction where the injunction will have the effect of very materially injuring the rights of third persons not before the court"

His Lordship cited with approval a passage from Dr Spry's Equitable Remedies. We too adopt the author's statement:

"the interests of the public and of third persons are relevant and have more or less weight according to the other material circumstances. So it has been said that courts of equity `upon principle, will not ordinarily and without special necessity interfere by injunction, where the injunction will have the effect of very materially injuring the rights of third persons not before the courts'. Regard must be had `not only to the dry strict rights of the plaintiff and the defendant, but also the surrounding circumstances, to the rights or interests of other persons which may be more or less involved'. So it is that where the plaintiff has prima facie a right to specific relief, the court will, in accordance with these principles, weigh the disadvantage or hardship that he would suffer if relief were refused against any hardship or disadvantage that might be caused to third persons or to the public generally if relief were granted, even though these latter considerations are only rarely found to be decisive. (Conversely, detriment that might be caused to third persons or to the public generally if an injunction were refused is taken into account.)"

Two propositions result from this opinion, the first being, as was adopted by their Honours, that "detriment that might be caused to third persons or to the public generally if an injunction were refused is taken into account" in the exercise of the jurisdiction to grant injunctions. The second, which follows from the first, is that such detriment is relevant to the form of final orders in circumstances in which a court has the power to provide relief of an injunctive nature. Thus it might be expected that the jurisdiction of this Court to grant an extension of the life of the contract between the parties, which although not being injunctive relief has a similar effect, is such that the potential detriment to third parties and to the public generally if such relief be refused is a matter which this Court should take into account in the exercise of that jurisdiction.

Additionally, as s.106 is concerned with contracts whereby persons perform work and as it is found in a statute which is directed at providing "a framework for the conduct of industrial relations that is fair and just" (s.3(a)), it is appropriate, in a case such as this, for the Commission to pay regard to the persons who perform the work which founds the jurisdiction. The effect upon them of any unfairness would seem to be the evil to which, perhaps, predominant consideration should be given. Thus it is arguable in the present case that, assuming unfairness, any ultimate orders of the Commission should be directed not to compensating the employer but rather to the protection of the workers who face retrenchment and to whom, as I understand it, it is questionable as to whether, in these proceedings, any compensation could be ordered to be paid.

It is my view that s.106 and its predecessors were never intended to provide remedies for corporations engaged in commercial disputes. Its intention was to provide protection for persons performing work who are disadvantaged by unfair contracts. Also, it should be remembered that the primary remedy under s.106 is that either of the avoidance of an unfair contract or the variation of it to remove the unfairness. The awarding of monetary compensation is secondary and dependant upon that pivotal and primary remedy having been granted.

Mr Christie argues, with some force, that retrenchment is no substitute for continued employment and that preservation of the employment of the 18 threatened employees of TeleTech would be a more appropriate outcome than compensation to TeleTech for the retrenchment payments which would follow if those employees were retrenched. Additionally he contends that the loss of such skilled and trained employees would place TeleTech at a competitive disadvantage and that they would be difficult to replace if other similar contracts were later acquired by the company.

It is my view that continued employment opportunity is generally preferable to retrenchment and I accept that the retrenchment of 18 people must be expected to impose significant hardship, both financial and emotional, upon them. Additionally, if the 18 are retrenched on 30 September, it would be unlikely that the hardship imposed upon them could be rectified by any later and final order in the s.106 proceedings. The existence of jurisdiction to grant orders prolonging the life of the contract between the parties for another year is not contested. If, however, the 18 were to be retrenched prior to such final orders it is questionable whether or not they would gain any benefit from those orders. Thus it is possible that the final orders considered appropriate to the case might be frustrated or put at naught if the retrenchments occur.

40    The issue that requires, or may require, consideration is whether the judgment of Maidment J is erroneous, to the extent that it travels beyond the approach laid down by Peterson J in Gibson or, as the respondent submits, is inconsistent with that approach. Although Gibson was of course decided after TeleTech, it is appropriate to approach the matter in that way since Maidment J saw himself as deciding the matter in the context of the basal authorities which Peterson J relied on in Gibson.

41    Although I accept that there is a substantial argument that the approach of Maidment J in TeleTech (No 1) is inconsistent with the approach in Gibson, and thus may be incorrect, it is unnecessary to decide that issue in this case. Rather, the approach which should be taken is to have regard to the fact that the consideration by Maidment J went to matters or issues different to those considered in the line of cases culminating in Gibson and the question that thus emerges is whether the present litigation falls into those other areas or into the area of consideration illustrated by Gibson. In my opinion, the present case falls into the latter category and not the former. I reach this conclusion because Maidment J made it plain that a crucial element in his consideration was the fact that the contract the subject of the proceedings was still on foot and the relevant consideration in the context of the application of the tests developed in the earlier cases was whether permitting the contract to be terminated represented a risk that the final orders which the Court might consider appropriate, and thus the effectiveness of the Court's jurisdiction, might be "frustrated or put at naught".

42    Thus, it seems to me, the only way in which it is presently possible for his Honour's approach to be reconciled with that in Gibson is where the subject contract is on foot, or has been terminated recently, or perhaps in other circumstances where it might be just and equitable or otherwise available, to treat the contract as if still on foot. For example, where the termination of the contract itself was sought to be varied in the s 106 proceedings. No such circumstances apply in the present proceedings. Accordingly, I do not consider that the approach taken by Maidment J in TeleTech provides a basis for relief to the applicant.

43    This finding is also sufficient to dispose of the applicant's reliance of the judgment of Watson J in Elliott v Royal Motor Yacht Club of New South Wales, Newcastle Branch. So far as the applicant might be able to call in aid his Honour's approach, it again seems to me to depend upon the holding that there may be circumstances where an interim order might be made pursuant to the then applicable provision (s 88F of the Industrial Arbitration Act 1940) where further unfairness will or may occur, but for the making of the interim order. The comparable basis from that case that might apply is a circumstance where an application was made to restrain the respondents from giving effect to a notice purporting to terminate the contract or arrangement. Again, the conceptual basis upon which that case has possible relevance to the present would only exist if the contract the subject of the s 106 application was on foot. For the reasons referred to earlier, that is not the situation here.

44    Although the next step to be considered might logically be the respective contentions as to whether the present application comes within the test laid down in Gibson and the line of cases represented by that judgment, it nevertheless seems appropriate, in light of the conclusion the Court has reached as to the present application, to deal with some of the other issues argued. As to whether the applicant has demonstrated a serious question to be tried as to the issues of unfairness raised by it, I consider that such a case has been demonstrated. Of course, a finding on the limited case that is before the Court will not be determinative of the issues at trial, if that stage is reached.

45    The issue of balance of convenience, if that stage of consideration is reached, presents greater difficulties. My present view is that the situation is rather finely balanced on that issue, particularly having regard to the rather unsatisfactory situation as to the evidence as to the submission by the applicant that there is a potential for it to become technically insolvent, should the interlocutory relief it seeks not be granted. Although I am prepared to accept that there is some basis for such a finding to be made, I have considerable doubts whether the evidence is sufficient for a finding even on the most limited basis necessary for interlocutory relief. In the circumstances of this case, I consider that that is a fact which also goes to balance of convenience and, if other things were equal, considering the evidence in the best possible light from the applicant's point of view, it would have to be said that the balance of convenience is so finely balanced it could not weigh ultimately in favour of the applicant. Another related consideration is whether damages would be an adequate remedy. I do not consider that it is open, on the material available, to find other than that damages would be an adequate remedy. That is also a consideration relevant to whether relief should be granted at this stage.

46    The final matter requiring consideration is whether the test laid down in cases such as Gibson has been met. Reference has earlier been made to the state of the evidence as to the submission by the applicant as to its potential technical insolvency should the interlocutory relief not be granted. It may not be strictly necessary to determine the issue as to the adequacy of evidence as to that submission because, on one view of the facts of this case irrespective of the finding on that issue, the appropriate conclusion here is that it could not be held that the potential effectiveness of final relief, if granted, in the substantive proceedings does require the making of the interlocutory order the applicant seeks. If that be the appropriate conclusion then, in terms of the authorities, there is no basis available to grant the interlocutory or interim relief. I conclude that on the basis of the approach in Gibson, even if the issue of insolvency was made out, that would not be a sufficient consideration to meet the criterion for the grant of relief. In other words, it does not result in the interim order sought being necessary to ensure the potential effectiveness of final relief; rather it is concerned with maintaining a certain factual situation for the purpose of determination of the application.

47    I should also refer to the limited state of the evidence. It is doubtful that the evidence goes so far as to make out, even at the limited level required, a case as to potential insolvency on the part of the applicant should interlocutory relief be denied, although I do not express a final view on that aspect in light of the earlier conclusions. In summary, there is no basis in terms of the relevant authorities to grant the interlocutory or interim relief. None of the other bases argued by the applicant, including its initial submission, provides a basis for the grant of relief in light of those authorities. The Court therefore orders that the application for interlocutory or interim relief made by the applicant be dismissed.

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LAST UPDATED: 28/03/2001