Gough & Gilmour Holdings Pty Ltd & Ors v Caterpillar of Australia Ltd and Ors [2007] NSWIRComm 3 (2 February 2007)

Last Updated: 21 September 2007

NEW SOUTH WALES INDUSTRIAL RELATIONS COMMISSION

CITATION : Gough & Gilmour Holdings Pty Ltd & Ors v Caterpillar of Australia Ltd and Ors [2007] NSWIRComm 3



FILE NUMBER(S): IRC 5227

HEARING DATE(S): 18/12/2006

DATE OF JUDGMENT: 2 February 2007
PARTIES:
FIRST APPLICANT
Gough & Gilmour Holdings Pty Ltd

SECOND APPLICANT
Harcourt David Gough

THIRD APPLICANT
Anthony Lansley Gilmour

FIRST RESPONDENT
Caterpillar of Australia Limited

SECOND RESPONDENT
Caterpillar Inc.

THIRD RESPONDENT
Caterpillar SARL

FOURTH RESPONDENT
Caterpillar Overseas Credit Corporation SA

CORAM: Boland J


CATCHWORDS: Unfair contract - Application by applicants to amend pleadings - Application by respondents to dismiss or permanently stay proceedings - Principles governing dismissal motions - Whether jurisdiction to proceed to deal with claims for compensation in circumstances where the law had changed since Court's finding in 2002 that contracts were unfair - Whether contracts were contracts whereby a person performs work in any industry - Related condition - Collateral arrangement - Consideration of s 106(2A) of the Industrial Relations Act 1996 - Whether 106(5) only authorises an order for the payment of money in the nature of restitution - Loss of opportunity - Goodwill - Principles governing amendment to pleadings - Whether amendments objectionable - Whether amendments met requirements of r 18A of the Industrial Relations Commission Rules 1996 - Whether amendments amounted to further causes of action - Whether amendments were futile - Whether amendments gave rise to prejudice - Whether amendments were in good faith - Whether delay on the part of the applicants was a basis for refusing amendments - Dismissal application refused - Leave granted to amend pleadings

Practice and Procedure - Unfair contract - Application by applicants to amend pleadings - Application by respondents to dismiss or permanently stay proceedings - Principles governing dismissal motions - Whether jurisdiction to proceed to deal with claims for compensation in circumstances where the law had changed since Court's finding in 2002 that contracts were unfair - Whether contracts were contracts whereby a person performs work in any industry - Related condition - Collateral arrangement - Consideration of s 106(2A) of the Industrial Relations Act 1996 - Whether 106(5) only authorises an order for the payment of money in the nature of restitution - Loss of opportunity - Goodwill - Principles governing amendment to pleadings - Whether amendments objectionable - Whether amendments met requirements of r 18A of the Industrial Relations Commission Rules 1996 - Whether amendments amounted to further causes of action - Whether amendments were futile - Whether amendments gave rise to prejudice - Whether amendments were in good faith - Whether delay on the part of the applicants was a basis for refusing amendments - Dismissal application refused - Leave granted to amend pleadings

LEGAL REPRESENTATIVES

APPLICANTS
Mr M J Kimber SC with Mr A B Gotting of counsel
Solicitor: Mr D Stewart
Harmers Workplace Lawyers


RESPONDENTS
Mr D E Grieve QC with Mr A Moses of counsel
Solicitor: Mr A Gray
Mallesons Stephen Jacques

CASES CITED: Ashfield Brokers & Consultants Pty Limited re Witek; Ex parte [1972] 14 AILR 486
Barataud v Chipperfield (No 3) [2006] NSWIRComm 249
Batterham v QSR Ltd [2006] HCA 23; (2006) 227 ALR 212
Brown v Rezitis [1970] HCA 56; (1970) 127 CLR 157
Caterpillar of Australia Ltd & Ors v Gough & Gilmour Holdings Pty Ltd & Ors [2006] NSWIRComm 146
David Jones v Cukeric (1997) 78 IR 430
Euphoric v Ryledar (2002) 117 IR 1
Fish v Solution 6 Holdings Ltd [2006] HCA 22; (2006) 80 ALJR 959
General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125
Gough & Gilmour Holdings Pty Limited v Caterpillar of Australia Limited (No. 11) [2002] NSWIRComm 354
Gough & Gilmour Holdings Pty Ltd and ors v Caterpillar of Australia Ltd and anor (No 15) [2003] NSWIRComm 173
Gough & Gilmour Holdings Pty Ltd and ors v Caterpillar of Australia Ltd and anor (No. 9) [2001] NSWIRComm 260
Hoffman v Industrial Commission (NSW) (1990) 33 IR 139
J L Holdings [1997] HCA 1; (1997) 189 CLR 146
Kennett and Anor v Mayrana Pty Ltd and Ors (No 4) [2006] NSWIRComm 357
Majik Markets v Brake & Service Centre (1991) 28 NSWLR 443, 39 IR 169
Mayne Nickless Ltd v Industrial Relations Commission of NSW (2004) 141 IR 1
Nagle v Tilburg (1993) 51 IR 8
Old UGC Inc v Industrial Relations Commission of New South Wales [2004] NSWCA 197; (2004) 60 NSWLR 620
Old UGC Inc v Industrial Relations Commission of New South Wales in Court Session [2006] HCA 24; (2006) 80 ALJR 1018
QSR v IRC (NSW) (2004) 208 ALR 368
Solution 6 Holdings Ltd v Industrial Relations Comn (NSW) [2004] NSWCA 200; (2004) 60 NSWLR 558
Stevenson v Barham [1977] HCA 4; (1977) 136 CLR 190
TCN Channel 9 v Antoniadis (1998) 44 NSWLR 682
Virtue v NSW Department of Education (1999) 92 IR 428
Westfield Holdings v Adams (2001) 114 IR 241
Westfield Ltd v Helprin (1998) 82 IR 411
Wirraway (NSW) Pty Ltd and anor v Ultra Tune Australia Pty Ltd [2006] NSWIRComm 300

LEGISLATION CITED: Health Insurance Act 1973 (Cth)
Industrial Relations Act 1996
Industrial Relations Amendment Act 2005



JUDGMENT:

INDUSTRIAL COURT OF NEW SOUTH WALES

CORAM: BOLAND J

Friday 2 February 2007

Matter No IRC 5227 of 2000

GOUGH & GILMOUR HOLDINGS PTY LIMITED AND ORS v CATERPILLAR OF AUSTRALIA LIMITED AND ORS (NO 17)

Application under s 106 of the Industrial Relations Act 1996

INTERLOCUTORY JUDGMENT
[2007] NSWIRComm 3

1 There are two applications before the Court; one is by the applicants seeking leave to amend a summons for relief under s 106 of the Industrial Relations Act 1996 and the other is by the respondents to dismiss or permanently stay the proceedings. Before coming to the applications themselves, it is necessary to fill in the background.

BACKGROUND

2 Gough & Gilmour Holdings Pty Limited, Harcourt David Gough and Anthony Lansley Gilmour ("the applicants") commenced proceedings in 2000 pursuant to s 106 of the Industrial Relations Act 1996 in response to notices issued by Caterpillar of Australia Limited ("the first respondent") to terminate three agreements governing the business relationship between the parties. The three agreements were:

(1) Sales and Service Agreement dated 1 July 1991;

(2) Distribution Agreement for Engines, Parts and Services dated 1 July 1991; and

(3) Product Support Agreement for Engines, Parts and Services dated 12 November 1997.

(“the Dealership Agreements”).

3 The relief sought by the applicants was in the alternative. The primary relief sought was continuation of the Dealership Agreements, albeit with substantial variations. Variations were also sought to what was alleged to constitute an “Overall Arrangement”. The alternative relief sought, in the event that the Court did not vary the Dealership Agreements in the manner sought by the applicants, was compensatory orders for the payment of money pursuant to section 106(5) of the Act.

4 In an interlocutory judgment given on 23 November 2000 it was determined that the applicants’ summons for relief would be heard in two parts. The first part would address the alleged unfairness of the Dealership Agreements and Overall Arrangement and whether they should be varied in the terms sought. The second part would deal with issues of compensation but only in the event that unfairness had been found and the primary relief sought, that is variation of the contracts, was refused.

5 In Gough & Gilmour Holdings Pty Ltd and ors v Caterpillar of Australia Ltd and anor (No. 9) [2001] NSWIRComm 260, a decision given on 23 October 2001, the Court made orders by way of interlocutory injunctive relief. The effect of those orders was to keep the Dealership Agreements on foot until further order of the Court and in the intervening period to prevent the respondents taking any steps inconsistent with or prejudicial to the ongoing operation of the Dealership. The applicants gave an undertaking as to damages.

6 In Gough & Gilmour Holdings Pty Limited v Caterpillar of Australia Limited (No. 11) [2002] NSWIRComm 354, given on 19 December 2002, the Court summarised its findings at [780]. Relevantly, the Court found:

1. The dealership agreements between the applicants and the first respondent constituted contracts for the purpose of s 105 of the Industrial Relations Act. The dealership agreements constituted part of an Overall Arrangement between the applicants and the respondents as pleaded by the applicants except in relation to the first and second assurances and part of the Fourth Assurance, which did not constitute part of any arrangement. That part of the Fourth Assurance that did constitute part of the Overall Arrangement was the assurance that the sale process would be conducted on an amicable and reasonable basis without duress and the respondents would assist the applicants to receive a fair value for the shares.

2. The contracts or arrangements between the applicants and respondents meet the necessary jurisdictional requirements of the Act as elucidated by the High Court in Stevenson v Barham and the New South Wales Court of Appeal in Production Spray Painting. Accordingly, there is jurisdiction to hear and determine the applicants’ claims for relief under s 106 of the Act.

...

28. The respondents acted unfairly or unconscionably in acting to cancel the applicants' dealership.

7 At [794] the Court found:

794 In the result, and having regard to the terms and operation of the Overall Arrangement and the conduct of all of the parties, I find that the Overall Arrangement referred to in par [780(1)] of this judgment between the applicants and the respondents was unfair within the meaning of ss 105 and 106 of the Industrial Relations Act.

8 At [795]-[797] the Court gave its reasons for refusing the primary relief sought by the applicants, namely, continuation of the Dealership Agreements on significantly varied terms. The reasons were as follows:

1. The applicants failed to make out the first and second assurances.

2. The decision by the first respondent to recommend an end to the relationship with the applicants was brought about by the conduct of the applicants. Such conduct constituted a reasonable and proper basis for the respondents to believe that essential elements of the relationship, namely, cooperation, respect, trust and confidence were no longer present.

3. To maintain the dealership would involve keeping the parties together in a relationship that requires respect, cooperation, trust and confidence. Those elements did not exist at the time of the respondents' decision to cancel the dealership. These proceedings have involved strong attacks on the credit and character of senior executives of both the applicants and the respondents. It is unrealistic to the extent of being fanciful to expect that a proper working relationship based on cooperation, trust, confidence and respect for one another could be established and maintained between the applicants and the respondents.

4. Hallmarks of the relationship between the applicants and the respondents were the requirements of respect, cooperation, trust and confidence. These hallmarks strongly suggest a relationship closer to a personal or relational contract as opposed to an arm's length commercial contract. The applicants cannot submit, on the one hand, the contract is akin to a franchise agreement with the characteristics of a relational contract in order to attract jurisdiction and, on the other hand, contend that trust and confidence do not assume particular significance in the relationship because the relationship is commercial in nature.

5. To grant the primary relief sought would be unfair against the respondents and would put the applicants in an advantaged position in the relationship. By acquiring a tenure that they never bargained for the applicants’ would secure an unfair advantage as the dealership would, for all practical purposes, be terminable only in strictly limited circumstances.

6. It could not be said that in 1989 either the applicants or the respondents would have contemplated the contractual arrangements of the nature now proposed by the applicants; it is neither just nor appropriate to now impose such arrangements on the respondents.

7. The primary relief sought is grossly disproportionate to the unfairness found to exist and is not in any sense remedial: see Beahan v Bush Boake Allen Australia Ltd (1999) 93 IR 1 at 13. The orders sought in these proceedings travel beyond the purpose of the legislation.

8. The orders sought amount to orders for specific performance. Such orders, in the circumstances of this case, are not justifiable. I agree with Macken J's observations in Bennett v B.P. Australia Limited where his Honour stated:

...were I to rewrite the contract I would face all the difficulties which in the past have prompted Courts to refuse orders for specific performance of contracts of personal service. The future conduct of BP would be governed by the terms of a lease rewritten by the Industrial Commission, but the conduct of the applicants in carrying out their obligation under that lease (the area in which personal endeavour and initiative resides) would be altogether outside the control of the Court ...(my emphasis).

9. Except for the failures by the respondents giving rise to findings of unfairness in these proceedings, the contracts and arrangements between the applicants and the respondents have operated fairly for over a decade, with the applicants achieving extraordinarily high returns on their original investments.

9 In relation to further proceedings the Court stated at [801]-[804]:

801 In Gough & Gilmour Holdings Pty Ltd and ors v Caterpillar of Australia Ltd and anor (No. 9) [2001] NSWIRComm 260 orders were made the effect of which was to keep the dealership agreements on foot until further order and in the intervening period to prevent the respondents taking any steps inconsistent with or prejudicial to the ongoing operation of the dealership. The respondents submitted that in the event the Court declines to grant the primary relief sought by them the underlying basis for the grant of the interlocutory relief pursuant to Interlocutory Judgment No. 9 falls away.

802 The effect of lifting the order that has allowed the dealership agreements to remain on foot would, of course, be to allow the agreements to be terminated by the first respondent.

803 It is yet to be determined whether, in light of the findings of unfairness, the applicants should be granted any alternative relief and, if so, what should be the form of that relief. It would seem that one of the foremost options available to the Court, if a proper case is made out, is to extend the notice period to terminate the dealership agreements. In those circumstances it would be premature to lift the orders allowing the agreements to remain on foot. However, given that the primary relief has been refused, there is a limit to how long the orders preventing termination can continue to apply.

804 Both parties have reserved their respective rights to make further submissions regarding alternative forms of relief. For that purpose, liberty is granted to either party to have these proceedings relisted for directions in relation to the scheduling of further hearings.

10 The Court made the following orders:

1. The Court declares that the Overall Arrangement as determined by the Court to have existed between the applicants and the respondents is an unfair contract within the meaning of ss 105 and 106 of the Industrial Relations Act 1996.

2. The relief sought by the applicants in accordance with orders 2, 2A and 4 of the applicants' Further Third Amended Summons For Relief and Schedule A to that Summons is refused.

3. Liberty is granted to the parties to have these proceedings relisted for directions in relation to the scheduling of further hearings on the question of whether the applicants are entitled to any alternative relief and, if so, the form of such relief.

4. Costs are reserved.

11 In Gough & Gilmour Holdings Pty Ltd and ors v Caterpillar of Australia Ltd and anor (No 15) [2003] NSWIRComm 173, given on 4 June 2003, the Court dealt with the applicants' claims for alternative relief. At [27] the Court noted that:

The issues to be determined in this stage of the proceedings will be as submitted by the respondents. That is:

(a) whether the applicants ought be granted leave to amend the third further amended summons;

(b) if the applicants ought be granted leave to amend the third further amended summons, whether the applicants ought be granted the alternative relief sought in the proposed fourth further amended summons;

(c) whether the injunction is to be dissolved.

12 The Court's determination of the three issues is reflected in the orders that the Court indicated it proposed to make (see [287]-[288] of the decision):

(1) Leave is granted to amend the third further amended summons to reflect the joinder of the third and fourth respondents to the proceedings pursuant to interlocutory judgment (No 12) [2002] NSWIRComm 379.

(2) Subject to Orders 3, 4 and 5 hereof, leave is granted to amend the third further amended summons to incorporate a new Schedule B to the summons in the terms sought by the applicants in their proposed fourth further amended summons.

(3) The proposed amendments to the third further amended summons concerning compensation will be considered in the compensation phase of the hearing.

(4) Leave to amend the third further amended summons by seeking an order under s 107 of the Industrial Relations Act 1996 is refused.

(5) Leave to amend the third further amended summons to reserve the rights of the applicants to amend the summons to reflect any further findings of the Court is refused.

(6) The Court will consider the issue of accumulated goodwill in the compensation phase of the hearing.

(7) The Overall Arrangement as determined by the Court in Gough & Gilmour Holdings Pty Limited v Caterpillar of Australia Limited (No 11) [2002] NSWIRComm 354 to have existed between the applicants and the respondents is varied as follows:

(i) Harcourt David Gough and Anthony Lansley Gilmour will have a period of 90 days ("the additional sale period") commencing on the day following the date of this judgment to sell their shares in the dealership business to that person nominated by Caterpillar of Australia Limited as the "preferred dealer candidate". Subject to Orders 7(ii), 7(iii) and 7(iv) hereof, after the expiry of the additional sale period Caterpillar of Australia Limited may give 26 weeks' notice of termination of the dealership agreements and the notice of termination period will commence to run from a date seven days after the expiry of the additional sale period.

(ii) In the event that Messrs Gough and Gilmour decide that they do not wish to sell their shares, that decision will be conveyed to Caterpillar of Australia Limited within 30 days of the date of this judgment and the additional sale period will terminate on the day after the date that Messrs Gough and Gilmour advise Caterpillar of Australia Limited they do not wish to sell ("termination date of the additional sale period"). Upon being so advised Caterpillar of Australia Limited may give 26 weeks' notice of termination of the dealership agreements and the notice of termination period will commence to run from a date seven days after the termination date of the additional sale period.

(iii) In the event that a sale occurs or a binding agreement to sell is made prior to the expiration of the additional sale period, Messrs Gough and Gilmour will advise Caterpillar of Australia Limited to this effect. Upon being so advised Caterpillar of Australia Limited may give 90 days' notice of termination of the dealership agreements and the notice of termination period will commence to run from a date seven days after the date of sale or the date of a binding agreement to sell, whichever is the earlier.

(iv) The date upon which the 26 weeks' period expires shall be known as the "final termination date". In the event a sale or a binding agreement to sell (whichever is first) occurs during the 26 weeks' notice period on a date that is more than 97 days prior to the final termination date the respondents shall be entitled to issue new termination notices giving the applicants 90 days' notice which will commence to run from a date seven days after the date of sale or date of the binding agreement to sell whichever first occurs.

(8) The Overall Arrangement as determined by the Court in Gough & Gilmour Holdings Pty Limited v Caterpillar of Australia Limited (No 11) [2002] NSWIRComm 354 to have existed between the applicants and the respondents is further varied as follows:

During the additional sale period Caterpillar of Australia Limited, Caterpillar Inc, Caterpillar SARL and Caterpillar Overseas Credit Corporation SA (“Caterpillar”) will not at any time:

(i) approach, solicit or entice employees or contractors of Gough & Gilmour Holdings Pty Limited, Harcourt David Gough and Anthony Lansley Gilmour (“Gough & Gilmour”) to terminate any contract or arrangement between such employees or contractors and Gough & Gilmour;

(ii) approach, solicit or entice any person to terminate, withdraw from or substitute any contract with Gough & Gilmour for the supply of any machine, part, product or other equipment referred to in the Agreements;

(iii) approach, solicit or entice, for the purpose of having the effect of causing loss or damage to Gough & Gilmour, any person to refrain from entering into any contract with Gough & Gilmour for the supply of any machine, part, product or other equipment referred to in the Agreements;

(iv) enter into any Sales and Service Agreement; Distribution Agreement; or Product Support Agreement for the supply of any machine, part, product or other equipment referred to in the said Agreements relating to New South Wales and/or the Australian Capital Territory, with any other person or entity; and

(v) procure or encourage any person to establish any infrastructure or operations in New South Wales and/or the Australian Capital Territory in preparation for, or for the purpose of, exercising contractual rights of the kind referred to in the Agreements, on any basis other than by acquisition of the business of Gough & Gilmour.

(9) The Overall Arrangement as determined by the Court in Gough & Gilmour Holdings Pty Limited v Caterpillar of Australia Limited (No 11) [2002] NSWIRComm 354 to have existed between the applicants and the respondents is further varied ab initio as follows:

1. For the purposes of this variation the parties are referred to both individually and jointly as follows:

(a) Gough & Gilmour Holdings Pty Limited, Harcourt David Gough and Anthony Lansley Gilmour – “Gough & Gilmour”; and

(b) Caterpillar of Australia Limited, Caterpillar Inc, Caterpillar SARL and Caterpillar Overseas Credit Corporation SA – “Caterpillar”.

2. If Caterpillar holds a serious concern that relationship difficulties it has with Gough & Gilmour may require consideration be given to terminating the dealership, then:

(a) Caterpillar will implement an improvement plan as set out in (b) below;

(b) the improvement plan is to include the following components:

(i) the relationship problems in which improvement is sought are to be clearly identified and described;

(ii) methods of bringing about improvement and evaluation of improvement are to be agreed between the parties;

(c) the improvement plan is to be pursued over a period of six months, or for such other period as may be agreed between the parties; and

(d) Gough & Gilmour will be given the opportunity to complete the plan before a recommendation is made within Caterpillar for the termination of the dealership or any exercise of its right to terminate the dealership agreements.

3. In the event that Caterpillar has complied with clause 2 hereof but this has proved to be unsuccessful, Caterpillar will take steps to provide Messrs Gough and Gilmour with a proper opportunity to sell their shares in the dealership business and will assist Messrs Gough and Gilmour receive fair value for those shares in that business by ensuring that the sale process is conducted on a reasonable basis without duress. Such steps are to be taken prior to the issue of any notice of termination. Furthermore, Caterpillar shall not use the act or timing of the issue of a termination notice for the purpose of weakening Gough & Gilmour’s bargaining position in any sale process.

4. To avoid doubt, Caterpillar will comply with its obligations under clauses 2 and 3 hereof by 25 October 2000.

(10) The terms of Orders 7 to 9 inclusive are to operate notwithstanding any provision to the contrary in the dealership agreements or any notices of termination already issued.

(12) The injunction granted by orders made on 24 October 2001 and continued by orders made on 13 February 2003 is dissolved.

(13) Proceedings are stood over to a date to be fixed.

(14) Costs are reserved.

The parties were directed to file short minutes of order reflecting the decision. The Court made formal orders on 14 July 2003 giving effect to the decision.

13 No sale of the business of the applicants occurred and the respondents gave notices of termination of the Dealership Agreements on 7 October 2003, having an expiry date of 9 April 2004. Termination of the Agreements took effect in accordance with the notices.

14 The applicants subsequently prepared a document referred to as the Fourth Further Amended Summons to reflect the amendments approved in Judgment No. 15 In April 2005, the applicants made submissions seeking leave to rely upon a further amended summons, namely, the Fifth Further Amended Summons. In the proposed amended summons the applicants claimed compensatory orders as follows:

(1) Compensation for the “lost opportunity” of retaining the dealership. Two amounts were sought in that respect:

(a) A nominal amount of $125 million (subject to allowance by way of deduction), calculated by reference to anticipated net profits for a period of at least ten years commencing in early 2000;

(b) An amount of $950,000 as compensation for amounts paid to retain staff between March and May 2000.

(2) Compensation for the “lost opportunity” to sell shares in the first applicant. The amounts sought in that respect were:

(a) A nominal amount of $150 million (subject to allowance by way of deduction), calculated by reference to the price at which the applicants allege that a share sale was highly probable to have occurred in October/November 2000;

(b) Amounts for costs incurred with respect to the failed sale process in 2000, particularised as:

(i) Valuation and advisory fees of $600,000;

(ii) Legal and mandatory costs of $450,000;

(iii) Legal and financial costs incurred in due diligence process of $250,000.

(3) Compensation was also claimed in an unspecified sum for loss of net profits arising from “the management distraction and disruption caused by these proceedings and by the publicity and associated uncertainty concerning the Applicants’ future as a Caterpillar dealer”.

15 Whilst the Fourth Further Amended Summons was filed, no decision was made accepting that the Summons as filed properly reflected the amendments approved in Judgment No. 15 Further, no decision was made on whether leave would be granted to further amend the summons in the form of the Fifth Summons. Any amendments, therefore, if the Court approves them, would be to the Third Further Amended Summons.

16 As the respondents submitted, in light of the application by the applicants seeking leave to further amend the initiating process in the proceedings, and jurisdictional cases which had been determined by the NSW Court of Appeal, the respondents commenced proceedings in the NSW Court of Appeal in file No. CA 40500 of 2005 (the “CA Proceedings”). The CA Proceedings, inter alia, sought to challenge the jurisdictional findings and orders made in proceedings before this Court. The application in the CA Proceedings also sought to prohibit further steps being taken in proceedings before this Court directed to the making of orders for the payment of money on the grounds that such orders could not relate, closely or at all, to the performance of work in an industry by the applicants, or by any other person.

17 Further, as the respondents submitted, the CA Proceedings were stood over for a significant period of time by consent because of the view that the issues being considered by the High Court of Australia in appeals from decisions of the Court of Appeal in Solution 6 Holdings Ltd v Industrial Relations Comn (NSW) [2004] NSWCA 200; (2004) 60 NSWLR 558, QSR v IRC (NSW) (2004) 208 ALR 368 and Old UGC Inc v Industrial Relations Commission of New South Wales [2004] NSWCA 197; (2004) 60 NSWLR 620, might be relevant to the determination of the CA Proceedings. These proceedings were also stood over for the same reasons.

18 On 1 December 2005, the NSW Parliament passed the Industrial Relations Amendment Act 2005, which commenced operation on 9 December 2005. The Amendment Act replaced the previous s 179 with a new privative provision. The purpose of the new provision was explained in the second reading speech (Hansard, Legislative Assembly, 17 November 2005, at p 20010):

The Court of Appeal has in a number of its decisions granted orders prohibiting the commission from exercising, or purporting to exercise, its power under section 106 with respect to particular proceedings, or from hearing and determining certain proceedings, on the basis that the commission does not have jurisdiction. These orders have been made where no decision has yet been made in relation to the matter by the commission, for example, in BEA Systems Pty Ltd v Industrial Relations Commission of New South Wales in Court Session & Anor [2005] NSW CA 227. Further, these applications are no longer confined to applications under section 106: an additional 13 matters relating to prosecutions for occupational health and safety matters have been filed in the Court of Appeal. This is a bad result for workers, the courts and the community.

The IRC is a quicker, cheaper, and less adversarial jurisdiction than the Supreme Court or Court of Appeal. In 2003 the IRC resolved over 90 per cent of all matters by conciliation without the need for a full hearing and the expense and delay which that entails. The Court of Appeal's decisions in Mitchforce and Solution 6 have created the potential for additional, more drawn-out and more expensive litigation. The bill seeks to remedy this situation in two ways. Firstly, it removes the protection of purported decisions of the Commission in Court Session from the privative clause. This allows for review of decisions that are claimed to be outside the Commission in Court Session's jurisdiction, and so should cause the Court of Appeal to reinstate the doctrine of restraint, and to refrain from accepting very early applications before the commission has had an opportunity to consider jurisdiction. Secondly, the bill makes clear that there will be no access to the Court of Appeal under any circumstance until the processes of the commission, including appeal, are complete. This will ensure that parties cannot use the judgment in Solution 6 to bypass the commission.

The effect of these amendments is that the Court of Appeal will be able to review the decisions of the Commission in Court Session, but only insofar as there is a challenge to the commission's jurisdiction, and only after the processes of the commission, including appeal to the Full Bench of the commission, are complete. These amendments provide for a reasonable amount of appellate supervision, including review by the High Court. At the same time, they will prevent the jurisdiction of the IRC from being undermined, and employees and contractors from being forced into expensive and delay-ridden appeals. These changes will only apply to the Commission in Court Session: the intention is to preserve the full operation of the privative clause in so far as the arbitral function of the IRC is concerned. Under the transitional provisions of the bill, the amendments to section 179 will not apply to current proceedings in the High Court. Again, this provision has been drafted to ensure that the bill does not interfere in any way with the High Court's determination in the Solution 6 case.

19 The Amendment Act also introduced s 106(2A) into the Industrial Relations Act in the following terms:

(2A) A contract that is a related condition or collateral arrangement may be declared void or varied even though it does not relate to the performance by a person of work in an industry, so long as:

(a) the contract to which it is related or collateral is a contract whereby the person performs work in an industry, and

(b) the performance of work is a significant purpose of the contractual arrangements made by the person.

20 The problem to which subs (2A) was directed was explained in the second reading speech as:

In Solution 6, the Court of Appeal held that the Commission may only declare void or vary a collateral arrangement or related condition that itself leads directly to the performance of work. This interpretation of the section significantly narrows the scope of the Commission's unfair contracts jurisdiction. It is problematic because an arrangement that leads directly to the performance of work may consist of a formal work contract as well as related agreements, which, in themselves, may not lead to the performance of work. If this interpretation were continued, and a person's total package were not reviewable, then the Commission's unfair contracts jurisdiction would be narrowed to a significant extent for employees and independent contractors. It would then be open to unscrupulous employers to ensure that the contract for work was minimalist and carefully quarantined from other aspects of the relationship that are set out in different documents, or entered into at different times.

21 On 12 December 2005, the Court of Appeal stood over the matter until 26 June 2006 to await the outcome in the High Court. On 20 January 2006 the respondents filed an application for the grant of an extension of time to file an application for leave to appeal and appeal Judgments No. 9, 11 and 15. On 18 May 2006 Kavanagh J refused the application for an extension: Caterpillar of Australia Ltd & Ors v Gough & Gilmour Holdings Pty Ltd & Ors [2006] NSWIRComm 146. Coincidentally, on the same day (18 May), the High Court delivered its judgments in Fish v Solution 6 Holdings Ltd [2006] HCA 22; (2006) 80 ALJR 959, Batterham v QSR Ltd & Ors [2006] HCA 23; (2006) 80 ALJR 995 and Old UGC, Inc v Industrial Relations Commission of New South Wales in Court Session [2006] HCA 24; (2006) 80 ALJR 1018.

22 On 6 June 2006, the respondents filed an application in the Industrial Court for leave to appeal and to appeal the judgment of Kavanagh J. At a directions hearing on 16 June 2006 Walton J, Vice President, raised with the parties whether or not it would be appropriate for the jurisdictional issues that the respondents wanted to raise to be dealt with by the trial judge at first instance. The respondents subsequently filed a notice of motion on 24 July 2006, which is before the Court in these proceedings. The motion sought the following orders:

1 An order dismissing the proceedings.

2 In the alternative to paragraph 1, an order permanently staying the proceedings.

23 The grounds in support of the motion included the following:

26 As the law has now been declared, following the decisions in the CA proceedings and in the HCA proceedings concerning the Court's jurisdiction, it is clear in the IRC proceedings (which are yet to be finally determined) that there is no jurisdiction for the Court to take any further steps in the Proceedings for reasons which include the following (the Respondents reserve the right to rely upon further grounds):

(a) the Dealership Agreement or "Overall Arrangement" to which the First Applicant and the First Respondent were parties (or alleged to be parties) were commercial contracts which do not fall within the jurisdiction of the Court;

(b) none of the three Dealership Agreements or the "Overall Arrangement" are contracts or arrangements whereby a person performs work in an industry within the meaning of section 106 of the 1996 Act, and therefore amenable to the jurisdiction of the Court, because:

(i) they did not directly lead to the performance of work in an industry in that:

(A) the performance of work in an industry was not their purpose;

(B) they did not in a relevant sense provide for the performance of work in an industry under or pursuant to their terms; and

(C) they did not have a relevant or recognisable impact on the conditions of the performance of work in an industry.

(ii) if (which is denied) any work was performed in an industry in consequence of the Dealership Agreements and/or the "Overall Arrangement", such work was merely incidental tot the provision of goods and services under those contracts or arrangements;

(iii) the Second and Third Applicants were no persons who were required to or did perform work for any of the Respondents within the meaning of section 106 of the 1996 Act.

(c) the Court has no jurisdiction or power to make orders for the payment of money in the Proceedings because such could not relate, closely or at all, to the performance of work in an industry by any person.

24 The propositions in support of the motion to dismiss were expressed as follows:

(a) The Court has the inherent power to review in appropriate cases its earlier findings as to the existence of jurisdiction. This is a case where the Court will be well satisfied that it should re-open and vary its findings as to the existence of jurisdiction in Judgment No. 11 handed down on 19 December 2002 for the reason that the law has been clarified and altered since that judgment in proceedings which are still on foot; and

(b) In any event, when one has regard to the development of the law since Judgment No.11, it is clear that there is no basis for the lawful grant of relief to the Applicants in Stage 2 of the Proceedings. Accordingly, and independently of re-opening of Judgment No.11, the Proceedings should be dismissed or permanently stayed.

25 It may be noted that, ultimately, the respondents did not press proposition (a) above although their position remained that the Court did not have jurisdiction to deal with any aspects of the applicants' claims under s 106 of the Act.

26 On 11 August 2006, the CA Proceedings were discontinued by consent in light of the Industrial Relations Amendment Act. On 8 September 2006, the appeal in the extension of time proceedings was stood over generally, pending the hearing of the respondents' motion before the Court as presently constituted.

27 The respondents, in support of their motion, filed written submissions on 7 September 2006. The applicants responded in writing on 20 October 2006 opposing what they contended was, in effect, an application to re-open the orders made by this Court following Judgments No. 11 and No. 15 on the ground that the Court had no power to re-open its orders that had been “perfected” or, in the alternative, the respondents had not established “exceptional circumstances” justifying the re-opening of the orders. The applicants also opposed the claim of the respondents to dismiss or stay permanently the proceedings, given that the Court had, both before and after the enactment of section 106(2A) of the Act, power to make the compensation orders sought.

28 The respondents' notice of motion was listed for hearing on 20 and 22 November 2006. On 27 October 2006 the applicants filed a notice of motion seeking an order that they be granted leave to amend the Fourth (sic) Further Amended Summons so that it was in the form of the Sixth Further Amended Summons annexed to the notice of motion and marked "A". The grounds and reasons in support of the applicants' motion were that:

1. Pursuant to s170 of the Industrial Relations Act 1996 (NSW) (“Act”) the Court may, in any proceedings before it, make any amendments to the proceedings that the Court considers to be necessary in the interests of justice and such amendments can be made at any stage of the proceedings; see also Rule 148 of the Industrial Relations Commission Rules 1996.

2. The interests of justice dictate that the summons in this matter be further amended in the manner now set out in the Sixth Summons for the reasons set out below.

3. The proposed amendments as contained in the Sixth Summons:

(a) seek to identify, with greater particularity than appears in the Fifth Further Amended Summons, matters relevant to the assessment of compensation in the compensation phase of the proceedings – see Part D of the Sixth Summons;

(b) seek to avail the effect of the enactment of section 106(2A) – see pars A1B, A2C, B39, B40, B41, D3(a) and D4(a) of the Sixth Summons; and

(c) seek to identify additional or alternate bases for the Court concluding that jurisdiction exists, that unfairness exists and that power to make compensation orders exists – see pars A2D and B36(o)(a) of the Sixth Summons.

4. The proposed amendments concerning the assessment of compensation:

(a) are consistent with the Court deferring the determination of the amendments concerning compensation until the compensation phase of the proceedings (see Gough & Gilmour Holdings Pty Limited v Caterpillar of Australia Limited [2003] NSWIRComm 173 (“Decision No 15”) at paragraphs [78], [80], [81] and [287(3)]);

(b) address a subject matter – the basis of the assessment of compensation – upon which the Respondents have been on notice since the date of Decision No 15 (4 June 2003);

(c) are consistent with the amendments contained in the Fifth Summons which was provided to the Respondents on 15 April 2005;

(d) are consistent with the rulings in decision No 15; and

(e) will not cause the Respondents prejudice as:

(i) the Respondents will have an opportunity to file an Amended Reply in response to the Sixth Summons;

(ii) the Respondents will have an opportunity to prepare and file evidence to be used in the compensation phase;

(iii) the Respondents will have an opportunity to test by cross-examination evidenced filed by the Applicants for use in the compensation phase; and

(iv) the Respondents will have an opportunity to make submissions at the end of the compensation phase of the proceedings.

5. The proposed amendments seeking to avail the enactment of section 106(2A):

(a) reflect the change in the law effected by section 106(2A) as enacted by the Industrial Relations Amendment Act 2005 (NSW) which applies to proceedings (such as these proceedings) which were pending as at the date of enactment;

(b) will not lead to the filing of new or further evidence by the Applicants;

(c) are consistent with the evidence already filed;

(d) are consistent with the findings of the Court in Gough & Gilmour Holdings Pty Limited & Ors v Caterpillar of Australia & Anor [2002] NSWIRComm 354 (“Decision No 11”) and Decision No 15;

(e) provide additional or alternative bases for jurisdiction existing in circumstance where the Respondents have, by Notice of Motion filed with the Registry of the Court on 24 July 2006 (“Notice of Motion”) sought to have these proceedings dismissed or permanently stayed for want of jurisdiction;

(f) will not cause the Respondents prejudice as they will not lead to new or further evidence and the Respondents will have the opportunity to make submissions concerning their effect.

6. The proposed amendments in the event of a re-opening of Decision No 11:

(a) will not lead to the filing of new or further evidence by the Applicants;

(b) are consistent with the evidence already filed;

(c) provide additional or alternative bases for jurisdiction existing in circumstances where the Respondents have challenged the jurisdiction of the Court by way of the Notice of Motion; and

(d) will not cause the Respondents prejudice as they will not lead to new or further evidence and the Respondents will have the opportunity to make submissions concerning their effect.

7. A failure to grant leave to amend to rely upon the proposed amendments would cause significant injustice to the Applicants, particularly given the deferral of the ruling on amendments concerning compensation in Decision No 15, and the recent raising of further jurisdictional challenges by the Respondents.

8. The Applicants rely on the affidavit of David Charles Philip Stewart sworn on 27 October 2006 in support of this motion.

It may be noted that in light of the respondents' decision not to press the contention that the Court should re-open and vary its findings as to the existence of jurisdiction in Judgment No. 11, the applicants did not press the amendments referred to in paragraph 3(c) of the grounds and reasons supporting its amended motion. That is to say, the amendments in paragraphs A2D and B36(o)(a) of the Sixth Further Amended Summons were not pressed.

29 A disagreement arose between the parties as to the order in which the respective notices of motion were to be dealt with. Directions made on 15 November 2006, which vacated the hearing on 20 and 22 November, overcame the disagreement. New hearing dates were set for 18 and 19 December 2006. The directions also dealt with the filing and serving of submissions.

30 On 27 November 2006 the applicants sought leave to amend the Third Further Amended Summons in the form of a revised Sixth Further Amended Summons. On 14 December 2006, however, the applicants filed an amended notice of motion seeking leave to amend the Fourth Further Amended Summons for relief filed on 15 April 2005 so it was in the form of the Sixth Further Amended Summons ("Sixth Summons") annexed to the amended notice of motion. The amendments were relatively minor in the scheme of things, but it is the amended motion with its annexed Sixth Summons upon which the applicants move.

31 In summary then, the position is as follows:

(1) In Judgment No. 15 the Court granted leave, in part, to amend the Third Further Amended Summons. The amendments were incorporated into the Fourth Further Amended Summons filed on 15 April 2005. On the same day the applicants filed their proposed Fifth Further Amended Summons, which incorporated amendments to the applicants' claim for compensation. No decision was made in relation to whether leave ought be granted to amend the Summons in the form of the Fifth Summons.

(2) On 24 July 2006 the respondents filed a notice of motion in the Court as presently constituted seeking the dismissal of the proceedings or, in the alternative, an order permanently staying the proceedings. The respondents move on their motion.

(3) On 27 October 2006 the applicants filed a notice of motion seeking amendments in the form of the Sixth Further Amended Summons. The amendments related to matters relevant to the assessment of compensation in the compensation phase of the proceedings and to the enactment of s 106(2A) of the Act (a matter I will come to in dealing with the application to amend). Annexed to the applicants' outline of submissions in support of their application for leave to amend the Third Further Amended Summons filed on 27 November 2006 was a revised Sixth Further Amended Summons.

(4) The applicants filed an amended notice of motion on 14 December 2006 seeking to amend, in relatively minor ways, the Sixth Further Amended Summons filed on 27 November 2006. The applicants move on their amended motion filed on 14 December 2006.

PRINCIPLES GOVERNING DISMISSAL MOTIONS


32 Reference was made earlier to the respondents' decision not to press the contention that the Court should re-open Judgment No. 11 and vary its findings as to the existence of jurisdiction. In deciding not to proceed with the re-opening argument the respondents reserved their right in respect of any jurisdictional challenge.

33 That leaves the respondents' contention that the Court does not have power to grant relief to the applicants in Stage 2 of the proceedings. It will be recalled that in its decision of 23 November 2000, the Court determined that the proceedings would be in two parts or stages. Stage 1 was to address the alleged unfairness of the contracts or arrangements and whether they should be varied in the terms sought. Stage 2 was to deal with the question of relief in the event unfairness was found.

34 The relief sought by the respondents in these interlocutory proceedings is that the Court dismiss or permanently stay the proceedings. A claim will be struck out or the proceedings permanently stayed only in plain and obvious cases: General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 129 per Barwick CJ; Majik Markets v Brake & Service Centre (1991) 28 NSWLR 443; 39 IR 169 per Kirby P at 446; 170; Nagle v Tilburg (1993) 51 IR 8 at 10-11.
35 In Virtue v NSW Department of Education (1999) 92 IR 428 at 447-448 Wright J, President conveniently summarised the principles guiding the Court in entertaining a challenge to jurisdiction in a preliminary or threshold way:

(1) The discretion of a court to determine a case at an early stage, when appropriate, has been repeatedly accepted.

(2) As a general rule it is desirable that an objection to jurisdiction be determined as early as circumstances will conveniently admit so that the tribunal does not embark on a hearing which it lacks authority to conduct. The course of a court entertaining a challenge to jurisdiction in a preliminary or threshold way is often a sensible one where a party has a substantial threshold argument which, if it succeeds, will knock out the claim and save the costs and inconvenience that attend a protracted hearing of proceedings on the merits.

(3) However, a further general proposition is that all issues arising should be dealt with in the substantive proceedings unless the basis for a challenge, either on jurisdictional grounds, or for lack of a reasonable cause of action, be clearly demonstrated.

(4) Threshold relief of the kind sought here must be conserved to a clear case where it is plain that the invocation of the jurisdiction impugned is wholly misconceived or, upon analysis, lacks an arguable legal foundation.

(5) Necessarily, refusal of relief at the threshold will not finally determine that jurisdiction exists for any order which the Court might make between the parties. This is because, to secure relief, the claimants must demonstrate that no order could be made which would be within jurisdiction. The resulting burden is a heavy one.

(6) Accordingly, whilst it is desirable for a case to be determined at an early stage it is only open to do so at the appropriate stage of the proceedings. That is, where the facts, either established by evidence or plainly agreed in terms, enable the Court to determine what the contract or arrangement is or, at least, the parameters of the contract or arrangement. In other words, unless the facts are sufficiently established to enable the Court to be satisfied it has the necessary material to reach a clear and final decision on the question then the appropriate stage has not been reached for such a determination to be made.

(7) Similarly, the jurisdiction to terminate an action summarily for want of a cause of action is to be sparingly employed and ought not to be used save where the lack of the cause of action was clearly demonstrated.

36 The foregoing principles were referred to with approval in Euphoric v Ryledar (2002) 117 IR 1 at [8]-[14] (per Wright J and Walton J, Vice President, Schmidt J not dissenting). At [11]-[14] their Honours stated:

11 In order to succeed in a motion to dismiss on a preliminary basis a summons for want of jurisdiction, a respondent must demonstrate that there is no power in the Commission to grant any relief sought in the application.

12 However, as indicated in the fifth proposition cited above from Virtue “refusal of relief at the threshold [that is on a basis of a preliminary point or motion] will not finally determine that jurisdiction exists for any order which the Court might make between the parties”. In other words, it remains open to a respondent unsuccessful on a preliminary motion to maintain its arguments as to lack of jurisdiction for the purposes of the final hearing.

13 Further, as observed in the seventh proposition and notwithstanding the public interest in having struck out at an early stage proceedings for which there is no jurisdiction, “the jurisdiction to terminate an action summarily for want of a cause of action is to be sparingly employed and ought not to be used save where the lack of the cause of action [is] clearly demonstrated”.

14 The jurisprudence of this Court represented by the judgment of the then Full Industrial Court in Nagle v Tilburg, and the cases which have followed it, has been important in controlling a practice which had developed in the jurisdiction of some respondents too readily raising jurisdictional arguments at an early stage, at times with at least the appearance of a forensic tactic or an attempt to place logistical difficulties in the way of a less well-resourced applicant. The decision in this matter should not be seen as, or become, a basis for the rigour which has hitherto been exercised in the jurisdiction to be lessened. These observations are made only to emphasise the decision in this matter has depended on the very particular and relatively rare set of circumstances raised by these proceedings. It should not be interpreted or considered by those who practice in the jurisdiction as signifying any lessening of the stringency with which the approach in Nagle v Tilburg will be adhered to.

37 Unless the respondents are able in these proceedings to clearly demonstrate that the Court has no jurisdiction in respect of the applicants' amended notice of motion, the Court would not dismiss the application at the threshold.

DOES THE COURT HAVE POWER TO GRANT ANY RELIEF TO THE APPLICANTS IN STAGE 2 OF THE PROCEEDINGS?

Respondents' contentions


38 The respondents' contentions regarding the absence of jurisdiction may be broken into two broad categories. The first relates to judgments by the High Court and the New South Wales Court of Appeal since Judgments No. 11 and 15, which the respondents submitted make it clear that there is no jurisdiction for this Court to take any further steps in the proceedings. The second relates to the nature of the claims made in the Sixth Summons and in respect of which the respondents contended were outside jurisdiction.

First category

39 The respondents' submissions regarding the effect of the judgments by the High Court and the New South Wales Court of Appeal since Judgments No. 11 and 15 may be summarised as follows:

(1) Although a superior court of record, the Court has limited jurisdiction. Once the Court reaches a point where its jurisdiction has ended it must refrain from purporting to exercise jurisdiction where there is plainly none: see National Parks and Wildlife v Stables Perisher (1990) 20 NSWLR 573 at 585 per Kirby P.

(2) The power of the Court now to grant any relief to the applicants is a question that should be determined as a preliminary point prior to Stage 2 of the Proceedings for the following reasons:

(a) It is plain that the jurisdictional question is whether the Court has the power to grant any relief to the applicants in Stage 2 of the proceedings;

(b) The proceedings, in light of recent declarations of the law and notwithstanding Judgment No. 11 would be resolved by taking the question of jurisdiction on a preliminary basis; and

(c) The evidentiary material relevant to the jurisdictional issue is before the Court.

(3) Since the judgments of the Court in these proceedings, the NSW Court of Appeal and the High Court of Australia have delivered a series of jurisdictional judgments:

· Solution 6 Holdings Ltd & Ors v Industrial Relations Commission of NSW & Ors [2004] NSWCA 200; (2004) 60 NSWLR 558;

· QSR Limited v Industrial Relations Commission of NSW & Ors (2004) 208 ALR 368;

· McDonald’s Australia Holdings Ltd & Anor v Industrial Relations Commission of NSW & 2 Ors (2005) 223 ALR 78;

· Fish v Solution 6 Holdings Ltd & Ors [2006] HCA 22; (2006) 80 ALJR 959;

· Batterham v QSR Ltd & Ors [2006] HCA 23; (2006) 80 ALJR 995;

· Old UGC Inc v Industrial Relations Commission of NSW in Court Session & Ors [2006] HCA 24; (2006) 80 ALJR 1018.

(4) Following the above judgments it is clear that there is no jurisdiction for the Court to take any further steps in the proceedings for reasons that include the following:

(a) the Dealership Agreement or “Overall Arrangement” to which the first applicant and the first respondent were parties (or alleged to be parties) were commercial contracts which did not fall within the jurisdiction of the Court;

(b) None of the three Dealership Agreements or the “Overall Arrangement” are contracts or arrangements whereby a person performs work in an industry within the meaning of section 106 of the Act, and therefore amenable to the jurisdiction of the Commission, because:

(i) they did not directly lead to the performance of work in an industry in that:

a. the performance of work in an industry was not their purpose;
b. they did not in a relevant sense provide for the performance of work in an industry under or pursuant to their terms;
c. they did not have a relevant or recognisable impact on the conditions of the performance of work in an industry.

(ii) if (which is denied) any work was performed in an industry in consequence of the Dealership Agreements and/or the “Overall Arrangement”, such work was merely incidental to the provision of goods and services under those contracts or arrangements.

(iii) the applicants were not persons who were required to or did perform work for any of the respondents within the meaning of section 106 of the Act.

(c) in any event, the Court has no jurisdiction or power to make orders for the payment of money in the proceedings because such orders could not relate, closely or at all, to the performance of work in an industry by any person.

(5) The principles that can be distilled from the recent NSW Court of Appeal and High Court cases include the following:

(a) the contract itself must lead directly to a person working in an industry: see Solution 6; Fish and Batterham;

(b) Characterisation of a contract to determine whether it is within jurisdiction of the Court under s.106 will raise questions of fact and degree in cases. The distinction is one of substance, not form. A relevant factor will be to examine whether the company of the alleged “working proprietor” engages a work force of significant magnitude. The critical question is whether the real transaction needs to be uncovered and whether it is a contract whereby a person works in an industry: see McDonald’s [95] and [102];

(c) It is not sufficient that a contract involves the provision of goods and services with a consequential performance of work in an industry. The impugned contract must directly, under or pursuant to its terms provide for the performance of work in an industry: see Solution 6;

(d) The minimum conditions for the conclusion of directness to be drawn may be that the impugned agreement or arrangement itself must directly envisage the employment of a person or persons in industry and have a recognizable impact upon the conditions of that employment: see Solution 6 at 576;

(e) Whether a contract leads directly to the performance of work has been posed in terms of whether the relevant contract requires a person to perform work and whether the performance of work is a purpose of the contract: see Solution 6 at 576[59];

(f) If there is an Overall Arrangement, it must still lead directly to the performance of work but need not be performance of work pursuant to a legal obligation, provided work was in fact performed: see QSR at 378 [46-47];

(g) Some element of subordination by the person said to be performing the work to the other party to the contract or arrangement is required to satisfy the concept of work in an industry: see QSR;

(h) There must be a nexus between the relevant jurisdictional fact establishing jurisdiction (i.e. whether there is a contract whereby a person performs work in an industry) and the relief claimed by the Applicants. The power to declare void or vary a contract or arrangement extends only to those parts of the contract or arrangement that are closely related to the performance of work in an industry: see Solution 6 at [95] and McDonald’s at [66], [81] and [82].

(6) In addressing the question of jurisdiction in Judgment No. 11 at [70] – [71], the Court concluded that the arrangement between the Applicants and the Respondents was relatively indistinguishable from the arrangement in Majik Markets Pty Ltd v Brake & Service Centre Pty Ltd (1992) 28 NSWLR 443. The Court of Appeal considered in McDonald’s whether franchise agreements (comprising certain Licence and Lease agreements) entered into by the parties, were a contract whereby work was performed in an industry. The Court found by majority that they were not.

(7) In McDonald's, Spigelman CJ was unable to distinguish the case from Majik Markets and Caltex Oil v Feenan; the common features were too significant. The majority (Mason P and Handley JA took a different view to Spigelman CJ in relation to whether the contracts were ones whereby the working proprietor, Mr McLaughlin, performed work in an industry. They found that they were not. Handley JA considered that the earlier franchise cases involved agreements with a “working proprietor” but not a working proprietor who employed “a workforce of this magnitude” (see [95]). His Honour observed that:

Characterisation of a contract to determine whether it is within the jurisdiction of the Commission under s 106 will raise questions of fact and degree in franchise cases near the borderline and the decision may not be an easy one. However there is no difficulty in the present case where the working proprietor’s company employs some 350 staff. The distinction is one of substance, not form, and the Commission, in the words of Barwick CJ in Brown v Rezitis at 164, can uncover the real transaction between the parties. The real transaction here does not have to be uncovered, and it is not a contract whereby Mr. McLaughlin works in an industry. ([102])

(8) The Dealership Agreements between the first applicant and the respondents were not contracts whereby the applicant performed work in an industry. It is pertinent to observe that the employment of over 700 employees by the first applicant (in comparison to the 350 staff employed by the Proprietor in the McDonald’s case) does not make it difficult to characterise this case as being outside the jurisdiction of the Court. The real transaction here does not have to be uncovered, it is clearly not a contract whereby the applicants performed work in an industry.

(9) In light of the limits to the jurisdiction of the Court which have since Judgment 11 been declared by the NSW Court of Appeal and the High Court in decisions which are binding on this Court, the respondents’ contentions that the present proceedings do not involve a contract or arrangement “whereby a person performs work in any industry” should be accepted.

(10) The impugned Dealer Agreements obliged the first applicant to essentially employ such adequately trained and experienced sales and service personnel as may be necessary to ensure that the dealer provided to its customers the highest standard of service and to properly perform all of its duties, obligations and responsibilities pursuant to the Dealer Agreements. However, there was no requirement for the first applicant to employ the second or third Applicant in any capacity or at all. Nor did it require them to do any work.

(11) Thus, the Dealer Agreement did not contemplate the actual performance of work by the Second and Third Applicant in any sense or, alternatively, at best, it did so in a remote or consequential sense. Their involvement was as directors but there was no requirement that they remain even in those positions.

(12) The work in the business of the First Applicant was performed by some 700 persons who were its employees: see for example Judgment No. 11 at [1].

(13) The first applicant’s commercial operations were substantial and could not be described as a “cover for a one man or even perhaps a two man enterprise whereby the persons concerned may be said under the arrangement to be required directly to work in an industry”: see D and G Motors Pty Limited v Capitol Motors Ltd 1973 AR (NSW) 806 at 807 per Watson J.

(14) In the event that the Court maintains its view that the Dealer Agreements are contracts whereby a person performs work in an industry, the question arises whether there is a nexus between the relevant jurisdictional fact establishing jurisdiction (i.e. whether this is a contract whereby a person performs work in an industry and the relief claimed by the Applicants in the Fourth Further Amended Summons or Fifth Further Amended Summons). The power to declare void or vary a contract or arrangement extends only to those parts the contract or arrangement that are closely related to the performance of work in an industry: see Solution 6. Put another way, the relief must relate in some reasonably direct manner to the performance of work by identifiable individuals: see McDonald’s at [66] per Spigelman CJ.

(15) In McDonald’s, Spigelman CJ also found that the relief sought had no relationship to the performance of work. Notably, the variations sought to the Agreements included, inter alia, prohibiting McDonald’s licensing any other restaurant within a 15 km radius, granting an option to renew, requiring McDonald’s to incur capital expenditure for equipment, services and facilities and other alterations which did not “directly impinge on any particular aspect of remuneration, but which have implications to the profitability of the venture” (at 81]).

(16) In the present proceedings, the question is therefore whether the relief sought has a direct impact on the performance of work. In this case it is clear that it does not for the following reasons:

(a) Parts D1 and D2 of the Fifth Further Amended Summons claim compensatory orders for the alleged failure of the respondents to comply with obligations imposed by the Court;

(b) Part D3 is a claim for compensation for the lost opportunity of retaining the dealership that has no relationship to the performance of any work pursuant to the Dealer Agreements let alone remuneration by persons performing work pursuant to the Dealer Agreements;

(c) Part D4 claims compensation for the lost opportunity to sell shares in the first applicant which is a speculative claim for compensation, which again has nothing to do with the performance of any work pursuant to the Dealer Agreements let alone remuneration by persons performing work pursuant to the Dealer Agreements; and

(d) Part D5 claims compensation for loss of net profits from the management distraction and disruption caused by these proceedings and by the publicity and associated uncertainty concerning the applicants’ future as a Caterpillar Dealer. Whilst a novel claim, it is certainly a claim that has nothing to do with the performance of any work pursuant to the Dealer Agreements let alone remuneration by persons performing work pursuant to the Dealer Agreements.

(17) Section 106(2A) of the Act did not impact upon the current application. The effect of the amendment introducing s 106(2A) was clear: it only sought to reverse so much of the judgment of the NSW Court of Appeal in Solution 6 that established the principle as to the need for a collateral arrangement (such as share option agreements, superannuation arrangements and deeds of releases) to lead directly to a person working in an industry. Section 106(2A), by its terms, had no impact upon the application of s 106(5).

Second category

40 In the second category, the respondents referred to what they regarded as a claim by the applicants for loss of opportunity arising from the unfairness found in relation to the Last Resort Policy and Fourth Assurance. It was contended for the respondents that s 106(5) of the Act does not confer power on the Court to make an order or award in the nature of damages, including, in particular, expectation damages. Next, the respondents contended that the Court, as a superior court of record exercising judicial power under section 106, was bound by principles as to finality of judgments and the principles of res judicata and issue estoppel. Accordingly, it was submitted, the applicants were unable, in Stage 2 of the proceedings, to agitate what in effect amounted to further causes of action and to seek to have the Court make further findings of unfairness in respect of them.

41 Also in the second category was a challenge by the respondents to the applicants' claim for lost goodwill. The respondents relied largely on the same grounds for challenge as those associated with the claim for lost opportunity. However, the following additional observation was made: in Solution 6 the Chief Justice referred to the fact that the provisions of the agreement in that case, whether individually or combined, could not be said to lead to the performance of work in an industry in a manner that was "direct'. It was submitted that the question of the existence and value of a proprietary interest in the nature of goodwill which was the subject of the applicants' claim did not involve an agreement that "directly envisages" the performance of work or had a "recognisable impact on the conditions of" that performance in the terms discussed by the Chief Justice in Solution 6.

Consideration of first category issues

42 Although the respondents did not press their application to re-open proceedings for the purpose of having the Court reconsider its decision in Judgments No. 11 and 15 regarding jurisdiction, the effect of what the respondents contended on jurisdiction was that:

(a) The Court was originally in error in finding it had jurisdiction to hear and determine the applicants' claims and in that circumstance it cannot now proceed, in the absence of jurisdiction, to deal with the second stage of the proceedings; or alternatively,

(b) Given that the power to declare void or vary a contract or arrangement extends only to those parts of the contract or arrangement that are closely related to the performance of work in an industry, the relief sought in these proceedings does not relate in some reasonably direct manner to the performance of work by identifiable individuals and accordingly no jurisdiction exists to make any of the compensatory orders sought in Parts D1 to D5 of the Sixth Summons.

43 In Judgment No. 11 at [72] the Court concluded that the contracts or arrangements between the applicants and respondents met the necessary jurisdictional requirements of s 106. Whilst [72] reflects the core reasons why the Court found jurisdiction, it is appropriate to set out those reasons here in full:

52 As Mr Hall submitted, in determining whether the relevant jurisdictional fact exists it is necessary to give close attention to the impugned agreements, which in this case are:

· The Sales and Service Agreement dated 1 July 1991.
· The Distribution Agreement for Engines, Parts and Service dated 1 July 1991.
· The Product Support Agreement for Engines, Parts and Service dated 12 November 1997.

53 It is not only the written agreements that must be examined but also the alleged broader arrangements that were said to exist between the applicants and the respondents. Further, in considering the agreements and arrangements it is important not to lose sight of the overall context in which the agreements and arrangements existed. Caterpillar Inc., through its wholly owned subsidiary the first respondent, had established a dealership network in Australia to sell product and parts manufactured by Caterpillar Inc. and to service those products and parts. Without a dealership network, the respondents would need to set up their own premises at various locations around the country and employ their own staff to sell and service their products.

54 The business relationship between the applicants and the respondents is based to a significant degree on cooperation, trust, confidence and loyalty to the Caterpillar brand. The fact that it was the alleged lack of trust and confidence that was the main driver in the respondents deciding to end the relationship with the applicants, underscores the importance of these factors. Later in this judgment I have referred to Bobux Marketing Limited v Raynor Marketing Limited [2001] NZCA 348 and the decision of Thomas J in that case where his Honour discusses "relational contracts". Thomas J described relational contracts thus at par [44]:

In a relational contract is one which involves not merely an exchange but a relationship between the contractual parties. The parties are not "strangers" in the accepted sense and much of their interaction takes place "off the contract" requiring a deliberate measure of communication, co-operation, and predictable performance based on mutual trust and confidence. Expectations of loyalty and interdependence mark the formation of the contract and become the basis for the rational economic planning of the parties.

55 In my opinion, the contracts and arrangements between the applicants and the respondents were in the nature of relational contracts with a strong personal element characterising the relationship. Again, this distinguishes the relationship between the applicants and the respondents from the arm's length relationships that characterise other commercial relationships.

56 In 1996 the former chairman of the second respondent, Mr Don Fites, wrote an extensive article published in the March-April edition of the Harvard Business Review. The article was entitled “Make Your Dealers Your Partners”. Mr Fites said in the article:

· [O]ur single greatest advantage over our competition was and still is our system of distribution and product support. The backbone of that system is our 186 independent dealers around the world who sell and service our machines and diesel engines.

· I believe the tight working relationships we have forged with our independent dealers to meet our customers’ needs hold lessons for other manufacturers ...

· [F]ew companies have integrated their dealers into their business systems to the degree we have.

· It is not uncommon for our competitors to bypass their distributors and sell directly to the customer if they think a deal is important enough. We’d sooner cut off our right arm than do that.

· It is somewhat misleading, however, to talk about “us” and “them”, because we genuinely treat our system and theirs as one. Our joint distribution operations are all linked by a worldwide computer network. I can turn to the computer on my desk and find out how many machines in the world are waiting for a part.

· Our Partners in Quality program ... links personnel at a factory responsible for building a particular machine with people at selected high volume dealerships. They meet quarterly to discuss quality issues. In addition, those dealers audit each machine they receive from the plant, and if there’s something wrong, they feed that information back to the plant immediately.

· Besides helping us manufacture better products, our dealer network also generates extraordinary and timely market intelligence.

· We have good relationships with our dealers not just because they like us but because the investment is good for them and for Caterpillar, and because both parties work to strengthen the relationship built on trust, confidence, shared interests and rewards.

· I hear a lot of talk about trust between manufacturers and their suppliers and distributors, but few companies really put their talk into practice. The kind of trust that exists between Caterpillar and its dealers is something that could be built up only over generations. Our dealership agreements are documents that run just a few pages. They have no expiration date, and either party can terminate without cause on 90 days’ notice. But turnover is rare because we recognise we’re in this together.

· Caterpillar helps its dealers finance purchases by customers. It supports dealers in inventory management and control, logistics, equipment management, and maintenance programs. The company ... underwrites technical training and support for dealers’ personnel in such areas as managing quality, continuous improvement, benchmarking, cost management, and communications. And we are prepared to respond to any need for training that a dealer identifies, whether it be in planning, forecasting, information systems, marketing and advertising, or other business functions.

· When we see particular dealers not performing well, we jump in and help them.

· Although it is a rare occurrence, the hardest situation is when the problem is the owner’s poor leadership. Even in those cases we won't sit on the sidelines. We try to find a solution that the owner can accept. Maybe it’s giving a son or a daughter a chance. Maybe it’s hiring an outsider to run the business until someone else in the family is ready. Whatever the solution, we will not simply watch while a dealership declines.

· There are no secrets between our dealers and us. We have the financial statements and key operating data of every dealer in the world. Dealers wouldn’t give us that information if they didn’t trust us. In addition, virtually all Caterpillar and dealer employees have real-time access to continually updated databases of service information, sales trends and forecasts, customer satisfaction surveys, and other critical data.

· It would be easy for an outside observer to assume that the structures we have created ... are the backbone of the relationship with our dealers. But the form is the easy part. What caused the deep relationships to develop are the close personal ties that have been nurtured. Those ties form a kind of family relationship.

· Continuity reinforces mutual trust, limits disputes, encourages sharing of information, and generates larger gains for everyone. To that end we prefer to work with privately held enterprises ...

· We actively help dealers keep the business in the family. For example, when the principal of a privately held dealership is about 50 years old, we hold seminars for the family on tax issues and succession planning – both financial and management.

· We also take proactive steps to try to interest children of dealership owners in the business.

57 None of the statements by Mr Fites in his 1996 article were disavowed by the respondents. Indeed, in a letter in April 1996 Mr Nitto commended the article to Mr Gough as a “very compelling description of our partnership.” Mr Nitto also said in his letter that the partnership was unique “because no other competitor in this industry and, for that matter, other industries, have the kind of commercial and personal bond that I believe we share with you and your company.” The article, I believe, reflects the degree of importance that Caterpillar places on the dealership network and, clearly, Caterpillar regards the network as an essential and integral part of its business. The article does refer to dealers as being “independent” but it also reveals an unusually close relationship that gives it a character that one would normally associate with franchise arrangements. In my opinion, therefore, there is considerable strength in Mr Kimber ’s submission that the relationship between the applicants and the respondents is akin to that of a franchisor and franchisee. In that respect, I note that the notices issued on 26 October 2000 purporting to terminate the relationship were to constitute notices for the purposes of the Franchising Code.

58 The fact that the relationship between the applicants and the respondents is akin to a franchise arrangement is not determinative of whether the relevant jurisdictional fact exists but it does suggest that the nature of the relationship lies closer to the class of ongoing arrangements that have been held to attract the provisions of s 106 and its predecessors than arms length, one-off commercial transactions which have not.

59 As I observed earlier, because the dealership agreements might be said to represent commercial transactions, this does not necessarily put the agreements outside the class of agreements to which s 106 may have application: see Mitchforce v Starkey [2002] NSWIRComm 85 at [36]. Because such transactions might be described as commercial, it does not rob them of the necessary “ industrial flavour", which is present if the contract or arrangement leads directly to the performance of work in an industry: Production Spray Painting at 58.

60 I turn to the written Agreements that underpin the relationship between the applicants and the first respondent. The Sales and Service Agreement contains a number of provisions relevant to the question of whether the contract leads directly to the performance of work in an industry. Clause 2(a) of the Agreement provides that:

Both Dealer’s and Company’s primary purpose in entering into this agreement is to develop and promote the sale of products and to provide a high standard of parts availability and mechanical service to insure (sic) satisfaction by users of products. Within the service territory... Dealer shall be primarily responsible for fully and adequately developing and promoting the sale to customers and prospective customers located within such territory and for the servicing of all products ... This is a personal contract entered into by Company in reliance upon the capability of Dealer to provide such sales and service to customers. Without the express written consent of Company, Dealer agrees not to appoint others to perform such sales and service responsibilities.

61 “Dealer” is defined to mean the dealer party to the individual dealership agreement and “Company” is Caterpillar of Australia Ltd. Clause 2(b) provides that the dealer cannot have any financial or management affiliation with any end user without Company’s consent. Clause 2(c) of the Agreement provides:

Company relies upon the qualifications and abilities of the particular individuals named as principals... to achieve such primary purpose. Dealer agrees that such individuals will continue in the active management of Dealer, or will continue to own a substantial financial interest in Dealer. No substantial change shall be made in the management positions, ownership or voting control of such principals without prior approval of Company.

62 The Agreement also provides:

· Dealer will maintain a suitable place or places of business at the points shown in Exhibit A to provide adequate sources of products and mechanical service for the benefit of users ...All places of business will be maintained by Dealer in a neat and attractive manner with adequate quantities of products specified in Exhibit A – all to the satisfaction of Company (cl 4).

· Dealer will employ an adequate number of qualified salesmen to solicit orders for products ...and will employ an adequate number of parts and service sales personnel at all times to serve the needs of the territory - all to the satisfaction of the Company (cl 5).

· Dealer will at all times render prompt, competent, diagnostic and mechanical service to all users in Dealer’s service territory of ... products specified in Exhibit A ... (cl 6(a)).

· Dealer will employ an adequate number of experienced and competent service men, maintain adequate supplies of replacement parts and provide adequate field and shop service facilities to perform all required services to the satisfaction of the Company.

· For the benefit of both Dealer and itself, Company will promote its products at its own expense and in its own name to such an extent and in such manner as in its judgment will best tend to support sales thereof, and, when specifically agreed upon in writing, will participate with Dealer in the expense of promoting such products and Dealer’s services in Dealer’s name in Dealer’s territory (cl 8(a)).

· Dealer, to the satisfaction of Company, will develop and execute promotion and market development programs to support sales of products specified in Exhibit A ...(cl 8(b)).

· Dealer to promptly provide warranty for all products in the territory, to the applicable warranty as set out and/or designated by Company (cll 10 and 11).

· Dealer to provide detailed regular reports to Company of all inventories, sales, names and addresses of customers and, annually, full detailed financial reporting in Company designated format (cll 24, 25, 26).

63 The 1991 and 1997 Product Support Agreements contain equivalent provisions to those described above with the additional requirement to appoint TEPS dealers where and when instructed by the Company.

64 The dealership agreements confirm the first respondent’s very close involvement in the applicants’ business and the first respondent’s right to exercise direction and control over important aspects of the dealership. I note that cl 27 of the Sales and Service Agreement provides that the relationship existing between the parties shall be “that of independent contractors and vendor and vendee.” But that is stated in the context of a provision that the Dealer is not to be regarded as an agent for the Company. I do not consider that I should view that bare provision as indicating the true nature of the relationship.

65 The agreements, if anything, again strengthen Mr Kimber's contention that the relation between the first respondent and the applicants are akin to that of franchisee and franchisor. The agreements require the applicants to set up a business in a certain way; they require the principals of the dealership to use their qualifications and abilities to achieve the primary purpose of the Agreements, for example, the development and promotion of the sale of products; they directly require the applicants to employ personnel to perform work in the business – the business could not operate unless relatively large numbers of personnel were employed to perform work for the business. Whilst the dealership does not operate under the business name of Caterpillar, the dealership is synonymous with that name. The dealership, through its employees, is required to develop and execute promotion and market development programs to support the sale of Caterpillar products and to solicit orders for Caterpillar products.

66 Given the foregoing, it may be said the agreements lead directly to the performance of work in an industry (indeed, it may be said the agreements lead directly to the performance of work by a person or persons for another) and Caterpillar has a real interest in the performance of that work. Moreover, the performance of work is not merely a remote consequence of the agreements but a necessary requirement that, in the absence of the performance of such work, would render the agreements meaningless.

67 It was submitted for the respondents that the dealership agreements “do not require or provide for the licensing or operation of premises for the conduct of a business thereon on behalf of or for the benefit of Caterpillar" and, therefore, it could not be said that the arrangements between the applicants and the first respondent were the same as that which applied in Majik Markets. Similarly, it was submitted that the agreements do not provide for the franchising or licensing of a business and do not require the applicants to conduct a business of Caterpillar or a business of their own under Caterpillar's name.

68 In determining whether the relevant jurisdictional fact exists, I do not consider it is necessary for there to be licensing or operation of premises for the conduct of the first respondent’s business. The dealership agreements do, however, provide that the applicants shall maintain a suitable place or places of business; require the applicants to provide adequate sources of products and mechanical service for the benefit of users and that all places of business will be maintained by the applicants in a neat and attractive manner with adequate quantities of Caterpillar products – all to the satisfaction of the first respondent. The agreements also require the applicants to maintain branches in specified locations.

69 I also do not consider it necessary for the dealership agreements to provide for the franchising or licensing of a business or for the applicants to conduct a business of Caterpillar or a business of their own under Caterpillar's name. Franchising or licensing arrangements are not the only such arrangements that may attract the provisions of s 106 and it would be a most artificial distinction to say that the agreements the subject of these proceedings do not come within the ambit of s 106 because they are not specifically franchise or licence arrangements. The dealership in this case is for all intents and purposes an integral part of the Caterpillar organisation.

70 The arrangement between the applicants and the first respondent, which includes the agreements is, except for the reference to land, indistinguishable from those that were the subject of proceedings in Majik Markets. Handley JA described it thus at 188:

The franchisees are independent contractors conducting retail businesses on the land of the franchisor and selling motor fuel purchased from the franchisor. The franchisees, or in some cases, their employees, work in the businesses both in consequence of the agreements and in fulfilment of them. The form of agreement requires the franchisee to perform work in the retail industry either personally or through employees and therefore it leads directly to the performance of work in that industry. The franchisor has a real interest in the performance of that work. It results in the sale of motor fuel purchased from the franchisor and tends to maintain and improve both the value of its general goodwill, and the value of the local goodwill attached to the premises.

71 If one were to transpose the observations of Handley JA in Majik Markets to the present proceedings it would read as follows:

The applicants are natural persons and a corporate entity conducting a sales and service business on land at a location determined by Caterpillar and required by Caterpillar to be suitable for the purpose, and selling Caterpillar equipment purchased from Caterpillar. The applicants, or their employees, work in the business both in consequence of the agreements and in fulfilment of them. The form of the agreement requires the applicants to perform work in the sales and service industry either personally or through employees and therefore it leads directly to the performance of work in that industry. Caterpillar has a real interest in the performance of that work. It results in the sale of Caterpillar products purchased from Caterpillar and tends to maintain and improve the value of its general goodwill.

Conclusion as to jurisdiction

72 I find that the contracts or arrangements between the applicants and respondents meet the necessary jurisdictional requirements of s 106. Accordingly, I find there is jurisdiction to hear and determine the applicants’ claims for relief under s 106 of the Act.

44 Additionally, the Court stated at [787] and [796](4):

787 It may be seen from the foregoing matters that the first respondent did have grounds to recommend to the second respondent that the relationship with the applicants should be brought to an end. Given the nature of the relationship the respondents were entitled to expect that the applicants would work cooperatively with the respondents in an environment of mutual trust and confidence. The applicants resisted the notions of cooperation, trust and confidence in the name of independence. There was some evidence that the first applicant should be regarded as an independent business. But the true nature of the relationship was one based on interdependence and it was not an arm's length commercial arrangement.

...

796 I am not prepared to grant the primary relief sought by the applicants in any of the alternatives that have been proposed. My reasons for refusing the primary relief are as follows:

...

4. Hallmarks of the relationship between the applicants and the respondents were the requirements of respect, cooperation, trust and confidence. These hallmarks strongly suggest a relationship closer to a personal or relational contract as opposed to an arm's length commercial contract. The applicants cannot submit, on the one hand, the contract is akin to a franchise agreement with the characteristics of a relational contract in order to attract jurisdiction and, on the other hand, contend that trust and confidence do not assume particular significance in the relationship because the relationship is commercial in nature.

...

45 It may be seen that the Court found that:

(1) The Dealership Agreements were agreements creating an "unusually close relationship" as distinct from "arms length, one-off commercial transactions" ([57], [58]);

(2) The dealer principals were required to use their qualifications and personal abilities to achieve the primary purpose of the Dealership Agreements (i.e., develop and promote the sale of products and to provide a high standard of parts availability and mechanical service) and to continue in the active management of the dealership ([60]-[61]);

(3) The agreements led directly to the performance of work in an industry (indeed, it could be said the agreements led directly to the performance of work by a person or persons for another) ([66]);

(4) The true nature of the relationship was one based on interdependence and it was not an arm's length commercial arrangement ([787]);

(5) Hallmarks of the relationship between the applicants and the respondents were the requirements of respect, cooperation, trust and confidence. These hallmarks strongly suggest a relationship closer to a personal or relational contract as opposed to an arm's length commercial contract ([796](4));

(6) The arrangement between the applicants and the first respondent was relevantly indistinguishable from that which was the subject of proceedings in Majik Markets v Brake & Service Centre (1991) 28 NSWLR 443, 39 IR 169 ([70]).

46 A good deal of the respondents' submissions in respect of their first category of challenge were arguments that were put at the time of the original challenge to jurisdiction during the first stage of the proceedings. For example: that the Dealership Agreements or Overall Arrangement were commercial contracts; that neither the Agreements nor the Overall Arrangement were contracts or arrangements that led directly to the performance of work; and, that some element of subordination by the person said to be performing the work to the other party to the contract or arrangement is required to satisfy the concept of work in an industry.

47 Given the factual position and the state of the law at the time, I am unable, on the arguments then put and now repeated, to come to any view other than that expressed in Judgment No. 11, namely, that the Dealership Agreements led directly to the performance of work and that the Overall Arrangement, including the Dealership Agreements, were not arm's length commercial contracts. Moreover, given the finding that the arrangement between the applicants and the first respondent was relevantly indistinguishable from that which was the subject of proceedings in Majik Markets, in my opinion, subject to a consideration of the new arguments put by the respondents in these proceedings, the findings as to jurisdiction in Judgment No. 11 stand on firm ground.

48 I propose to consider the respondents' new arguments as to jurisdiction, which were said to derive from the Court of Appeal and High Court decisions earlier referred to, notwithstanding that there is some force in the applicants' contention that all of these arguments "could have been advanced to the Court during the course of the very full opportunity that was provided to put whatever arguments they sought to mount as to the jurisdiction and powers of the Court..." and that there "was no barrier to the Respondents arguing before Decision No. 11 and Decision No. 15 were handed down that the Court did not possess jurisdiction or power on the grounds that eventually formed the basis of the reasoning in Solution 6 or formed part of the reasoning in McDonalds".

49 The question then, is whether the state of the law has changed to such an extent since Judgments No. 11 and 15 that the jurisdiction which existed in December 2002 now no longer exists so that the Court is deprived of the power to grant any relief for the unfairness found to have occurred in Stage 1 of the proceedings.

50 The two most prominent cases relied upon by the respondents to contend there was no jurisdiction to address the question of relief in Stage 2 of the proceedings, were McDonald's and Solution 6, decisions of the Court of Appeal. The main aspect of the judgment in McDonald's that the respondents relied upon was the decision of Handley JA (with whom Mason P agreed on this point) where his Honour held at [102]:

102 Characterisation of a contract to determine whether it is within the jurisdiction of the Commission under s 106 will raise questions of fact and degree in franchise cases near the borderline and the decision may not be an easy one. However there is no difficulty in the present case where the working proprietor’s company employs some 350 staff. The distinction is one of substance, not form, and the Commission, in the words of Barwick CJ in Brown v Rezitis at 164, can uncover the real transaction between the parties. The real transaction here does not have to be uncovered, and it is not a contract whereby Mr McLaughlin works in an industry.

51 It is not my intention to cavil with the majority judgment in McDonald's, but it is not easy to uncover the ratio of that decision. Handley JA appears to have held that where there is a franchise agreement with a working proprietor and that working proprietor's company engages a workforce of significant magnitude, the agreement will not be a contract whereby the working proprietor performs work in an industry. His Honour's reasoning appears to be based, at least in part, on the view he expressed at [101] that the basic purpose of s 106 was to "provide a safety net for workers or persons in the position of workers". In adopting that view his Honour referred to what Barwick CJ said in Brown v Rezitis [1970] HCA 56; (1970) 127 CLR 157 at 164:

... one of the purposes of the section is to deal with subterfuges ... which will take the worker out of the relationship of master and servant and therefore out of the operation of an industrial award designed, among other things, for the protection of workers in industry...

Handley JA acknowledged, however, that the Chief Justice recognised that the section was not confined to contracts of that character. Indeed, Barwick CJ concluded at 192 in relation to the predecessor provision to s 106 "that the language of s. 88F of the Act is intractable and must be given effect according to its width and generality."

52 If the unfair contract provisions are not confined to the purpose of providing a safety net for workers or persons in the position of workers, then it seems to me, with respect, the provisions may extend to the protection of working proprietors who seek relief from an unfair contract. In this respect, I note what the Full Bench said in Wirraway (NSW) Pty Ltd and anor v Ultra Tune Australia Pty Ltd [2006] NSWIRComm 300 at [35] that:

the provision [s 106] has never been restricted to cases where there has been a subterfuge taking workers outside award regulation

and at [45]:

While s106 requires a contract whereby a person performs work in an industry, there is no requirement that such work be full-time, substantially full-time or that it be "hands-on" work as opposed to managerial or supervisory work.

53 I note also that in McDonald's, Spigelman CJ took quite a different view to the majority when his Honour stated at [65]:

65 I am not able to distinguish this case from Majik Markets and Caltex Oil v Feenan. The common features are too significant. In the light of the authorities, it is not open to this Court to conclude that the Licence/Lease for each restaurant calls for the performance of work in only an indirect or consequential way. The nature of the obligations imposed on MFR and also, separately, on Mr McLaughlin, do, on the present state of the authorities, answer the Stevenson v Barham test of a contract which leads directly to the performance of work in an industry.

54 Mr McLaughlin was, under the terms of the contract with McDonald's, required to work fulltime in the business. It is difficult in those circumstances to understand how the contract did not lead directly to the performance of work. Handley JA considered, however, it was a question of characterisation of the contract. At [97]-[98] and [102] his Honour observed:

A building or engineering contract for a major project will create a lot of employment but such a contract does not lead directly to the performance of work in an industry and does not have a recognisable and direct impact on the conditions of employment of those working on the job: compare Spigelman CJ [para 34].

98 In my judgment the result in such a case would not be different if, in the contract, the proprietor required the contractor to employ identified persons on the project as site manager, architect, or engineer. One could not characterise the contract as a whole as one whereby the named persons performed work in an industry. It could only properly be characterised as a construction contract.

...

102 Characterisation of a contract to determine whether it is within the jurisdiction of the Commission under s 106 will raise questions of fact and degree in franchise cases near the borderline and the decision may not be an easy one. However there is no difficulty in the present case where the working proprietor’s company employs some 350 staff...

55 His Honour's approach would, with respect, seem to be somewhat at odds with the "leads directly to" test laid down by the High Court in Stevenson v Barham [1977] HCA 4; (1977) 136 CLR 190, a test that has not since been overruled in any of the High Court cases referred to by the respondents. Whatever the character of a contract, the contract may, nevertheless, be one that leads directly to the performance of work.

56 It must be acknowledged, however, that the test in Stevenson v Barham has been supplemented by the requirement that the industrial context of the legislation is to be taken into account when applying the Stevenson v Barham test to determine when the requisite connection between the contract or arrangement and the performance of work is sufficiently “direct”: McDonald's at [9] per Spigelman CJ. The requirement to take account of the industrial context of the legislation is not the same as the contract characterisation test apparently adopted by Handley JA in McDonald's, a test that does not appear to have been applied in any of the other cases referred to by the respondent.

57 As far as I am able to ascertain from the cases, the requirement to consider the industrial context has not meant that a line has been drawn between employees or persons in the position of employees on the one hand and working proprietors on the other such that working proprietors are excluded from the unfair contract provisions of the Act.

58 It may be that Handley JA was using characterisation as an alternative to speaking about the purpose of the contract. The respondents contended that the test of whether a contract leads directly to the performance of work has been posed in terms of whether the relevant contract requires a person to perform work and whether the performance of work is a purpose of the contract. Reference was made to Solution 6 at [59] per Spigelman CJ. Whether performance of work is a purpose of the contract has not, in my opinion, displaced the Stevenson v Barham test, although the Chief Justice was of the view in Solution 6 that inquiring as to the purpose may assist in determining whether a contracts leads directly to the performance of work in an industry.

59 But even if one does ask whether work was a purpose of the Overall Arrangement, the answer is in the affirmative. There was no suggestion that work must be "the" purpose but only "a" purpose. In that respect, the second and third applicants, as dealer principals under the Dealership Agreements, were, inter alia, required to actively participate in the management of the business of the first applicant (see, for example, clause 2(c) of the Sales and Service Agreement; clause 2(c) of the Product Support Agreement; clause 2(c) of the Distribution Agreement). Moreover, as the applicants submitted, the second respondent’s decision to terminate the agreements was based on its dissatisfaction with the work relationship between the first respondent and the second applicant in particular (because he was, amongst other things, too independent and not prepared to perform as a dealer in a manner that was to the first respondent’s “satisfaction”).

60 In any event, in so far as the majority decision in McDonald's is concerned, in Wirraway, a judgment by which I am bound, the Full Bench stated at [33]-[35]:

33 In McDonald's, the franchisee company and its proprietor operated four McDonald's restaurants under license and lease agreements and the proprietor was required to devote his full-time attention to and exercise his best efforts in the operation of the restaurants. The Chief Justice could not distinguish the McDonald's arrangements from the franchise arrangements held to be within jurisdiction in Feenan and Majik Markets. While Handley JA (with whom Mason P agreed) readily accepted the correctness of Feenan and Majik Markets, it was thought that to merely approach the McDonald's' arrangements on the basis that a single working proprietor under a franchise agreement had been held to be within jurisdiction was too literal a construction and application of s106. The defining difference appeared to be the fact that the earlier cases did not involve contracts with a working proprietor holding a number of franchises and employing a workforce of the magnitude involved in McDonald's, namely, 350 mainly casual employees with some 20 - 25 being full-time employees. It is unknown whether the evidence descended into any detail as to the regularity of work available to casuals or whether there were a very large number of casuals performing a very small number of hours of work (as often favoured by students and persons seeking remuneration additional to their substantive employment).

34 It is difficult to understand how the number of franchise outlets and the number of persons employed in those outlets would affect the jurisdictional issue of whether the contracts were ones whereby work was performed in an industry. It might be expected that different contractual provisions or important factual differences would be needed to take the same type of contract outside of the jurisdiction when it would be within jurisdiction when involving a single proprietor with a small number of employees. To focus on the number of employees or employees and outlets suggests a reformulation of the test rejected in Majik Markets, namely, that properly construed the franchise arrangements were really commercial arrangements beyond the reach of the Commission's jurisdiction. In addition, the provision has never been restricted to cases where there has been a subterfuge taking workers outside award regulation.

35 Having regard to the number of outlets and the number of employees, either as a test or a relevant consideration, has additional difficulties. Firstly, the High Court in its recent decisions about s106 has cautioned against an approach that does not focus upon a search for the provision within the contract whereby a person performs work in an industry. Secondly, in applying the McDonald's approach, a question arises as to where the line is to be drawn. When does a contract involving work by a proprietor and a number of employees become so numerous in the number of franchise outlets and employees that it can no longer be regarded as a contract whereby work is performed in an industry? These difficulties strongly suggest that the decision in McDonald's falls into a unique or special category and is a case that is limited to its own peculiar facts.

61 Implicit in the Full Bench decision in Wirraway is a cautionary note about following McDonald's because it was "strongly" suggested that decision "falls into a unique or special category and is a case that is limited to its own peculiar facts." The respondents contended, nonetheless, that the circumstances in McDonald's were relevantly indistinguishable from those in the present case. If that were so, despite what I regard as some difficulties with the majority judgment in McDonald's I would, nevertheless, be bound to follow it. However, I do not regard the facts in this case as being on all fours with McDonald's. The proposition that it is overlooks the findings in Judgment No. 11, in particular, as the applicants submitted, that:

[T]he Dealership Agreements were unique “partnership” agreements creating an “unusually close relationship” (distinguished from the normal “arm’s length” or “commercial relationship”) under which the Applicants as the dealer principals were treated as an “integral” part of the Caterpillar business and where their “personal qualifications and abilities” were “so relied on” by Caterpillar that they could not surrender their management roles without Caterpillar’s consent.

62 The Overall Arrangement as found by the Court was, in my opinion, on reflection, akin to an employment relationship between the first respondent and the second and third applicants given the closeness of the relationship.

63 Wirraway also serves to support the correctness of the decision in Judgment No. 11 that jurisdiction existed. In Wirraway, the Full Bench dismissed a motion by Ultra Tune Australia Pty Ltd in which Ultra Tune sought a finding that the Court lacked jurisdiction because a Franchise Agreement with the applicant, Wirraway (NSW) Pty Ltd, did not lead directly to the performance of work in an industry. The Full Bench observed at [8] that the challenge to jurisdiction was primarily prompted by the judgment of the Court of Appeal in McDonald's. At [36]-[39] and at [46] the Full Bench stated:

In addition, this Franchise Agreement contains provisions that are in very similar terms to those dealt with by the Court of Appeal in Majik Markets: importantly, the Franchise Agreement requires management of the franchise to be personally supervised, conducted and operated by the Franchisee or, in the case of a corporate Franchisee as is in the present case, the Franchisee's nominee. When the Franchise Agreement was signed, the second schedule identified Mr Warwick Johnstone as the Franchisee's nominee to operate, manage and conduct the franchise: he was to "run the franchise business". The parties have since proceeded on the basis that Ms Johnstone is that nominee.

37 As Ultra Tune's argument was refined during oral submissions, it accepted the correctness of the decision in Majik Markets. It was noted that in Majik Markets the franchisee was obliged to devote their full-time attention and full-time effort to the conduct, operation and management of the franchise. This was to be compared with the Ultra Tune Franchise requirements that made no mention of full-time participation: although speaking about the management of the franchise being personally supervised and conducted, that could be done by an external company or in any number of ways and there was no obligation on the Franchisee to operate the franchise. These distinctions were said to be important, leading to a different result to that in Majik Markets.

38 That submission was impossible to maintain, however, in light of a number of the provisions of the Franchise Agreement. Clause 6.7 and clause 7.12.1 required the Franchisee to operate and conduct the franchise business and to operate the service centre at the franchised premises in accordance with the standards set by the Franchisor. Clause 7.12.3 required the Franchisee to promptly and strictly observe the methods of operation as established by the Franchisor and set out in the Operations Manual. The alleged distinction is inconsistent with the provisions of the second Schedule whereby Mr Warwick Johnstone was nominated "to run the franchise business". The submission also does not sit well with the provisions of clause 5. 1.4 under which the Ultra Tune System was defined to include training programmes and a procedure for evaluating the effectiveness of managers and mechanics in the performance of the franchised business. While counsel for Ultra Tune submitted that clause 5.1.4 was instructive only, it is difficult to sustain an argument that the Franchisee was not required to implement the training and procedures referred to in clause 5.1.4 when read together with clause 7.12.3.

39 Further, it does not fit comfortably with clause 7.13, which required that, if the Franchisee was a corporation (as is the case in the present proceedings), the management of the franchise must be personally supervised and conducted by the Franchisee's nominee. Further, under clause 7.13 the nominee was required to participate in the Initial Training.

...

46 Having regard to the other provisions of the Franchise Agreement identified by counsel for Wirraway, the picture formed is one of a contract entered into by the parties for their mutual financial benefit and it is one whereby the parties clearly intended that as a direct consequence of the contract Wirraway, through its nominee, would operate, manage, conduct and control the outlet and would employ sufficient persons to supply the service. There is a recognisable and direct impact of the terms of the Franchise Agreement upon the working remuneration of the Franchisee's nominee. As the evidence presently stands, it is not possible to characterise the contract as simply one whereby intellectual property is conveyed between the Franchisor and the Franchisee such that it is the only or primary purpose of the contract. On the evidence available, that is not an accurate characterisation of the substance of the Franchise Agreement, nor is it analogous to a construction contract as referred to in McDonald's. The similarity of the terms with those scrutinised in Majik Markets supports a finding that the application under s106 is within jurisdiction and that Ultra Tune's Notice of Motion challenging the Court's jurisdiction to deal with the application must therefore fail.

64 It may be seen that the Full Bench found, inter alia:

(1) That the Franchise Agreement contained provisions that were in very similar terms to those dealt with by the Court of Appeal in Majik Markets. This was also the case in Judgment No. 11.

(2) That the Franchisee was required to operate and conduct the franchise business and to operate the service centre at the franchised premises in accordance with the standards set by the Franchisor. This was a very similar arrangement to that considered in Judgment No. 11.

(3) That the management of the franchise was to be personally supervised and conducted by the Franchisee's nominee. In Judgment No. 11 a similar finding was made.

(4) That the picture formed of the relationship was one of a contract entered into by the parties for their mutual financial benefit and it was one whereby the parties clearly intended that as a direct consequence of the contract Wirraway, through its nominee, would operate, manage, conduct and control the outlet and would employ sufficient persons to supply the service. A similar picture emerges from Judgment No. 11.

(5) That the similarity of the terms of the Franchise Agreement with those scrutinised in Majik Markets supported a finding that the application under s 106 was within jurisdiction. The same finding was made in Judgment No. 11. Moreover, Majik Markets is still good law. It has not been overruled in any of the High Court or Court of Appeal judgments referred to and relied upon by the respondents.

65 Further support for the correctness of Judgment No. 11 may be found in Mayne Nickless v Industrial Relations Commission of NSW (2004) 141 IR 1. The Court of Appeal held it has not been established that there was no contract whereby a person performed work in an industry and that the directness test required by Stevenson v Barham was open to be satisfied as the Deed in that case directly recognised, contemplated and provided for the work that was to be done by the fourth opponent in the provision of pathology services.

66 At [50] Mason P (Hodgson and McColl JJA agreeing), stated:

50 The Contracts directly envisage that the fourth opponent will continue her hands-on role as a pivotal worker in the pathology business. Without that involvement the statutory requirements under the Health Insurance Act will not be satisfied.

67 The fourth opponent was a pathologist who was also a director and beneficial owner of a company providing pathology services. The company and its directors had entered into a deed with Mayne Nickless to regulate the provision of pathology services at the Port Macquarie Base Hospital. The Health Insurance Act 1973 (Cth) required the proper supervision of the rendering of pathology services, including ensuring that a properly qualified person supervised the rendering of the service and had personal responsibility for the proper rendering of the service.
68 There can be no doubt that like the directors of the pathology service company in Mayne Nickless, both the second and third applicants were "pivotal workers", each with a "hands-on role" and were treated as an integral part of the Caterpillar business.

69 The next significant part of the respondents' jurisdictional challenge was that, in the event the Court maintained its view that the Dealership Agreements were contracts whereby a person performs work in an industry, the necessary nexus between that jurisdictional fact and the relief claimed by the applicants, did not exist. It was submitted for the respondents that the power to declare void or vary a contract or arrangement extended only to those parts of the contract or arrangement that were closely related to the performance of work in an industry: see Solution 6 Holdings at [95] and McDonald’s at [66] and [81] to [84].

70 In Solution 6 the Court of Appeal held that the Commission’s power to declare void or vary a contract or arrangement, or related condition or collateral arrangement, extended only to such aspects of it as closely related to the performance of work in an industry. In relation to the agreement that was the subject of proceedings in Solution 6, a Share Sale Agreement, it was held that it was not a contract whereby a person performed work in any industry within s 106; it was a contract for the purchase and sale of a business and nothing more. The relationship between the Agreement and the performance of such work was indirect or consequential.

71 At [95] Spigelman CJ held:

95 In my opinion, the power of the Commission to declare void or to vary a contract or arrangement does not extend to a provision which has no relationship whatsoever to the performance of work. Specifically, the formula for computation of the purchase price, in my opinion, has no such relationship and the Commission has no power to vary it.

72 In McDonald's the Chief Justice stated at [66] and [81] to [84] (those paragraphs relied upon by the respondents):

66 I have set out above in summary form the relief sought by the Opponents in the Commission. In Solution 6 supra I said that the Commission did not have jurisdiction to grant relief that did not have a close relationship with the performance or the work (at [80] and [83]). An alternative formulation was that relief should “relate in some reasonably direct manner to the performance of work” ([87]). In the event, I concluded that the relief sought in that case bore no relationship to the performance of work ([95]).

...

81 The position taken by the Opponents in this Court was that any aspect of the commercial arrangement between the parties, however tenuously or indirectly it may be connected to the performance of work, is open for the Commission to avoid or to vary so long as it is in any way capable of impacting upon the profitability of the operation of the restaurants, whether on the revenue side or on the expenditure side. This position is manifest in the numerous specific variations and, perhaps even more clearly, in the overall thrust of the variations which they seek, encompassing as they do such matters as imposing prohibition upon McDonald’s licensing any other restaurant within a 15 km radius of each restaurant; granting MFR an option to renew the Licences and Leases; removing McDonald’s rights of re-entry; removing McDonald’s rights to terminate the Licences and Leases for breach; removing MFR’s obligation to repair or maintain the restaurant and imposing the obligation upon McDonald’s; requiring McDonald’s to incur capital expenditure for equipment, services and utilities and various other alterations to the Licences and Leases of a similarly fundamental character which do not directly impinge on any particular aspect of remuneration, but which have implications to the profitability of the venture.

82 No doubt because of their commercial wish to continue in the business, the Opponents do not seek to declare the Leases and Licences void. Rather, they seek orders varying the Leases in the radical terms summarised above. It is by no means clear to me that the cumulative effect of the relief sought is capable of answering the description of orders “varying” a contract, within the meaning of s 106(1). The effect of the orders would be to so radically transform the nature of the relationship between the parties as to go well beyond anything that could be described as a ‘variation’. Nevertheless, this was not the objection taken by McDonald’s in this regard.

83 McDonald’s relied on the proposition that the relief sought does not closely relate to the performance of work. In my opinion, this submission should be upheld, indeed, as was held to be the case in Solution 6 at [95], the relief sought in this case does not merely fail a test of having a close relationship to the performance of work, the relief sought has no relationship to the performance of work, or alternatively, to use the alternative formulation in Solution 6 at [87], the relief does not relate to the performance of work in a reasonably direct manner.

84 It is not sufficient to say, as the Opponents did, that any aspect of the relationship between the parties can be modified so long as the modification can be seen to have some consequence on the profitability of the business and, therefore, upon the remuneration of Mr McLaughlin or, perhaps, other employees. Something more direct, indeed in my opinion something close, is required. Nothing more direct was suggested to exist.

73 In Solution 6, and in McDonald's, the Chief Justice was, in my opinion, directing his attention to the power to vary or declare void in s 106(1) of the Act, not the provisions of 106(5), when he held that relief should relate in some reasonably direct manner to the performance of work. Assuming that be right, it raises for consideration s 106(2A) of the Act.

74 As I stated, the proposition that the power of the Commission to declare void or to vary a contract or arrangement does not extend to a provision which has no relationship whatsoever to the performance of work, derives from the judgment of Spigelman CJ in Solution 6 and it was affirmed in Fish and Old UGC. Since the judgment in Solution 6 was given, and after the judgments in Fish and Old UGC were reserved in November 2005 (the judgments were given in May 2006), the New South Wales Parliament enacted (in December 2005) s 106(2A) of the Act for the express purpose of overcoming the decision in Solution 6.

75 In my opinion Solution 6, Fish and Old UGC, in so far as they are relevant to this issue, are no longer applicable as a consequence of the introduction of s 106(2A). That is to say, s 106(2A) overcomes the proposition in Solution 6 as affirmed in Fish and Old UGC, namely that, related conditions and collateral arrangements must be, in themselves, contracts whereby a person performs work in any industry.

76 The effect of s 106(2A) (which is set out at [19] of this judgment) was referred to in Barataud v Chipperfield (No 3) [2006] NSWIRComm 249. There the Full Bench observed:

35 The new s 106(2A) was referred to by the High Court in Fish, but its effect not considered. (See [45] and in footnote 69. It was also mentioned, but not dealt with, in Old UGC v Industrial Relations Commission in Court Session [2006] HCA 24; (2006) 80 ALJR 1018 (at [31]).

36 Section 106(2A) empowers the Commission to declare void or vary any "related condition" or "collateral arrangement" to a contract whereby a person performs work in an industry, even if the related condition or collateral arrangement does not relate to the performance of work, so long as the performance of work is a significant purpose of the contractual arrangements made by the person. In our view, this latter condition requires a factual assessment of the contractual arrangements, viewed as a whole, to determine whether the performance of work could be described as a significant purpose.

77 In Judgment No. 15 the Court varied the Overall Arrangement ab initio so that it reflected the Last Resort Policy and the Fourth Assurance (as found by the Court in Judgment No. 11), having found that the Overall Arrangement was unfair and had operated unfairly because the respondents had not honoured those two particular aspects of it. That is to say, the Court found in Judgment No. 11 that the respondents' conduct in relation to the sale process was completely at odds with the assurances given to the applicants that the respondents would assist the applicants in the sale process in achieving a fair price for the business and that the process would be amicable (Fourth Assurance) and that the respondents failed to adhere to their Last Resort Policy in that in March 1999 the first respondent decided to recommend to the second respondent that the relationship with the applicants should be brought to an end and did so without taking steps to allow the applicants every reasonable opportunity to retain the dealership. Further, in September 2000 the respondents decided to terminate the dealership agreements, again without satisfying themselves there were no options open other than cancellation and that proper grounds existed to support cancellation.

78 The Overall Arrangement was varied in Judgment No. 15 to provide relief for the unfairness found in relation to the Fourth Assurance and the Last Resort Policy. Even if it were the case that the variations to the Overall Arrangement bore no relationship to the performance of work (and that is not conceded), it is arguable that the Fourth Assurance and the Last Resort Policy may be characterised as related conditions or collateral arrangements for the purposes of s 106(2A); they were, together with the Dealership Agreements, part of an overall, interrelated, arrangement. Further, as the earlier discussion in this judgment reveals, the performance of work was a significant purpose of the contractual arrangements, that is, the Overall Arrangement as found to exist by the Court.

79 The respondents, however, contended that the finding of Spigelman CJ in Solution 6, to the effect that there was no jurisdiction to grant relief that did not have a close relationship with the performance or the work, extended to the making of money orders under s 106(5) of the Act. That is to say, the respondents contended the Court does not have the power to make the compensatory orders sought by the applicants in the proceedings because they did not bear any relationship to the performance of work. For example, it was contended that Part D3 of the Sixth Summons was a claim for compensation for the lost opportunity of retaining the dealership that had no relationship to the performance of any work pursuant to the Dealer Agreements let alone remuneration by persons performing work pursuant to the Dealer Agreements.

80 I agree with the submission put by the applicants that once the Court has made a relevant finding of “unfair contract” and varied that contract pursuant to section 106(1), the Court undoubtedly has the power to make orders “in connection with” that varied contract in the sum the Court considers “just in the circumstances of the case”. The meaning of the expression “in connection with” was determined by the High Court in Brown v Rezitis (at 165) and that decision was not doubted (let alone overturned) in the recent High Court decisions in Fish, Batterham or Old UGC (see also Mayne Nickless at [72]).

81 I think, with respect, what Handley JA stated in Hoffman v Industrial Commission (NSW) (1990) 33 IR 139 at 142-143 about the predecessor provision to s 106(5) still holds good:

In my opinion Brown v Rezitis decides that the jurisdictional requirement in s 88F(2) is that the monetary order must "in connection with" a contract or arrangement etc avoided or varied by the Commission. No other jurisdictional limitation was expressed in the subsection and, in my judgment, no other such limitation is to be read in by a process of construction.

Mr Campbell also contended that s 88F(2) was subject to a further limitation, that it was only exercisable so as to achieve restitution for the benefit of an applicant who had succeeded in obtaining an order or award in subs (1).

In this respect he referred to, and relied upon the remarks of Barwick CJ in Brown v Rezitis at 164. However, in my opinion those remarks by the Chief Justice while indicating a substantial purpose underlying subs (2) were not intended by his Honour, and were not expressed by his Honour, to be an exhaustive statement of the effect of that subsection.

I therefore consider that the further limitation, which Mr Campbell has urged upon us, which would involve limiting the powers of the Industrial Commission under subs (2) so as to leave the present orders beyond jurisdiction should not be accepted either (my emphasis).

82 Having varied the Overall Arrangement to provide relief for the unfairness, it is open to the Court to consider the amount of compensation that should be paid to the applicants in connection with the arrangement as so varied and there is no requirement that the compensatory orders sought must bear a direct relationship with the performance of work under the Overall Arrangement. (Even if there was a requirement for such a relationship, the Last Resort Policy was designed to protect the applicants in their ability to continue to operate the dealership and to continue to earn remuneration from the business. It is at least arguable, on the evidence that is already in, that the non-compliance with the Last Resort Policy affected the second and third applicants' ability to work in the dealership and also affected their remuneration. Similarly, with the Fourth Assurance; arguably the failure by the respondents to assist the applicants in the sale process had an effect on their ability to perform work in the dealership and also affected their remuneration).

83 I should add that I agree with the submissions by the applicants that:

[I]f part of a relevant contractual arrangement (namely a “related condition” or “collateral arrangement”) not related to the performance of work can be varied under s 106(2A), it also must follow that the Court could either, additionally or in the alternative, make a monetary order under s 106(5) of the Act that was not directly or closely related to the performance of work.

84 In any event, as to this aspect of the respondents' challenge to jurisdiction, I respectfully agree with what Schmidt J said in Kennett and Anor v Mayrana Pty Ltd and Ors (No 4) [2006] NSWIRComm 357:

105 The respondents also submitted, however, that a further difficulty arose, in relation to the money orders sought by the applicants. Once 'a contract that is a related condition or collateral arrangement' is declared void or varied, as s 106(2A) permits, then the question of the money orders which the Court might make as a matter of discretion under s 106(5), will arise for consideration.

106 The respondents submitted that s 106(2A) does not 'go far enough', so as to permit the money orders sought to be made in respect of orders of variation or avoidance directed to the 'related condition or collateral arrangement', the sale.

...

109 The precise nature of the close connection between the relief sought and the performance of work which his Honour was discussing is not entirely clear, although plainly the existence of the connection is a question of fact, to be determined on the evidence in each case. By way of example, in MMAL Rentals Pty Ltd v Bruning [2004] NSWCA 451; (2004) 139 IR 377, the Court of Appeal varied a share allotment agreement to require the respondent to pay fair market value for the applicant's shares and made money orders under s 106(5) of $2 million in the applicant's favour, in connection with that variation. At [125]-[145], the question of jurisdiction to make the orders sought under s106, in light of the judgment given in Solution 6, was considered by Spigelman CJ. At [135] an 'interrelationship' between the share allotment agreement and the management agreement under which Mr Bruning performed work was considered. At [143] -[144] his Honour concluded:

[143] This finding is also, in my opinion, determinative of the second matter which the Appellants sought to raise in this regard, namely whether the power in s106 extended to variation of the price determination formula of “fair market value” under cl 11.2.3. What is required is a close relationship between the performance of work and the aspect of the relevant contract that the Court is called upon to declare void or to vary. (See Solution 6 supra at [83]-[95].) I reiterate the view I there expressed at [94] that:

“It is not appropriate ... to take a narrow approach to the total package of benefits, conditions, rights and obligations which relate to performance of work.”

[144] In Solution 6 the Court concluded that the computation of the purchase price for the business had no relationship whatsoever to the performance of work. That case concerned the sale of an asset. In the present case Mr Bruning acquired equity at the very commencement of his relationship with Mitsubishi in a form envisaged to endure for the period of his employment, and no longer. Mitsubishi acquired a call option and, if that were not exercised, Mr Bruning had a put option, each exercisable after termination. His Honour’s finding that the salary component of Mr Bruning’s remuneration package was determined in part by reason of the existence of an incentive to perform in the form of an equity investment was, in my opinion, such as to establish the requisite close relationship between the performance of work and the mechanism for determining the price at which either option would be exercisable.

110 The respondents relied on the approach of Spigelman CJ in Solution 6 to advance the narrow construction of s 106(5) which they here urged, despite the amendment of the section. It is apparent, however, that even on his Honour's approach to the construction of the section prior to its amendment, that so long as there was a close relationship between the performance of work and the sale price of the College, the challenge to the fairness of these contracts would have been within jurisdiction, as would the making of the consequential money orders in relation to the sale price, which are sought under s 106(5).

111 The answer to the question of whether the orders sought in this case may now be made under the section as amended, is to be found in the section, which in this respect is to my mind, also unambiguous. As Spigelman CJ also observed in Solution 6 at [81]:

[81]. In contemporary Australian jurisprudence, a purposive approach to interpretation is to be adopted, not a narrow literalism. That approach is expressed in a joint judgment of Brennan CJ, Dawson, Toohey and Gummow JJ in CIC Insurance Limited v Bankstown Football Club Limited [1997] HCA 2; (1995) 187 CLR 384. (See also the joint judgment of McHugh, Gummow, Kirby and Hayne JJ in Project Blue Sky Inc v Australian Broadcasting Authority at [69]), and the joint judgment of McHugh ACJ, Gummow and Hayne JJ in Network Ten Pty Ltd v TCN Channel Nine Pty Ltd [2004] HCA 14; (2004) 78 ALJR 585 at [11].) The Courts no longer “make a fortress out of the dictionary” Cabell v Markham 148 F 2d 737 (1945) at 739 per Learned Hand J.

82 The CIC Insurance judgment (at 408) said:

“... [T]he modern approach to statutory interpretation (a) insists that the context be considered in the first instance , not merely at some later stage when ambiguity might be thought to arise, and (b) uses ‘context’ in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy. Instances of general words in a statute being so constrained by their context are numerous. In particular as McHugh JA pointed out in Isherwood v Butler Pollnow Pty Ltd [(1986) 6 NSWLR 363 at 388], if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent.” [Emphasis added]

112 Section 106(5) provides:

(5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case.

113 Here, neither inconvenience nor improbability of result, suggests that the literal meaning of s 106(5) was not what the Parliament intended, particularly having in mind the amendment made with the introduction of s 106(2A).

114 The word 'contract' wherever used in s 106, is used in its defined sense, as provided in s 105 - that is 'any contract or arrangement, or any related condition or collateral arrangement, but does not include an industrial instrument... '. In its express terms, s 106(5) is concerned with money orders to be made by the Court 'in connection' with such contracts, which the Court has 'declared wholly or partly void, or varied'. The scheme of s 106 permits such money orders to be made in relation to both contracts under which work is performed (s 106(1)) and those which 'are a related condition or collateral arrangement' (s 106(2A)), so long as, in the latter case, the requirements of s 106(2A) are met and the Court has ordered their variation, or has declared them void.

115 In discerning legislative purpose in this case, it may not be overlooked that s 106(2A) was enacted to overcome the Court of Appeal's decision in Solution 6, which had the result of narrowing the broad construction of the section which had earlier viewed the Court as having jurisdiction to make both orders of avoidance and variation as to related conditions and collateral arrangements, as well as to make money orders in connection with such orders. That the High Court later agreed with the Court of Appeal's narrow approach to the construction of the section, does not take away from the Parliament's earlier decision to amend the section to overcome the approach which the Court of Appeal had adopted. I am satisfied that it did so in a particular and unambiguous way, which must now be given effect.

116 To adopt the narrow construction urged for the respondents would also be directly contrary to the ordinary canons of statutory construction, which require that in the case of ambiguity, beneficial legislation such as s 106 be construed 'so as to give the fullest relief which the fair meaning of its language will allow.' (See Bull v Attorney General (NSW) [1913] HCA 60; (1913) 17 CLR 370 at 384 and the discussion in Statutory Interpretation in Australia, 6th Ed, Pearce and Geddes at [9.2]).

117 In any event, as I have said, I am satisfied that there is no ambiguity and that nothing in the language of the section, as amended by the insertion of s 106(2A), would permit a proper reading of its terms to confine s 106(5), by excluding the making of money orders in respect of 'any contract declared wholly or partly void, or varied', pursuant to the express provision made for such orders in s 106(2A).

Consideration of second category issues

85 It was submitted by counsel for the respondents that the manner in which monetary relief was sought by the applicants was in the form of damages for a range of matters including loss of opportunity by reason of the first respondent’s alleged non-compliance with the Last Resort Policy and the Fourth Assurance; damages in respect of alleged losses flowing from post Judgment No. 15 events (which have not been particularised in part B of the Revised Sixth Summons); and an amount for compensation for losses arising out of the management distraction and disruption caused by these proceedings. None of these matters, it was submitted, were restitutionary in nature.

86 The respondent submitted s 106(5) does not speak in terms of damages or compensation, let alone damages in the nature of expectation loss. Section 106(5) only authorises an order for the payment of money in the nature of restitution within the scope enunciated by the High Court in Brown v Rezitis [1970] HCA 56; (1970) 127 CLR 157 at 165, 170 per Barwick CJ; see also ex parte Ashfield Brokers Re Witek [1972] 14 AILR 486. The claims for damages for loss of opportunity as foreshadowed by the applicants in the Sixth Summons fell well beyond the limitations set out in Brown v Rezitis and well beyond any concept of restitutionary damages.
87 The difficulty I have in accepting this submission is the decision in Westfield Holdings v Adams (2001) 114 IR 241, where the Full Bench specifically addressed the basis upon which monetary relief might be granted under s 106(5) and in doing so had regard to Brown v Rezitis. After addressing at some length the decision of Barwick CJ the Full Bench stated at [98]-[102]:

98 So, the formulation by Barwick CJ as to the nature of the power to make money orders under s 88F(2) of the 1940 Act may be said to be, strictly speaking, obiter. However, the main point we wish to make about Brown v Rezitis is that in arriving at his formulation, the Chief Justice did so against the background of the facts of the case. He was required to focus on the question of restitution because of the order of Richards J that the appellants repay the $2,000 paid by the respondents for the contract, thus restoring "the aggrieved party to a situation which existed before the making of the contractual arrangement". Understandably then, the concept of restitution figured prominently in the Chief Justice's judgment. Given the other orders by Richards J requiring the appellants to pay the respondents for work done and expenses incurred, Barwick CJ was also required to address the question of making remedial provision for what had taken place or been done under the contract.

99 In these circumstances, given the particular facts of the case with which Barwick CJ was dealing, it could not be said that the formulation by the Chief Justice regarding the nature of the power to make money orders under s 106 is to be taken as the exclusive, or even the primary, test to be applied universally to all of the diverse circumstances that arise under s 106. Restitution has been said to be concerned with restoring or giving back something to its proper owner or making reparation for loss or injury previously inflicted. As the Full Industrial Court (Fisher CJ, Bauer and Hill JJ) observed in State of New South Wales v Health and Research Employees Association of New South Wales (unreported, 31 March 1993) (at 82): "... 'restitution' seems to involve a reversion to a position as if the contract had never been entered into."

100 In Harris v Dealing Information Systems Pty Ltd (unreported, Schmidt J, 11 December 1997) in considering the effect of Brown v Rezitis, her Honour rejected a submission that "all monetary orders under s 106(5) are to be understood as restitutionary, rather than compensatory in nature". Having regard to our analysis of Brown v Rezitis, we respectfully agree with her Honour.

101 Restitution may be an appropriate approach where a franchisee has paid money for a franchise and the contract has been found to be unfair. But restitution, as a basis for compensation, is rarely relevant to contracts of employment found to have operated unfairly.

102 We do not think that Brown v Rezitis mandates an approach to the assessment of compensation under s 106(5) on the basis that restitution in the sense referred to, is to be the fundamental guiding principle. Restitution so understood may be appropriate in particular cases, but the fundamental guiding principle is that which is stated in the statute itself, namely, what is just in the circumstances of the case.

88 It is not unusual in the cases to find compensation having been awarded under s 106(5) for the loss of opportunity. In Westfield Ltd v Helprin (1998) 82 IR 411, for example, the Full Bench agreed with Marks J’s conclusion at first instance that Mr Helprin’s contract was unfair in that it did not require a counselling and warning process, including an opportunity for Mr Helprin to improve his performance, prior to the exercise of the right of termination. Both Marks J and the Full Bench considered it appropriate to vary the contract to incorporate a requirement that the respondent provide the applicant with a period in which to improve his performance. Thus, the variation to remedy the unfairness in Mr Helprin's case enabled the Court to make a consequential order awarding monetary compensation to reflect the respondent’s failure to provide the opportunity to the applicant to improve his performance. Another example is David Jones Ltd v Cukeric (1997) 78 IR 430 where, notwithstanding Mr Cukeric's employment had been terminated, the Full Bench varied the contract ab initio to provide that the employment was not to be terminated as a result of any restructuring without fair consideration first being given to Mr Cukeric's future position in any new structure. The Full Bench also concluded at 462 that:

[I]t would be just in the circumstances to make a monetary order in favour of Mr Cukeric in connection with the arrangement as varied by us. The Company is to pay to Mr Cukeric an amount of money (additional to that already paid) to reflect entitlements in respect of a further period of 6 months' notice of termination.

89 Next, the respondents contended there could be no causative loss based on the improvement plan. The Overall Arrangement was varied to provide for an improvement plan. It was a form of relief to remedy the unfairness of the respondents in failing to properly consider such a plan to allow the applicants the opportunity to rehabilitate themselves.

90 I do not consider myself in a position in these interlocutory proceedings to conclude that there is no possibility of the Court making compensatory orders based on the improvement plan variation to the Overall Arrangement.

91 In relation to the claim for lost goodwill the respondents challenged this on the same basis as the claim for lost opportunity, but in addition contended the claim did not involve an agreement that "directly envisages" the performance of work and nor did it have a "recognisable impact on the conditions of" that performance: see Solution 6 per Spigelman CJ. I have already addressed the lost opportunity and connection with the performance of work contentions. In respect of the "recognisable impact on conditions" point I note that it is not a separate test for jurisdiction: see McDonald's at [39].

92 The respondents submitted that the applicants were unable, in Stage 2 of the proceedings, to agitate what, in effect, amounted to further causes of action and to seek to have the Court make further findings of unfairness in respect of them. The Court, it was submitted, having already made relevant findings of unfairness in Stage 1 and having made consequent variations to the Overall Arrangement, was precluded in Stage 2 from considering what, if any, monetary payment should be made in connection with variations made as a result of enlarging the scope of claims post-judgment. I will deal later in the judgment with this issue.

Conclusion in respect of respondents' jurisdictional challenges

93 I am unable, on what has been put to me at this interlocutory stage of proceedings, to find any jurisdictional basis for dismissing or permanently staying the proceedings. Consequently, the respondents' application to dismiss or permanently stay the proceedings is refused.

AMENDMENTS TO PLEADINGS

94 The applicants' proposed amendments to the pleadings fall into four classes:

(1) Those amendments to the third further amended summons that the applicants contend reflect the rulings of the Court in Judgment No. 15. Those amendments were initially set out in the proposed fourth further amended summons filed with submissions on 15 April 2005.

(2) Those amendments to the proposed fourth further amended summons amending Part D to more clearly reflect the claims for compensation pressed by the applicants in light of the Court's findings in Judgment No. 15. These amendments were initially set out in the proposed fifth further amended summons also filed with submissions on 15 April 2005.

(3) Those amendments to the proposed fifth further amended summons that seek to avail the enactment of s 106(2A). These amendments are set out in the proposed sixth further amended summons.

(4) Those amendments to the proposed fifth further amended summons that make further changes to Part D - Particulars of the manner in which any amount claimed will be calculated. These amendments are set out in the proposed sixth further amended summons.

Principles governing amendments

95 The power of the Court to amend is contained in s 170 of the Act and r 148 of the Industrial Relations Commission Rules 1996. As the respondents acknowledged, the Court usefully summarised the principles relating to amendment of pleadings in Judgment No. 15 at [52]-[57] and, as well, the respondents accepted the correctness of the applicants' summary of the principles which, I consider, is worth reproducing:

The power to amend may be exercised “at any stage of any proceedings” (see section 170(2)(a) of the Act and rule 148(1) of the Rules; see also Decision No 15 at [52]). Consistent with the position under general law (see National Australia Bank Limited v Nobile (1988) 100 ALR 227 at 235; TCN Channel 9 Pty Limited v Antoniadis (1998) 44 NSWLR 682 (“TCN Channel 9”) at 695), the power may be exercised as after the evidence has closed and even after the delivery of judgment (see Decision No 15 at [57]; Mercantile Mutual Insurance v Farrington (1996) 44 NSWLR 634 at 648F-651F). In TCN Channel 9, the Court of Appeal said (at page 695B-695C) that:

“There being no legal objection to the proposed contextual imputations, the finding that Channel Nine did not rely on any new facts to support them was a compelling reason for allowing the amendment. An amendment which reformulates a claim or defence within a cause of action or defence which has already been pleaded, based on evidence that has been or will be adduced, should ordinarily be allowed in order to raise the real questions and issue between the parties. Such an amendment should be allowed even after the evidence has closed. This is not a new principle as can be seen from Clough v London and North Western Railway Company (1871) 7 Ex 26 at 30 and it was emphatically endorsed by Stephen J, Mason J and Jacobs J in Leotta v Public Transport Commission (NSW) (1976) 50 ALJR 666 at 668; 9 ALR 437 at 446, and by this Court in Commonwealth v McLean (1996) 41 NSWLR 389 at 397-398” (Underlining added)

Decision No 15 itself involved this Court permitting the Applicants to further amend the Third Summons after the evidence was closed and after the Court had delivered its decision in Gough & Gilmour Holdings Pty Limited & Ors v Caterpillar of Australia Limited & Ors [2002] NSWIRComm 354 (19 December 2002) (“Decision No 11”) (see also Gilbertson v South Australia (1976) 15 SASR 156 at 159 generally; FF Seeley Nominees Pty Limited v El Ar Initiations (UK) Limited (No 41) (1990) 55 SASR 314; Sherpa v Anderson (unreported, Supreme Court of NSW (Young J), 14 October 2003, BC9302148) at page 3.5 and 5.2 of the Internet print; see further Decision No 15 at [16]-[19], [64]-[66]).

The power to amend is to be exercised in such manner as the Court considers “to be necessary in the interests of justice” (see section 170(1) of the Act and rule 148(1) of the Rules; see also Decision No 15 at [52], [55]). The consideration of “justice” reflects the position under the general law (see Queensland v J L Holdings Pty Limited [1997] HCA 1; (1997) 189 CLR 146 (“J L Holdings”) at 155, 167, 172; see also Macquarie Bank Limited v National Mutual Life Association of Australia Limited (1996) 40 NSWLR 543 at 554). In J L Holdings (at 153), the majority cited with approval the following passage from Clough and Rogers v Frog (1974) 48 ALJR 481 at 482 wherein the High Court said:

“As the defence, if established, would be a complete answer in either action, the amendments sought should have been allowed unless it appeared that an injustice would thereby have been occasioned to the respondent, there being nothing to suggest fraud or improper concealment of the defence on the part of the appellants. With the exception of the suggestion of prejudice arising in respect of the loss of the possible claim against the nominal defendant, the matters relied upon by the respondent in opposition to the amendment sought go at the most to delay and irregularity only, matters which are relevant to costs but do not constitute injustice to the respondent in the sense in which that expression is used” (underlining added).

The above authorities stand for the following propositions, namely that:

(a) subject to a number of factors identified below, proposed amendments to pleadings should be permitted “at any stage of proceedings”, save in circumstances of “incurable prejudice” to the other side (see Decision No 15 at [59]-[60]);

(b) when the evidence is closed, there is no barrier to further “pleading” amendments that merely seek to contend that such evidence would or could also support alternative legal characterisations or conclusions (see Mummery v Irvings Pty Limited [1956] HCA 45; (1956) 96 CLR 99 at 112; Leotta v Public Transport Commission (1976) 9 ALR 437 (“Leotta”) at 446 (note the view of Barwick CJ, in dissent – that there was a penalty involved in running a case in a particular way – was rejected by the majority)); and

(c) it is not a relevant type of prejudice that allowance of proposed amendments will or may deprive the other party of a success which would or might be achieved were the amendment not to be allowed (see Nominal Defendant v Cameron (unreported, Court of Appeal: (Kirby P, Hope and Samuels JJA), 2 August 1998, BC8801666) at page 6.9 of the Internet print).

96 The respondents submitted, however, the general principles summarised by the applicants were subject to the following considerations:

(a) Justice does not necessarily require that a party should have multiple opportunities to plead and present its case: Queensland v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 at 171 per Kirby J.

(b) The applicant for leave bears the onus of persuading the Court that it is just to allow the amendment. “If the court concludes that it cannot decide whether or not it is just to allow the amendment, the party applying for leave must fail”: Hancock Shipping Co v Kawasaki Ltd [1992] 3 All ER 132 at 137 per Staughton LJ (with whom Sir Michael Kerr agreed); McKenzie v Commonwealth of Australia [2001] VSC 361 at [88] per Gillard J; Moore v TWT Ltd (1991) 105 FLR 350 at 353 per Higgins J (ACTSC).

(c) It is essential that the party seeking leave to amend discharge the onus of demonstrating that the application is made in good faith/for a proper purpose: Brooks v Wyatt (1994) 99 NTR 12 at 20-21 per Kearney J; Campbell v Metway Leasing Limited (1998) ATPR 41-630 at 40,920-40,921 per McInerney J. Relevant matters include the circumstances in which the application was made, the conduct of the proceeding so far on behalf of the applicant for leave, and the multiplicity of the causes of action being sought to be relied upon by way of amendment.

(d) When application is made for leave to amend a pleading, the precise terms of the amendment sought should be formulated and stated in writing so that the Court and the other party know what is being sought: Busch v Stevens [1963] 1 QB 1 at 4 per Lawton J; J Leavey & Co Ltd v George H Hirst & Co Ltd [1943] 2 All ER 581 at 582 per Lord Greene MR (with whom MacKinnon and Du Parcq LJJ agreed). See also Judgment No. 13, paragraph [26].

(e) Courts will prevent new causes of action being raised, for example, in a damages hearing, after the relevant liability findings have already been made: see, eg, National Australia Bank Ltd v Maher (No.2) [1999] VSCA 189; [1999] 3 VR 589 at [20] per Callaway JA; and

(f) An amendment which is futile because it is obviously bad in law will not be allowed: The Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394 at 456 per Dawson J; Brooks v Wyatt (1994) 99 NTR 12 at 21 per Kearney J; Campbell v Metway Leasing Limited (1998) ATPR 41-630 at 40,920-40,921 per McInerney J.

Applicants' contentions

97 The applicants submitted that the proposed amendments:

(1) Were made in good faith;

(2) Were not futile, especially in circumstances where:

(a) the proposed amendments contained in Section D of the Sixth Summons were necessary to properly articulate the foundations for the applicants’ claim for compensation order under section 106(5) of the Act; reflect the fact that the applicants were expressly granted leave to press amendments to Section D of the Third Summons in Decision No 15 (at [287] (3)); were not bad as a matter of law; and were entirely consistent with the findings of the Court and the well established principles as to the Court’s powers under section 106(5) of the Act;

(b) the proposed Section D amendments (and the proposed section 106(2A) amendments) were also an answer to the contentions set out in the respondents' submissions concerning the alleged impact of Solution 6, inter alia, on the power of the Court to make monetary orders under section 106(5) of the Act (see also J L Holdings at 169.5);

(c) the proposed section 106(2A) amendments avail the enactment of section 106(2A) of the Act in circumstances where the new subsection was introduced by the New South Wales Parliament in December 2005 for the express purpose of overcoming the decision in Solution 6 and where the new subsection is said to apply to “pending” proceedings in the Court ((see also Kennett v Mayrana Pty Limited (No 4) [2006] NSWIRComm 357 (“Kennett”) at [44]-[46], [71], [74], [78], [91]-[95] and [103]-[117]); and

(d) The defensibility of the applicants’ application for leave to amend in such circumstances is a fortiori in view of the decision of the Full Bench in Burgess v Mount Thorley Operations Pty Limited (2003) 132 IR 400 wherein it was indicated that the applicants in that case should have applied for leave to amend the summons before the first instance proceedings were concluded and that their failure to do so was a significant consideration in the decision to dismiss the appeal in that case (see Burgess at [91] and especially [98]). The absence of any application for leave to amend in that case relieved the respondents of the burden of establishing any “incurable prejudice” they would suffer if the particular amendments were permitted, especially given that any such application could not have been defeated (as a form of “penalty” against the applicants in that case) for having made a “mistake” in not raising the alternative contentions earlier (see J L Holdings at 155.5 and 165).

(3) Do not require further evidence to support them (see J L Holdings [1997] HCA 1; (1997) 189 CLR 146 at 171; TCN Channel 9 v Antoniadis (1998) 82 IR 411 at 695) in that:

(a) None of the proposed section 106(2A) amendments or the proposed Dealership Agreements amendments require further evidence to be called to support them and there is no proper basis for the respondents to suggest that they would have called (or now would need to call further evidence) if these amendment were to be allowed. The Court has already heard all the evidence concerning the Last Resort Policy (which was common ground) and the Fourth Assurance (which, in substance, was not put in issue by the respondents: see Judgment No. 11 at [500] and Judgment No 15 at [211]) and the applicants do not seek to press any amendments that seek to challenge the Fourth Assurance, as found by the Court;

(b) The proposed section 106(2A) amendments and the proposed Dealership Agreement amendments do not involve factual considerations or disputes but rather involve a question as to whether the Last Resort Policy and the Fourth Assurance (as found by the Court) can, in the alternative, be properly characterised as “collateral arrangements” or “related conditions” to the Dealership Agreements such that Judgment No. 11 and Judgment No. 15 can be supported (if need be), inter alia, by reference to section 106(2A) of the Act. Furthermore, give that the Court found that, in this case, the Dealership Agreements themselves were unfair vis-a-vis termination and decided to correct any unfairness by varying the Overall Arrangement, inter alia, so as to override the unfair operation of clause 29 of the Dealership Agreements, these proposed amendments which simply advance alternative characterisations and other remedial options available on the evidentiary case already heard and determined do not raise “new issues” such that the Respondents would suffer incurable prejudice (see Judgment No. 15 [63]-[69] generally; see also Leotta at 446-447). In such circumstance, just as the Court of Appeal will not prohibit proceedings in this Court where jurisdiction can be established by an amendment asserting that undisputed facts have a particular legal effect (see Solution 6 at [36] and [43]; Mayne Nickless at [61]), this Court will not deny the applicants an opportunity to further amend the Third Summons based on established facts, especially in the face of asserted challenges to the jurisdiction and power of the Court to make the decisions and orders that it has made.

(4) Do not cause prejudice, in that:

(a) In light of the authorities bearing upon the relevant prejudice (or type of prejudice) that needs to be shown and the fact that none of the proposed section 106(2A) amendments or the proposed Dealership Agreements amendments will require the calling of any further evidence (or would have resulted in the respondents calling further evidence), there is no proper basis for suggesting that the respondents will suffer any relevant prejudice at all if the Court grants leave to the applicants to move on the basis of the Sixth Summons. The applicants do not ask the Court to create any new “phase” in these proceedings so as to consider and rule on the proposed amendments (apart from the proposed Section D amendments which will be considered by the Court in the compensation phase of these proceedings in any event) but rather assert that, out of abundance of caution in the circumstances that have arisen (namely the introduction of section 106(2A) of the Act the Third Summons should be further amended so that, inter alia, the applicants are not faced with a Burgess type argument in any appeal to the Full Bench of this Court (assuming that the Respondents can convince a Full Bench that they can still appeal against Judgment No. 11 and Judgment No. 15) or any further proceedings that may be taken by the respondents in the Court of Appeal.

Respondents' contentions

98 The respondents opposed the amendments contained in the proposed Sixth Summons on three bases:

(1) The proposed amendments in large measure did not comply with the rules of pleading;

(2) Aspects of the proposed amendments purported to raise new claims and related to matters which were plainly outside of the jurisdiction of the Court; and

(3) The proposed amendments should be refused on discretionary grounds. The Applicants have simply failed to discharge the onus they bear of persuading the Court that it is just to allow the amendments.

Form of the Pleadings

99 The respondents' contentions under this heading, in so far as they need to be considered, may be summarised as follows:

(1) Pleadings and particulars are the backbone of the litigation”: Pulham v Dare [1982] VR 648 at 653. It is axiomatic that a proposed amendment which does not comply with the rules of the pleading will not be permitted.

(2) The requirements imposed by rule 18A of the Industrial Relations Commission Rules 1996 that an application under section 106 must "specify in summary the matters of fact and law which form the basis of the application.... and... contain sufficient information to allow the (Court) to carry out its duty to conciliate under section 109 by a succinct summary" reflect the fundamental principle of natural justice that a party against whom a charge of misconduct is made in support of a claim for a penalty or monetary compensation is entitled to be provided with proper notice of the charge in the form of a coherently articulated statement of the facts alleged to have constituted the misconduct and those alleged to warrant the imposition of the penalty or order for the payment of compensation. The Revised Sixth Summons now propounded by the Applicants does not satisfy that fundamental principle.

(3) The Applicants acknowledge in their submissions that the application for leave to amend "only relates to the proposed additional claims by (them)" and that "the proposed amendments..... are necessary to properly articulate the foundations for (their) claim for (a) compensation order under section 106(5) of the Act.....". But when analysed they fail to achieve the latter object.

(4) In view of the matters determined by the Court to date (and particularly the orders made in consequence of Judgment No. 15), there are a number of passages (identified in the submissions) in part B that are now irrelevant to any matter which could conceivably remain in issue and should therefore be struck out.

(5) Part D of the sixth further amended summons particularly fails to comply with rule 18A of the Industrial Relations Commission Rules. It does not specify the matters of fact which form the basis of the application for an order for the payment of money under section 106(5).

(6) In Judgment Nos. 11 and 15, the Court concluded that by, at the very latest, 4 June 2003 (being the date of the publication of the latter Judgment), there was no prospect that the agreements between the parties could continue beyond the periods of 90 days and 26 weeks (at most): see for example Judgment No. 15 at [287]. It is therefore idle of the applicants to speculate (as they do in paragraph D3 of the Revised Sixth Summons) about what may or may not have happened if the respondents had implemented an improvement plan on or before 25 October 2000 (of which plan they (the Respondents) were then, of course, unaware).

(7) The contentions made in sub paragraphs (e) and (f) of paragraph D3 are devoid of any factual foundation in the Revised Sixth Summons. (These subparagraphs were in the following terms:

(e) Without the adverse publicity and other effects that the Applicants suffered as a consequence of the Respondents moving against them in 1999/2000 and without the distraction of this protracted litigation, the Applicants would have been able to make net profits in each of those 10 years on an average of at least $12.5 million per year.

(f) The Applicants claim compensation of $125 million for this lost opportunity, but accept that due allowance (by way of deduction) will need to be made for:

(i) the net profits that the Applicants did make in the period 2000 – April 2004;

(ii) the prospect that the improvement plan failed completely such that a successful sale process or termination occurred thereafter;

(iii) the prospect that the improvement plan succeeded but that the rehabilitated relationship thereafter failed before the effluxion of 10 years and a successful sale process or termination then occurred.)

It would be quite unfair to the Respondents to permit the Applicants to advance such a nebulous claim. The evident purpose of rule 18A (reflecting, as it does, the basic principle of pleadings) is to ensure that the respondent to any application is afforded proper notice of the factual (and legal) matters which are to be asserted against it as the basis of the application.

(8) The assertion in subparagraph D3(g) is, wholly lacking in factual particularity and raises at least the following questions:

· how is the $950,000 calculated?

· To which members of staff were the retention costs of $950,000 paid, in what sums, when and for what reasons? and

· How did the Respondents' failure to comply with the obligations referred to in paragraph D1 (a) cause the Applicants to incur the staff retention costs of $950,000?

(Subparagraph D3(g) was in the following terms:

The Applicants also claim compensation for staff retention costs of $950,000 that they incurred in the period March to May 2000, being costs that would not have been incurred but for the Respondents’ failure to comply with the obligations referred to in paragraph 1(a) above.)

(9) The use of the word "Applicants" in sub paragraphs (a), (d), (e), (f) and (g) is inapposite in light of Salomon v Salomon & Co [1897] AC 63. The Respondents are entitled to know which of the Applicants claims what and why. They should not be obliged to guess about these matters particularly when confronted with what appear to be very extravagant claims for $125 million or $150 million less unspecified "deductions".

(10) The manifest inconsistency between the claims made in paragraphs D3 and D4 are embarrassing. While claims in the alternative are in certain circumstances permissible, here the Applicants invite the Court to speculate about the possibility that the first applicant may have been able to retain the dealership for some 10 years beyond 2000, on the one hand, and the possibility that the second and third Applicants may have been able to negotiate, in 2000, a sale of their shares in the first applicant's capital, on the other. The facts which have been established to the Court's satisfaction are that the relationship of trust and confidence fundamental to the continuance of the First Applicant's dealership had broken down completely by 2000 and that it was inevitable that in the dealership would either be sold or terminated. By the orders made in light of the Judgment No. 15, the Court afforded the Applicants an opportunity to dispose of either the First Applicant's business or the Second and Third Applicants' shares. The Applicants elected not to take advantage of that opportunity with the result that the dealership was duly terminated. In light of the continuing (substantial) profitability of the undertaking between 2000 and 2003, there is simply no factual basis in the Revised Sixth Summons for any contention that the business or shares were worth any less in 2003 than they were in 2000. It follows that if the Applicants have incurred a loss as a result of not availing themselves of the opportunity to sell the business or shares, that loss is a loss of their own making and cannot, in any sense, be attributable to any improper conduct on the part of any of the Respondents. However, importantly in the context of the present application to amend, the Applicants have failed to plead any facts in support of the Revised Sixth Summons which occurred after 26 October 2000. On that basis alone, there is simply no justification for this aspect of the amendment being permitted.

(11) there is a demonstrable lack of logical connection between the matters referred to in paragraphs D4 (e) and D1 (b). (These paragraphs are in the following terms:

D1 By its judgment in Gough & Gilmour Holdings Pty Ltd v. Caterpillar (No. 15) [2003] NSWIRC 173) (“Decision No. 15”) the Court varied the Overall Arrangement ab initio, inter alia, so as to:

...

(b) impose further obligations on the Respondents to reflect and give effect to the Court’s unfairness findings with respect to the Respondents’ Last Resort Policy and the Fourth Assurance: see Decision No. 15 at [287](9) clauses 1 and 3-4.

...

D4 (e) The Applicants also claim compensation for the costs that they incurred with respect to the failed sale process in 2000, namely:

(i) Valuation and advisory fees: $600,000.

(ii) Administrative, legal and mandatory (including audit/accounting and taxation) costs: $450,000.

(iv) Separate legal and financial costs incurred in due diligence process: $250,000,

being costs that would not have been incurred but for the Respondents failure to comply with the obligations referred to in paragraph 1(b) above.)

(12) Paragraph D5 is ex facie untenable, both in principle and for want of factual detail. (Paragraph D5 is in the following terms:

5 The Applicants also claim compensation for the loss of net profits for the period between 8 June 1999 and the ultimate termination date (April 2004) arising from the management distraction and disruption caused by these proceedings and by the publicity and associated uncertainty concerning the Applicants’ future as a Caterpillar dealer, being costs that would not have been incurred but for the Respondents’ failure to comply with the obligations referred to in paragraph 1(a) above.)

New claims

100 The respondents' contentions under this heading, in so far as they need to be considered, may be summarised as follows:

(1) The Court, as a superior Court of record, exercising judicial power, under section 106, is bound by principles as to finality of judgments and the principles of res judicata and issue estoppel. Accordingly, the Applicants are unable, as they seek to do in the Revised Sixth Summons, to agitate what in effect amount to further causes of action and to seek to have the Court make further findings of unfairness and variations in respect of them. It is contended that the Court, having already made findings of unfairness and having made consequent variations to the “Overall Arrangement” in Stage 1 of the proceedings, should not entertain the new claims in part A.

(2) The new claims made in part A of the Revised Sixth Summons should not be entertained given the orders which have been made in consequence of Judgment No. 15. In particular, the orders set out in paragraph A1B cannot be supported in light of the reasons expressed in Judgment No. 11 at paragraphs [475] to [500]. Moreover, in Judgment No. 15, the Court has practically spent its power of variation rendering the claims made in paragraphs 2 and 2A of part A altogether inappropriate.

(3) The claim for a declaration as set out in paragraph A 1B should not be entertained on the ground of inutility. Similarly in paragraphs A 2B, A 2C and A 2D the Applicants apparently wish to revisit the subject matter of the orders made in consequence of Judgment No. 15. The Court has already declined to make an order in terms of paragraph A4.

(4) The Applicants' professed attempt to invoke and rely on section 106 (2A) is embarrassing and pointless. They have always maintained that the three agreements made by the parties did not exhaustively define their contractual relations which, so they would have it, have been subject to an "Overall Arrangement". In paragraph 8 (c) (ii) of their submissions the Applicants say ".... these proposed amendments which simply advance alternative characterisations and other remedial options available on the evidentiary case already heard and determined do not raise 'new issues' such that the Respondents would suffer incurable prejudice....."; that proposition simply means that the amendments add nothing to the matter and are therefore needless. The Applicants repeat the same proposition in paragraph 8 (d) (i). More importantly, nothing has been put by the Applicants to demonstrate that their "section 106 (2A) amendments" have any bearing on their claim for monetary compensation under section 106(5). It is obvious that they do not.

(5) The amendments sought to be made in respect of part D of the Summons are futile because they are beyond the Court’s jurisdiction for reasons which include:

(a) The Court can only grant relief pursuant to section 106(5) which relates in some reasonably direct manner to the performance of work: see McDonald’s supra at [66] per Spigelman, CJ and Fish at [41];

(b) The Revised Sixth Summons simply does not disclose the existence of any connection between the performance of work in industry by the Applicants or any of them, on one hand, and any justification for an order for the payment of money by the Respondents or any of them, on the other;

(c) The manner in which monetary relief is sought is in the form of damages for a range of matters including loss of opportunity by reason of the First Respondent’s alleged non compliance with the Last Resort Policy and the Fourth Assurance; damages in respect of alleged losses flowing from post Judgment No. 15 events (which have not been particularised in part B of the Revised Sixth Summons); and an amount for compensation for losses arising out of the management distraction and disruption caused by these proceedings. None of these matters relate in any manner to the performance of work and are not restitutionary in nature; and

(d) Section 106(5) does not speak in terms of damages or compensation, let alone damages in the nature of expectation loss. Section 106(5) only authorises an order for the payment of money in the nature of restitution within the scope enunciated by the High Court in Brown v Rezitis at 165, 170 per Barwick CJ. The claims for damages for loss of opportunity as foreshadowed by the Applicants in the Revised Sixth Summons falls well beyond the limitations set out in Brown v Rezitis and well beyond any concept of restitutionary damages.

Discretion

101 The respondents' contentions under this heading, were as follows:

(1) Before considering the question of amendment, it is important to note that this application is being made only after the Respondents filed their Notice of Motion to strike out or stay the proceedings and served their submissions in support.

(2) The Court should proceed with caution in evaluating any reasons which are advanced in support of the application to amend the pleadings in the form the Revised Sixth Summons. The amendments in large measure appear to be fashioned to attempt to meet the Respondents’ jurisdictional contentions. One of the more blatant attempts to resist the jurisdictional challenge arises in subparagraph D3(a) of the Revised Sixth Summons which is inconsistent with paragraph B18 of the Revised Sixth Summons. This assertion could have been met by evidence and been the subject of cross examination by the Respondents. It can only be inferred that this amendment is an attempt to “clothe the Court” with jurisdiction in circumstances where none plainly exists to grant the relief in paragraph D3.

(3) Accordingly, the application for leave to amend ought be refused for the following discretionary reasons:

(a) The Applicants have been guilty of inordinate delay in making this application. The Court may infer that the timing is a pure strategic ploy on the part of the Applicants;

(b) The hearing has involved a considerable amount of court time and resources before this application has been made;

(c) The raising of new issues and claims will potentially result in further cross examination of the Applicants in respect of some of the amendments including D3(a);

(d) The party seeking leave to amend has the onus of demonstrating that the application is made in good faith or for a proper purpose. The Applicants have failed to discharge this onus on the material before the Court; and

(e) In any event, the proposed amendments would be futile for the reasons advanced above.

Consideration regarding amendments to pleadings

102 Early in these proceedings (November 2000) the Court decided that it would split the proceedings into two parts. The first part would address the alleged unfairness of the Dealership Agreements and Overall Arrangement and whether they should be varied in the terms sought. The second part would deal with issues of compensation but only in the event that unfairness had been found and the primary relief sought, that is variation of the contracts, was refused.

103 In the result, the Court found there was unfairness and whilst it did not grant the primary relief sought by the applicants it did vary the Overall Arrangement to provide relief from the unfairness.

104 In Judgment No. 15 leave was granted (in part) to the applicants to amend the Third Further Amended Summons. The amendments were incorporated into the proposed Fourth Further Amended Summons. The applicants then sought leave to further amend the fourth summons so as to amend Part D thereof to more clearly reflect the applicants' claim for compensation in light of Judgment No. 15.

105 Subject to a consideration of the respondents' contentions, prima facie the foregoing amendments are unobjectionable. They merely reflect the Court's decisions in Stage 1 of the proceedings. The later amendments to Part D, amounting to a refinement of the applicants' compensation claims also on their face would not appear to be objectionable. The same view may be taken of the amendments whereby the applicants seek to avail themselves of the benefit of the introduction into the Act of s 106(2A).

106 Turning to the respondents' specific contentions opposing the amendments, the first was that the Sixth Summons did not provide proper notice in the form of a coherently articulated statement of the facts alleged to warrant an order for the payment of compensation. Having regard to r 18A of the Commission's Rules, an application under s 106 must "specify in summary the matters of fact and law which form the basis of the application.... and... contain sufficient information to allow the (Court) to carry out its duty to conciliate under section 109 by a succinct summary". In my opinion, the amendments meet the requirement of the Rule. The amended summons outlines the factual matters supporting the claims, much of which is derived from Judgment No's 11 and 15. The applicants are not required to particularise their evidence in support of those claims but are only required to "specify in summary the matters of fact and law which form the basis of the application". In my view, the amended summons provides a reasonably full summary, moreso than is often found in summonses filed with the Court.

107 The next objection was that the summons contained references that were "irrelevant to any matter which could conceivably remain in issue and should therefore be struck out". The respondents were referring to those matters of fact and law in the summons that they considered had been dealt with in Stage 1 of the proceedings. I do not know of any practice in this Court of deleting matters from pleadings after reasons for judgment have been issued. Nor do I know of any practice whereby the Court, after having varied or declared void a contract under s 106, deletes matters that are no longer relevant prior to dealing with question of compensation under s 106(5) of the Act. I cannot see any prejudice to the respondents by leaving the summons intact. Moreover, as the applicants submitted, if an appeal and cross-appeal from Decision No. 11 and Decision No. 15 are still available at the end of the compensation phase of these proceedings, the position in support of retaining such matters in the pleading is a fortiori.

108 The third objection was that Part D of the Sixth Summons failed to comply with r 18A of the Industrial Relations Commission Rules. I do not agree. As the applicants submitted, the requirements of r 18A are that an applicant under s 106 is to specify “in summary the matters of fact and law which form the basis of the application” (my emphasis) and this is contemplated as being done in Part B of the summons for relief (as reflected in Form 12A). By contrast, Part D of the summons is only required to contain “particulars of the manner in which any amount claimed is calculated”, which in my view has been done with one exception that I will come to.

109 The fourth objection was that it was idle of the applicants to speculate (as it was alleged the applicants did in paragraph D3 of the Sixth Summons) about what may or may not have happened if the respondents had implemented an improvement plan on or before 25 October 2000 (of which plan they (the respondents) were then unaware). The Court addressed the issue of what might or might not have happened if the respondents had implemented an improvement plan in Judgment No. 15 at [260]-[261] and concluded that it was impossible to say that the applicants would not have cooperated in an improvement plan:

260 As to the proposition that imposing an improvement plan might create its own unfairness because the relationship between the applicants and the respondents was in the nature of a relational contract and that, therefore, the parties should be left to their own devices, I do not agree. The Court has found that the respondents committed acts of unfairness against the applicants and they are entitled to have considered by the Court whether and to what extent that unfairness should be remedied.

261 In relation to the specific submission by the respondents that an improvement plan/last resort provision is inconsistent with the nature of the relationship between the applicants and the respondents, that is the relationship is akin to a relational contract, I disagree. There was an expectation on both sides that the dealership was a long term arrangement and would only be cancelled if all reasonable steps to keep the dealership on foot had failed. In other words, cancellation of a dealership was a measure of last resort. As part of the relationship between the applicants and the respondents there was an obligation on the respondents to observe their Last Resort Policy. The respondents' failure to provide the applicants with a final opportunity to rehabilitate themselves was inconsistent with the Last Resort Policy. As the applicants contended, it was not open to Caterpillar to implement or ignore the Last Resort Policy at its discretion unless, of course, the conduct of the dealer could properly be characterised as serious and wilful misconduct justifying summary termination. To have ignored the Last Resort Policy in the manner that the respondents did was inconsistent with their obligations in the relationship with the applicants. Additionally, whilst the applicants must carry the lion's share of blame for the break down in the relationship, the respondents' conduct contributed to that break down. Given that contribution, it seems somewhat perverse for the respondents to contend that any improvement plan would have inevitably failed.

262 The respondents submitted that the evidence, and the Court’s own findings, point clearly to the conclusion that, even if an improvement plan had been implemented in the present case, it would have made no relevant difference. I have already addressed this issue. Whilst the applicants' past conduct provides reason for considerable pessimism that an improvement plan would have actually worked, and even if it did the question might have been for how long, it is impossible to say categorically that the applicants would not have cooperated in such a plan.

110 It seems to me that on the basis of the findings in Judgment No. 15 the applicants are entitled to at least claim that had an improvement plan been implemented in conjunction with clear warnings about dealership cancellation if the plan failed, it would have been successful such that the respondents would not have resolved in 1999 to bring the relationship to an end and would not have issued cancellation notices in October 2000. Whether the Court, in dealing with the merits in the compensation phase, accepts the validity of the compensation claim to the extent contended for by the applicants remains to be determined.

111 The fifth objection was that paragraphs D3(e) and D3(f) were “devoid of any factual foundation” and gave rise to a “nebulous claim”. I think the respondents' criticisms put it too highly. Nonetheless, it is often a fine line in knowing whether particulars that have been provided are insufficient or whether they are sufficient subject to further information being provided in the applicant's evidence, with the respondent having the opportunity to assess the applicant's evidence to test that evidence in cross-examination and to put on any evidence in response to it that the respondent sees fit. Ultimately, the respondents are entitled to know the particulars of how the amount of $12.5 million was arrived at and what the deductions amount to. Whether this is provided in the form of additional particulars or in the applicants' evidence to be filed in the proceedings would not seem to be a critical issue but I consider the particulars provided in the summons are sufficient.

112 I make similar observations about the sixth objection regarding staff retention costs. The respondents are entitled to know what is precisely meant by staff retention costs, how the $950,000 was calculated and to whom it was paid. But this information can also be provided separately from the summons, which I consider contains sufficient particulars to put the respondents on notice as to how the applicants' compensation claims have been arrived at.

113 The respondents' criticism regarding the lack of distinction made in the summons about the identity of the individual applicants is not such that it would cause the Court to require the applicants to be more specific in the summons. The identity of the individual applicants and the amount they claim collectively or individually will no doubt be the subject of evidence and the Court will ensure the respondents have a proper opportunity to reply.

114 The objection by the respondents based on an asserted inconsistency between paragraphs D3 and D4 in the summons is, to some extent, understandable given the applicants concede that double counting would be involved were the Court to compensate for both matters. However, paragraph D3 relates to the alleged loss flowing from the failure of the respondents to follow their own Last Resort Policy and the basis for calculating compensation for such loss. Paragraph D4 relates to the alleged loss flowing from the respondents failure to adhere to both the Last Resort Policy and the Fourth Assurance. Whilst there is the potential for double counting, a matter that will need to be addressed in the substantive proceedings, there is no inconsistency per se. Moreover, the tenor of the respondents' objections are more in the nature of a challenge to the merit of the claims, which are more appropriately dealt with in the substantive hearing in Stage 2.

115 The respondents' ninth objection was that there was a demonstrable lack of logical connection between the matters referred to in paragraphs D4(e) and D1(b). I do not think this is so. As the applicants submitted, the costs identified in paragraph D4(e) (costs incurred with respect to the failed sale process in 2000) were allegedly wasted costs upon the failure of the respondents to adhere to the Last Resort Policy and the Fourth Assurance (as found by the Court) – the failure identified in paragraph D1(b).

116 The tenth objection was that the claims in paragraph D5 were “ex facie untenable, both in principle and for want of factual detail”. I consider the applicants were correct in submitting there was no barrier in principle (and subject to the provisions of s 106(5)) to the applicants obtaining compensation for losses associated with being required to focus on litigation rather than the dealership conducted by the applicants (assuming such loss is supported by evidence), nor for any loss of business due to the actions of the respondents in the market place. The claim is, however, short on detail, namely, the amount claimed and the particulars of the manner in which the amount claimed is calculated. The summons should be amended to provide the necessary particulars.

117 The respondents' next objection was that the applicants were seeking to agitate “what in effect amount to further causes of action”. The respondents were referring, inter alia, to amendments in Part A of the Sixth Summons affected by what the applicants described as the "s 106(2A) amendments". I note that although the respondents appeared to challenge orders 2 and 2A, these were part of the Third Further Amended Summons considered in Judgment No. 11.

118 Thus the amendments under challenge are as follows:

1B. Further, or in the alternative, to Order 1 and/or 1A, an order declaring that:

(a) the collateral arrangement or related condition constituted by the last resort policy; and

(b) the collateral arrangement or related condition constituted by the Fourth Assurance,

are unfair, harsh or unconscionable or against the public interest.

...

2C. Further, or in the alternative, to Orders 2, 2A and/or 2B, an order that the collateral arrangements or related conditions referred to in claim 1B above be set aside or varied ab initio as follows:

[set out thereafter were terms that reflected the orders proposed at [287] of the Court's judgment in Judgment No. 15].

119 It is first necessary to put the foregoing orders in context. Order 1 in Part A of the Sixth Summons was an order seeking a declaration that the Dealership Agreements were unfair. Order 1A was an order seeking further, or in the alternative to order 1, a declaration that the Overall Arrangement was unfair. Order 2 was an order seeking further, or in the alternative to order 1 and/or 1A, the Dealership Agreements be varied from their commencement, or such other date as the Court considers just, in accordance with the provisions in Schedule A to the Summons, Schedule A being the proposed amendments to the Dealership Agreements. Order 2A was an order varying the Overall Arrangement. Order 2B was an order seeking further, or in the alternative to orders 2 and 2A, the Overall Arrangement be varied to insert the terms set out in Schedule B, such Schedule being the proposed variations to the Overall Arrangement.

120 The orders sought in 1B and 2C were orders in the alternative to those sought in relation to the Dealership Agreements and the Overall Arrangement. The Fourth Assurance and the Last Resort Policy constituted part of the Overall Arrangement and these two aspects were found to be unfair. Relief was provided to the applicants in relation to the unfairness by variations to the Overall Arrangement: see Judgment No. 15 at [287].

121 The amendments in the form of orders 1B and 2C in the Sixth Summons, in effect, involve a question of whether the Last Resort Policy and the Fourth Assurance may, in the alternative, be characterised as collateral arrangements or related conditions. Undoubtedly, it was open to the applicants to seek orders in the form of those set out in paragraphs 1B and 2C from the outset or at least following Judgment No. 15; the very nature of the Assurance and the Policy lend themselves to be described in common language as either collateral arrangements or related conditions (whether in law they may be so described, is another matter). However, what brought the character of the Last Resort Policy and the Fourth Assurance into more recent focus was the respondents' application to re-open the proceedings to challenge the correctness of Judgment No's 11 and 15, their continued insistence that the Court does not possess the necessary power to determine the compensation claims (for most of the same reasons that were to be advanced in the abandoned re-opening application), and the enactment of s 106(2A).

122 In the face of the respondents' contention that the Court does not possess jurisdiction to make any orders for compensation because of, inter alia, the decisions in Solution 6 and Fish it is understandable, in light of the introduction of s 106(2A) that the applicants might seek to amend the pleadings so as to rely on that provision given that the proceedings may properly be regarded as pending. That is to say, the applicants want to be able to contend that:

(1) Section 106(2A) empowers the Court to declare void or vary any "related condition" or "collateral arrangement" to a contract whereby a person performs work in an industry, even if the related condition or collateral arrangement does not relate to the performance of work, so long as the performance of work is a significant purpose of the contractual arrangements made by the person; and,

(2) that it must follow that the Court could either, additionally or in the alternative, make an order under s 106(5) of the Act that was not directly or closely related to the performance of work.

123 Given the earlier findings in this judgment that Solution 6 et al does not necessarily constitute a jurisdictional barrier there is no reason, on that front, to refuse the amendments.

124 It is arguable the amendments are not necessary because it could be implied that findings of unfairness that led to variation of the Overall Arrangement were findings relating to the Fourth Assurance and Last Resort Policy as collateral arrangements or related conditions that constituted elements of the Overall Arrangement. The applicants, however, referred to the Full Bench decision in Burgess where the Full Bench was critical of the applicants' failure to seek to amend their claims in a timely way. At [91]-[92] and at [98] the Full Bench stated:

... In the present appeal there was no application by the appellants at first instance to amend their claims notwithstanding the fact, as they submitted, any variations which would be appropriate in the circumstances could only be finally determined upon hearing the evidence of the respondents. Once that evidence had been adduced, it was open to the appellants at first instance to seek leave to amend the proceedings and thereby put the Court and the respondent on notice of the changed circumstances.

92 In our opinion, that is the course that should have been followed. The proceedings before Schmidt J were not without complexity, involving as they did 14 applicants and significant issues of fact and law. It is not sufficient to say that the respondent should have anticipated claims in the alternative, or should have sought particulars of the claims, when the claim was developed unequivocally on the basis that the Award and EA had been expressly or impliedly incorporated into the appellants' contracts of employment or constituted an arrangement or collateral arrangement. It would have been unfair to the respondent to have to meet an alternative claim not articulated until closing submissions that if it were found there was no incorporation the Court should, nevertheless, vary the contracts to achieve that end.

...

98 We would emphasise that this conclusion is not be taken as indicating that this Court should act as a Court of strict pleadings. (See Gough & Gilmour Holdings Pty Ltd and ors v Caterpillar of Australia Ltd (No.13) [2003] NSWIRComm 26 at [25]). Rather, it was incumbent upon the appellants to seek leave to amend the applications at an appropriate time, a step which they expressly rejected.

125 In seeking to amend the pleadings in the form of the s 106(2A) amendments the applicants are putting the respondents unequivocally on notice that as a form of alternative relief the applicants are contending the Fourth Assurance and the Last Resort Policy are either related conditions or collateral arrangements and that they are seeking to avail themselves of the provisions of s 106(2A).

126 With these considerations in mind and given that: no further evidence is required to support the proposed amendments; the amendments cannot necessarily be regarded as futile; the respondents will not suffer any prejudice if the Court allows the amendments; and, the application is made in good faith, there is no proper basis to refuse the s 106(2A) amendments.

127 The respondents' next contention was that the amendments sought to be made in respect of Part D of the Summons were futile because they were beyond the Court's jurisdiction for reasons that included:

(1) The Court can only grant relief pursuant to section 106(5) which relates in some reasonably direct manner to the performance of work. The manner in which monetary relief is sought is in the form of damages for a range of matters including loss of opportunity by reason of the first respondent’s alleged non compliance with the Last Resort Policy and the Fourth Assurance; damages in respect of alleged losses flowing from post Judgment No. 15 events (which have not been particularised in part B of the Revised Sixth Summons); and, an amount for compensation for losses arising out of the management distraction and disruption caused by these proceedings. None of these matters relate in any manner to the performance of work and are not restitutionary in nature; and

(2) Section 106(5) only authorises an order for the payment of money in the nature of restitution; The claims for damages for loss of opportunity as foreshadowed by the Applicants in the Revised Sixth Summons falls well beyond the limitations set out in Brown v Rezitis and well beyond any concept of restitutionary damages.

128 I have already dealt with these contentions in considering the jurisdictional aspects of the respondents' case. It is sufficient to say that I rejected the respondents' contentions.

129 In relation to discretionary considerations, the respondents submitted:

The Court should proceed with caution in evaluating any reasons which are advanced in support of the application to amend the pleadings in the form the Revised Sixth Summons. The amendments in large measure appear to be fashioned to attempt to meet the Respondents’ jurisdictional contentions. One of the more blatant attempts to resist the jurisdictional challenge arises in subparagraph D3(a) of the Revised Sixth Summons which is inconsistent with paragraph B18 of the Revised Sixth Summons. This assertion could have been met by evidence and been the subject of cross examination by the Respondents. It can only be inferred that this amendment is an attempt to “clothe the Court” with jurisdiction in circumstances where none plainly exists to grant the relief in paragraph D3.

130 Paragraph B18 was in the following terms:

Since 1989, the majority of the first applicant’s profits have been reinvested into its business and the business has performed well. Total sales have gone from $111 million in 1988 to $360 million in 1999/2000. Staff numbers have increased from 431 (with 11 metal trades apprentices) in 1989 to approximately 803 at present, including about 139 current metal trades apprentices.

131 Paragraph D3(a) was in the following terms:

With respect to para 1(a) above, the Applicants seek compensation on the following bases:-

The Applicants lost the opportunity to retain the dealership as a consequence of the Respondents failure to take whatever reasonable steps were available to enable/facilitate the Applicants in keeping the dealership, and hence the Second and Third Applicants lost inter alia the opportunity to continue to work in the dealership business and to receive at their direction (as sole Directors and shareholders in the First Applicant) all the annual business profits either as salary, dividend or other drawings.

132 The inconsistency referred to by the respondents does not necessarily arise. The second and third applicants were entitled to receive all of the business profits of the first applicant as dividends but at their direction reinvested those profits in the business of the first applicant.

133 The respondents submitted the application for leave to amend ought be refused for the following discretionary reasons:

(a) The Applicants have been guilty of inordinate delay in making this application. The Court may infer that the timing is a pure strategic ploy on the part of the Applicants;

(b) The hearing has involved a considerable amount of court time and resources before this application has been made;

(c) The raising of new issues and claims will potentially result in further cross examination of the Applicants in respect of some of the amendments including D3(a);

(d) The party seeking leave to amend has the onus of demonstrating that the application is made in good faith or for a proper purpose. The Applicants have failed to discharge this onus on the material before the Court; and

(e) In any event, the proposed amendments would be futile for the reasons advanced above.

134 There are two matters I need to address out of the foregoing submissions. First, an opportunity for the respondents to cross-examine. If the Court considers it appropriate in the circumstances the respondents will not be denied the opportunity to further cross-examine. Secondly, the question of delay: these proceedings have undoubtedly been plagued by delay and that has been a worrisome feature. Nevertheless, the proceedings remain incomplete and given that there is no valid reason why the pleadings should not be amended and that there is no jurisdictional barrier (at least in so far as this interlocutory judgment has found) to proceeding to hear and determine Stage 2, I do not consider delay is a basis for refusing leave to amend the pleadings.

ORDERS

135 The Court makes the following orders:

(1) The respondents' application in the notice of motion filed on 24 July 2006 in these proceedings is refused.

(2) In accordance with this decision the applicants are granted leave to amend the Third Further Amended Summons in the terms of the Sixth Further Amended Summons filed with an amended notice of motion on 14 December 2006.

(3) Costs are reserved.

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LAST UPDATED: 2 February 2007