Sylvan Buildings Pty Ltd v Ag&s Building Systems Pty Ltd and another [2007] NSWIRComm 4 (1 February 2007)

Last Updated: 20 June 2007

NEW SOUTH WALES INDUSTRIAL RELATIONS COMMISSION

CITATION : Sylvan Buildings Pty Ltd v AG&S Building Systems Pty Ltd and another [2007] NSWIRComm 4



FILE NUMBER(S): IRC 1089

HEARING DATE(S): 22/03/2006, 26/05/2006. Written submissions: 11/07/2006, 08/09/2006.

DATE OF JUDGMENT: 1 February 2007
PARTIES:
Applicant
Sylvan Buildings Pty Ltd

First respondent
AG&S Building Systems Pty Ltd

Second respondent
Dennis McFadden

CORAM: Backman J


CATCHWORDS: Unfair contract - application by way of notice of motion seeking orders that summons for relief under s 106 be dismissed on the ground that the contracts were not contracts whereby work was performed in any industry - relevant legal principles considered - whether work performed - whether work performed under the impugned distribution agreements - held: distribution agreements not contracts which led directly to the performance of work - orders in amended notice of motion granted - summons dismissed - costs.

LEGAL REPRESENTATIVES

Applicant
Mr J. Catlin, of counsel
Solicitors
Sofra Solicitors

Respondents
Mr G. Sirtes, of counsel
Solicitors
Jackson Smith Solicitors


CASES CITED: Barataud v Chipperfield (No 3) [2006] NSWIRComm 249
Caltex Oil (Australia) Pty Ltd v Feenan [1981] 1 NSWLR 169
Euphoric Pty Limited v Ryledar Pty Limited and Anor (2002) 117 IR 1
Fish v Solution 6 Holdings Ltd (2006) 227 ALR 241
Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Limited (No 11) [2002] NSWIRComm 354
Majik Markets Pty Ltd v Brake and Service Centre Drummoyne Pty Ltd and others (1991) 28 NSWLR 443
McDonalds Australia Holdings Ltd v Industrial Relations Commission of New South Wales (2005) 144 IR 219
Mitchforce Pty Ltd v Industrial Relations Commission of New South Wales and others (2003) 57 NSWLR 212
Mitchforce Pty Ltd v Starkey (No 2) (2003) 130 IR 378
Production Spray Painting & Panel Beating Pty Ltd v Newnham (1991) 27 NSWLR 644
Stevenson v Barham (1976-1977) 136 CLR 190
Sylvan Buildings Pty Ltd v AG&S Building Systems Pty Ltd and another [2005] NSWIRComm 368
Taouk v Fairline Corporation Pty Ltd (2005) 147 IR 365
Wirraway (NSW) Pty Ltd and Anor v Ultra Tune Australia Pty Ltd [2006] NSWIRComm 300

LEGISLATION CITED: Industrial Arbitration Act 1940
Industrial Relations Act 1996
Industrial Relations Amendment Act 2005



JUDGMENT:

- 31 -

INDUSTRIAL COURT OF NEW SOUTH WALES

CORAM: Backman J

Thursday, 1 February 2007

Matter No IRC 1089 of 2005

Sylvan Buildings Pty Ltd v AG&S Building Systems Pty Ltd and another

Application under s 106 of the Industrial Relations Act 1996

INTERLOCUTORY JUDGMENT

[2007] NSWIRComm 4

1 The present proceedings concern an application by way of amended notice of motion filed by the first and second respondents on 15 November 2005.

2 On 3 March 2005 the applicant (Sylvan) commenced proceedings under s 106 of the Industrial Relations Act 1996 seeking relief and orders in relation to the distribution rights to a software concept granted to it sometime in 2002 by the first respondent (AG&S).

3 On 18 October 2005 I dismissed a notice of motion filed by the respondents on 5 May 2005 which had sought a dismissal of the proceedings on the basis that the summons for relief had been filed out of time: Sylvan Buildings Pty Ltd v AG&S Building Systems Pty Ltd and another [2005] NSWIRComm 368.

4 In the judgment of 18 October 2005 I briefly recounted the relevant factual background set out in the summons (at [3] to [6]). For convenience those facts are reproduced here.

5 The applicant has a business constructing and selling construction kits, carports, domestic garages, industrial sheds and concrete slabs. The respondents owned the licence to a system, referred to as Multibuild which was a materials ordering and pricing system and an associated computer software programme. Multibuild selected and ordered products such as sheds, garages, carports and other similar products. The software allowed the distributor or retailer of the product to remotely design the products to customer specifications which were shown in "real time" to the customer at the distributor's or retailer's premises. Once a customer selected a design, a company order was generated and forwarded by AG&S to the authorised supplier. The supplier then delivered the product to the customer. The products were all in kit form and could be assembled by the customer with or without the assistance of a tradesperson.

6 In 2001 the applicant acquired rights to the Multibuild concept and distribution rights from AG&S. Five written agreements were entered into between the applicant and AG&S. Each agreement granted distribution rights to the applicant in an "agreed territory". The term of each agreement was 99 years. The parties also entered into an arrangement whereby the applicant was required to source products from an authorised supplier, chosen and approved by AG&S. The nominated supplier was Strammit Pty Ltd.

7 During 2003, a competitor, Ranbuild Pty Ltd entered the market. The applicant advised AG&S that it would not breach its agreements with AG&S by entering into an agreement with Ranbuild.

8 Between October 2003 and February 2004 the three computers connected to the Multibuild system at the applicant's Shepparton site were randomly and without warning disconnected. Reconnection followed telephone discussions between the second respondent and the applicant. Then in early February to March 2004, the applicants became aware that AG&S had sold part of the Shepparton territory to another entity "A. C. Sheds". Subsequently, correspondence was received by the applicants from the solicitors acting for AG&S advising that the agreements with the applicant had been terminated.

9 The present notice of motion seeks an order that the proceedings be dismissed on the ground that, "the Commission does not have the power to make the orders sought in the summons". No further particulars of this ground were provided in the notice of motion. Instead the Court was informed that the basis for the order sought was that the "agreements between Sylvan and AG&S do not constitute agreements or arrangements whereby Sylvan performs work in an industry within the meaning of s 106(1)"; and, "... the relief sought by Sylvan does not have a close relationship with the performance of work in an industry". A second ground relied upon in the notice of motion was that the summons discloses no cause of action under the Act against the second respondent (Mr McFadden). The respondents concede that if the Court decides the first ground relied upon in the notice of motion in their favour, the second ground does not fall to be decided.

10 The orders sought in the amended notice of motion are set out in full below:

1. The proceedings are dismissed.

2. In the alternative, the Summons insofar as it relates to the second respondent be struck out.

3. The Applicant pay the Respondents' costs of the proceedings.

4. In the alternative, the Applicant pay the Second Respondent's costs of the proceedings.

11 I should emphasise at this point that the contracts alleged to be unfair are the five distribution agreements entered into between Sylvan and AG&S during either 2001 or 2002. One of the distribution agreements was tendered as an exhibit by the respondents on the basis that it "characterises" the agreements between the parties. Both parties confined their submissions to the agreement which was tendered into evidence. This agreement was referred to as the "Shepparton agreement" and was executed on 3 April 2001, although the part of the agreement headed "Schedules" bears the date 28 March 2002. According to the affidavit of the second respondent sworn on 22 February 2006, the agreements were all signed on 3 April 2002 and, the year "2001", where it appears on the execution pages of the agreements, is incorrect. Sylvan maintained in oral submissions that the Shepparton agreement was identical to the other agreements except for the actual territory specified and the specified territorial reach. I therefore intend to approach the matter on the basis that the contracts alleged to be unfair comprise the distribution agreements alone, and that the Shepparton agreement, which was the only distribution agreement tendered in the proceedings, is representative of the other agreements.

12 In submissions the respondents relied on a number of cases to make good their primary submission that the agreements do not constitute contracts whereby Sylvan performed work in an industry under s 106(1). Particular reliance was placed on the Court of Appeal decision of McDonalds Australia Holdings Ltd v Industrial Relations Commission of New South Wales (2005) 144 IR 219. In that decision the majority, Mason P and Handley JA held that a series of transactions comprising leases and licences were not collectively or separately contracts, whereby one of the opponents, Mr McLaughlin performed work in any industry. According to the facts set out in the judgment McDonalds authorised McLaughlin's Family Restaurants Pty Ltd (MFR) and Mr McLaughlin, pursuant to the licence and lease agreements to operate from McDonalds Restaurants in New South Wales. Spigelman CJ, found that the agreements fell within s 106(1) because he was bound to follow the authority of Stevenson v Barham (1976-1977) 136 CLR 190. His Honour said (at [51]):

...the literalist test adopted in Stevenson v Barham , which this Court must apply, prevents the Court from concluding that the role performed by a proprietor of a business as such is not encompassed by the statutory formulation of ‘performance of work in an industry.

13 Handley JA, with whom Mason P agreed found that the agreements fell outside the meaning of s 106(1). In so finding his Honour distinguished the factual circumstances from those found in Majik Markets Pty Ltd v Brake and Service Centre Drummoyne Pty Ltd and others (1991) 28 NSWLR 443, and Caltex Oil (Australia) Pty Ltd v Feenan [1981] 1 NSWLR 169. In both those cases the requisite jurisdiction under s 106(1) was found to exist. The major distinguishing feature for Handley JA appears to be the size of the workforce of the working proprietor's company. By contrast in relation to the factual circumstances in Caltex v Feenan and Majik Markets his Honour said:

I have no difficulty in characterising the franchise agreements in Feenan and Majik Markets as contracts within the section although they contemplated the employment of additional staff by the franchisees. The Court could also find, without difficulty, that the terms of the contract had a recognisable and direct impact on the working conditions and remuneration of the proprietors.

14 According to the respondents there is no distinguishable difference between the present circumstances and those set out in McDonalds. This is because they say the distribution agreements between Sylvan and AG&S did not directly cause the performance of work in an industry and, there is nothing in the terms of the agreements that had a recognisable or direct impact on the working conditions and remuneration of the proprietors and, it is not sufficient that the agreements led merely to the employment of staff by Sylvan. Sylvan sells garages and sheds to its own customers. AG&S, like McDonalds operates a system in which its distributors enter contracts with approved third party suppliers. The McDonalds contract with its franchisees imposed a number of requirements upon the franchisee but this of itself was insufficient to establish that the contract directly brought about the performance of work in an industry.

15 The respondents also relied on the High Court decision of Fish v Solution 6 Holdings Ltd (2006) 227 ALR 241 to suggest that the approach to establishing that the impugned contract was a contract whereby a person performs work which in any industry is a confined one. This is to be contrasted say the respondents with the decision of the majority in Mitchforce Pty Ltd v Starkey (No 2) (2003) 130 IR 378 which adopted an expansive approach to the issue. This expansive approach according to the respondents is demonstrated in particular passages of the judgment (at [111], [124] and [215]) where the majority said:

[111] In our view, it is clear that the various attempts to "define" the meaning to be attributed to the term "whereby", all demonstrate that the jurisdictional hurdle of "whereby work is performed in an industry" is to be seen as a relatively undemanding one.

. . .

[124] The above passage from V G Haulage was not referred to by the majority in Stevenson v Barham . The majority considered the critical passage from V G Haulage was that at 87 - 88 and reproduced at 200 of the judgment in Stevenson v Barham . The passage in Mitchforce at [12] was cited in the dissenting judgment of Aickin J in Stevenson v Barham at 210. It could not be said, in our opinion, that the majority in Stevenson v Barham adopted as a requirement for jurisdictional purposes that the contract must have a "recognisable impact upon the conditions of that employment".

. . .

[215] The High Court in Stevenson v Barham considered that the Commission's unfair contracts jurisdiction was limited to those contracts that lead directly to a person working in any industry. It was the fact that the “contract is one which leads directly to a person working in any industry” that gave the contract “the requisite industrial character” and made the Industrial Relations Commission the "appropriate repository" of the unfair contracts jurisdiction. The High Court did not consider the need for any further constraints on the Commission's jurisdiction. The reason for this is surely because, as noted by Wright and Walton JJ at [110], the higher courts have regarded the phrase "whereby work is performed in any industry" as "broad and comprehensive in its scope"; that it must be given effect "according to its width and generality"; and, that its language is "intractable": see Barwick CJ in Stevenson v Barham at 192.

16 The respondents contend that the decision of the High Court in Fish "sweeps aside" the reasoning in Mitchforce (No 2), and, that a "central tenet" of the conclusion in Mitchforce (No 2) was "flatly rejected" by the High Court. This conclusion is said to be found in [41] and [42] of the judgment in Mitchforce (No 2) where the majority said:

[41] We do not agree that, in law, in order for a contract (as defined in s 105 of the Act) to fall within the Commission's jurisdiction, there is a requirement that the relevant contract or arrangement have "an industrial colour or flavour" in addition to the requirement to demonstrate that the contract or arrangement led directly to the performance of work. Shortly stated, our conclusion has been reached having regard to the provisions of s 106 as they presently stand and is reinforced by the legislative history of the relevant provisions, including the clear purpose of the initial enactment of the predecessor provisions in 1959 and the consistent approach to the construction of the provision following the leading decision of the High Court in 1977 (Stevenson v Barham) .

[42] It is, in our view, well settled that the relevant jurisdictional test of “whereby a person performs work in any industry ”, will be satisfied where the impugned contract or arrangement directly, that is under or pursuant to its terms (noting, of course, the difficulty of using verbiage such as "term" when considering a broader arrangement - a matter to which we will return to later), provides for the performance of work in any industry. The consequential performance of work is not enough: see Production Spray Painting & Panel Beating Pty Ltd v Newnham (1991) 27 NSWLR 644 at 657. We do not consider that there is any co-extensive test to be applied to the effect that the contract must have an industrial colour or flavour about it (in the sense that, as was discussed in some of the earlier cases, the contract or arrangement must be subversive of industrial standards or arise in an industrial context, such as being associated with a contract of employment or a contract for services designed to undermine employment standards).

17 The above conclusion in Mitchforce (No 2), as I understand the respondents' contention, also illustrates the expansive approach adopted by the majority which held that in order for a contract, as understood in its extended sense under s 105, to fall within the Commission's jurisdiction it is enough if it be demonstrated that the contract leads directly to the performance of work, and, there is no "co-extensive test" that the contract must also have an "industrial colour or flavour".

18 For completeness I should state here that the majority's conclusion on the ambit of the relevant jurisdictional test was in response to the observations of Spigelman CJ in the Court of Appeal decision of Mitchforce Pty Ltd v Industrial Relations Commission of New South Wales and others (2003) 57 NSWLR 212 (at [54]), namely that:

The word 'directly', in the case law, is to be regarded as an essential part of the process of determining that the contract be said to have the requisite "industrial colour or flavour.

19 Sylvan relied primarily on two propositions in support of its submission that the impugned agreements constituted contracts whereby work was performed in any industry. First, it said the agreements were close to or akin to franchises of the type held to be within the jurisdiction of s 106 such as those examined in Caltex v Feenan. Secondly, it said that the agreements exhibited substantial control by AG&S indicative of a master-servant relationship between the parties.

20 In relation to the first proposition Sylvan relied on the reasoning of Handley JA in Majik Markets at 465 where his Honour said:

[W]hile the franchisees, if natural persons, are working for themselves, they also in a very real sense working for the franchisor. If the business was not operated by some franchisee, the franchisor would either have to employ staff of its own or sell or lease the site to an independent purchaser or lessee". In the same way, if the respondents did not enter into an agreement for the applicants to distribute its products in NSW/ACT then it would not need to employ its own staff to do that.

21 Adapting this reasoning to the impugned agreements Sylvan says that if AG&S did not grant distribution rights to the Multibuild concept to Sylvan then AG&S would have to employ its own staff. In addition Sylvan contends that their was a close business relationship between the parties which is a common feature of franchises. In Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Limited (No 11) [2002] NSWIRComm 354 Boland J made a similar observation in relation to certain dealership agreements which were before his Honour for consideration as to whether they were agreements whereby work was performed in any industry. In the context of analysing a business article written by a former chairperson of the second respondent, Caterpillar Inc. his Honour said:

[57] ...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...

[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.

22 In relation to the second proposition Sylvan contends that the impugned agreements imposed an ongoing obligation for the performance of work and gave AG&S considerable control over many significant aspects of that work. The respondents had a great interest in how the work was done and on what terms: see Euphoric Pty Limited v Ryledar Pty Limited and Anor (2002) 117 IR 1 at [40].

23 According to Sylvan the respondents' interest in the performance of work under the agreements can be demonstrated by reference to a number of provisions in the agreements. AG&S for example was the owner of the Multibuild concept and merely granted the right to use to Sylvan. Moreover the agreements contained provisions for the "division of profits/remission of periodic licence fees". Further Sylvan, as the distributor was working for the benefit of AG&S as owner by increasing the goodwill of the brand and remitting licence fees. Clause 3(a) of the agreements, by way of example, provides that Sylvan must, "actively and diligently promote the sale of the Products". Other provisions, says Sylvan, strongly contemplate employment. Clause 3(f) contemplates salaries and wages being paid and workcover expenses. Under clause 3(r) Sylvan's covenant to be of good character contemplates quality staff. Training is contemplated and was provided under annexure 1(c) of the schedules to the agreements. According to the affidavit of Bryan Norris sworn on 3 February 2006 Sylvan's staff were dedicated solely to the sale of AG&S products and associated tasks such as customer liaison, site management and delivery. Continuous improvement in staff performance was also contemplated by a weekly newsletter issue by AG&S and annual conferences organised by AG&S.

24 Sylvan contends that the agreements illustrate that the relationship between the parties was not at arms length and the provisions of the agreements demonstrated that AG&S was in a position of practical quasi control. Sylvan relies on the following provisions contained in the agreements which it says point to the level of control of the business relationship by AG&S:

(a) annexure 1(b) which Sylvan says requires monitoring by AG&S of monthly turnover;

(b) clause 3(w)(ii) which requires AG&S approval of sales location and delivery sites;

(c) clause 3(c) under which Sylvan must purchase all goods and materials for the AG&S products from AG&S;

(d) clause 2(f) under which AG&S undertakes to rectify damage to or shortage of goods and materials caused by the manufacturer;

(e) other provisions which deal with the modification of a large range of standards and procedures;

(f) other provisions dealing with termination by AG&S of access to supplies and the Multibuild concept;

(g) other provisions imposing conditions of pre-payment of fees before sending supply orders.

25 According to the affidavit of Brain Norris, AG&S was involved in the practical operation of the distributorships by taking global responsibility for orders. AG&S had a leading role in a number of areas including problem resolution, computer updates, deliveries, quotations, sales training, manuals and credit limits. In relation to problem resolution Sylvan staff made about 10-15 calls daily to AG&S. Sylvan staff also had to contact AG&S if a design was outside normal specifications. Engineering queries, which were frequent, had to be put through AG&S. The operation of the software by Sylvan was controlled by AG&S by the requirement of a regular renewal of the licence by AG&S. Approximately once a year AG&S conducted special promotions of its products and the participation of Sylvan was encouraged.

26 AG&S, according to Mr Norris, also exercised considerable financial control over the operations of Sylvan. Payments for example had to made in advance and AG&S was able to impose trading terms on Sylvan. AG&S also unilaterally set the price for the components of sheds. Roller doors, which were an optional component for the sheds, were produced by an independent company, but Sylvan, according to Mr Norris, was not able to negotiate directly with that company on the price of the doors. Instead prices were negotiated on an ongoing basis by AG&S.

27 Sylvan also contended that the closeness of the relationship with AG&S was manifest in clause 3(hh) of the agreements which contained an acknowledgement that while Sylvan is an independent entity it is in a "fiduciary relationship" with AG&S.

Consideration

28 The respondents' contention that the majority decision in Fish "sweeps aside" the reasoning of the majority in Mitchforce (No 2) is not borne out, in my opinion, by an analysis of the two cases.

29 In Fish the impugned contract was a share purchase agreement under which Nisha Nominees Pty Ltd had agreed to sell its shares in Fish Tech and Partners Pty Ltd to Solution 6 Holdings Ltd for $19million. Nicholas Terence Fish, who was a party to the impugned agreement, made a separate agreement with a subsidiary of Solution 6 Holdings by which it was agreed he would be employed as "Executive Manager Enterprise Integration Services". It was a term of the impugned agreement that Nisha could sell its shares if Mr Fish's employment was terminated, otherwise than for cause or by him. In November 2001 following the completion of the impugned agreement and after a substantial fall in the share price Mr Fish was made redundant and his employment was terminated.

30 The majority in Fish addressed the central question in the appeal which was whether the impugned agreement was a "contract whereby a person performs work in any industry". The "proper approach" to the question was outlined in the following four paragraphs:

[17] The central question in this appeal, and in the two other appeals heard at the same time, is whether the contract which the applicants in the Commission sought to have declared wholly or partly void, or sought to have varied, was a "contract whereby a person performs work in any industry". In this and in the other appeals, other questions arise but before identifying those other questions, it is as well to begin by identifying what, uninstructed by any of the decisions on the construction of s 106 or its legislative predecessors, is the proper approach to determining its application to particular facts and circumstances.

[18] The Act is concerned with matters industrial. The power given to the Commission by s 106(1) to declare wholly or partly void or to vary certain contracts should be understood as hinged about the reference to performance of work in any industry. The first inquiry required by s 106(1) is whether a person "performs work in any industry". What may be declared wholly or partly void or varied is any "contract" whereby a person performs that work.

[19] Because "contract" is given the extended definition that has been noted earlier, it must be understood as extending to any arrangement or related condition or collateral arrangement of the requisite kind, namely, a contract or arrangement whereby a person performs work in any industry. But what must be identified is the set of arrangements (leaving aside, for the moment, whether those arrangements are or may be contractual or otherwise) according to which (that is, "whereby") a person performs the relevant work. What may be declared void or varied is any part of those arrangements: the arrangements in accordance with which a person performs work.

[20] It is to invite error to begin by identifying what contracts or arrangements are related one to another. It invites error because it suggests that it is appropriate then to ask whether any of that interlocking set of arrangements made provision for the performance of work in an industry, and to treat any and every aspect of the interlocking arrangements that have been identified as amenable to the powers given to the Commission under s 106. And that is the way in which much of the argument advanced on behalf of those parties who were applicants in the Commission proceeded.

31 What emerges from the above extract is that in considering whether a contract alleged to be unfair under s 106 is one whereby a person performs work in any industry, the first step is to enquire whether a person performs work in any industry. The second step is to identify the contract as understood in its extended sense under s 105 according to which a person performs work. The third step, provided the requisite preconditions are satisfied (that is the contract whereby work is performed is found to be unfair and is amenable to orders for relief), is to avoid or vary any part of the contract (or arrangements) in accordance with which a person performs work: see also Wirraway (NSW) Pty Ltd and Anor v Ultra Tune Australia Pty Ltd [2006] NSWIRComm 300 at [42].

32 Later in the judgment the majority made certain observations in relation to the findings in Stevenson v Barham (at 201 per Mason and Jason JJ) that the relevant jurisdictional fact which needs to be established is that an impugned contract under s 106 is a contract "whereby a person performs work in any industry". At [27] - [29] the majority said:

[27] On the appeal to this Court in Stevenson v Barham, emphasis appears to have been placed in argument upon a notion of subversion of industrial regulation as marking the limit of the ambit of the Commission's powers to decide that a contract was unfair. The argument was rejected. Rather, the decision in Stevenson v Barham was taken, in subsequent cases, as holding that the relevant jurisdictional fact to be established in the Commission was that "if the contract is one which leads directly to a person working in any industry it has the requisite industrial character - it is a contract 'whereby a person performs work in any industry'" (emphasis added). And reference was subsequently made, not infrequently, to the remark of Barwick CJ that "the language of s 88F ... is intractable and must be given effect according to its width and generality".

[28] The description of a contract as "one which leads directly to a person working in any industry" is not without its difficulty. What is meant, in this context, by "directly"? As Lord Diplock, giving the advice of the Privy Council in Caltex Oil (Australia) Pty Ltd v Feenan, pointed out, this, and other glosses on the section, must not be permitted to divert argument away from the words of the statute in an attempt to "construe" the words in which judges express their reasons for reaching a conclusion in a particular case. To divert attention in that way is wrong. And even the gloss on the word "whereby" offered in the Caltex Case ("in consequence of which" or "in fulfilment of which"), like the gloss offered earlier in these reasons ("according to which"), must not be misunderstood as necessarily solving every difficulty that may be presented in seeking to apply the statutory language.

[29] What emerges from Stevenson v Barham is the perception of a difficulty in reading the "intractable" language of s 88F in a way that did not give the Commission power to interfere with any and every kind of bargain. Barwick CJ, in Stevenson v Barham, said that:

"[t]he legislature has apparently left it to the good sense of the ... Commission not to use its extensive discretion to interfere with bargains freely made by a person who was under no constraint or inequality, or whose labour was not being oppressively

exploited".

And the reference, by Mason and Jacobs JJ, to a transaction which "leads directly to a person working in any industry" was evidently intended to mark a limit upon the Commission's jurisdiction.

33 In Mitchforce (No 2), Wright J, President, and Walton J, Vice-President, undertook a detailed examination of Spigelman CJ's construction in Mitchforce v IRC of the words "whereby a person performs work in any industry" as they appear in s 106. Following that examination the majority held (at [42]):

It is, in our view, well settled that the relevant jurisdictional test of “whereby a person performs work in any industry ”, will be satisfied where the impugned contract or arrangement directly, that is under or pursuant to its terms (noting, of course, the difficulty of using verbiage such as "term" when considering a broader arrangement - a matter to which we will return to later), provides for the performance of work in any industry. The consequential performance of work is not enough: see Production Spray Painting & Panel Beating Pty Ltd v Newnham (1991) 27 NSWLR 644 at 657. We do not consider that there is any co-extensive test to be applied to the effect that the contract must have an industrial colour or flavour about it (in the sense that, as was discussed in some of the earlier cases, the contract or arrangement must be subversive of industrial standards or arise in an industrial context, such as being associated with a contract of employment or a contract for services designed to undermine employment standards).

(see also: [102] [112] [120]).

34 The contract under examination in Mitchforce (No 2) was a lease. The majority found that the lease was not a contract "whereby work was performed in any industry". Boland J in Taouk v Fairline Corporation Pty Ltd (2005) 147 IR 365 at [27] made the following observation in relation to the finding:

What, I consider, flows from the majority's judgment in Mitchforce (No 2) in respect of contracts such as a lease is that unless the terms of the lease, expressly or by implication, require the performance of work in an industry or it could be said that a purpose of the lease was the performance of work, the bare terms of the lease will not establish the necessary jurisdictional fact because it could not be said the lease leads directly to the performance of work. Even if it could be said the terms of the lease "contemplate" the performance of work it will not be sufficient to attract jurisdiction: see Mitchforce v IRC at [49].

35 The above analysis of Fish and Mitchforce (No 2) reveals two things. First, the finding in Mitchforce (No 2) that in order to attract jurisdiction under s 106 a contract "must directly (under or pursuant to its terms) provide for the performance of work in any industry", was not "swept aside" (to use the respondent's terminology) by the decision in Fish. Certainly the majority in Fish cautioned against putting a gloss on the section when construing its meaning. According to the majority in Fish however the original reference by Mason and Jacobs JJ in Stevenson v Barham to a transaction which "leads directly to a person working in any industry" was intended to, "mark a limit upon the Commission's jurisdiction", bearing in mind the "intractable" language of s 88F of the Industrial Arbitration Act 1940 (a predecessor section to s 106), and, the perceived difficulties such language may pose in marking the ambit of the Commission's jurisdiction. Secondly, it is necessary to recognise the context in which the majority observations and findings were made in Fish. In that judgment two contracts were under consideration, the share purchase agreement and the employment contract entered into by Mr Fish. The original proceedings brought under s 106 in the Commission in Court Session (as it then was) sought orders in relation only to the share purchase agreement, not in relation to the employment contract. The latter contract was a contract whereby work was performed. The former, did not constitute, either as a whole or as to its particular provisions, a contract whereby work was performed: see Fish at [43].

36 Before leaving this issue I should add that the High Court in Fish was not called upon to consider s 106(2A) of the Act which was introduced on 9 December 2005 by the Industrial Relations Amendment Act 2005. Section 106(2A) provides:

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.

37 In the present proceedings the Court was not called upon to consider the provision. Section 106(2A) was considered in the recent Full Bench decision of Barataud v Chipperfield (No 3) [2006] NSWIRComm 249 where it was 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) 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.

38 As I earlier indicated the only contracts pleaded in the summons under s 106 as being unfair (and unconscionable and against public policy) are the distribution agreements of which the Shepparton agreement was tendered as a representative sample. Sylvan's submissions to the Court on the present notice of motion were directed solely to the issue of whether the distribution agreements were contracts "whereby work is performed in any industry". No other contract, arrangement or condition to which it is said the agreements are related or collateral has been relied upon. In these circumstances therefore, s 106(2A) does not fall for consideration.

39 Taking into account the matters discussed above I intend to approach the issue by following the steps outlined by the majority in Fish in order to determine whether the agreements are contracts "whereby a person performs work in any industry". I also intend to be guided by the finding in Mitchforce (No 2) that the test will be satisfied where the impugned contract or arrangement, "directly ... provides for the performance of work in any industry". Finally I will also consider the issue by reference to the claims made in the summons as well as the evidence of both Sylvan and the respondents.

Was work performed?

40 According to the summons Sylvan performed work in the industrial shed, garage and building industry in Victoria and New South Wales. Its business involved the sale of sheds, construction kits, carports, domestic garages, industrial sheds and concrete slabs, as well as the erection and construction of those products. Prior to entering into the distribution agreement with the respondents, Sylvan apparently had pre-existing outlets for its products. After the agreements were entered into, Sylvan sold the respondents' products as well as its own products which it says were complementary to the respondents' products. Sylvan employed additional staff to assist with the increased volume of work created by the business generated as a result of the agreements with the respondents. According to the affidavit of Mr Norris, Sylvan employed staff at the Shepparton and Albury sites. The Albury site sold the respondents' products exclusively, and was created solely to meet its obligations under the Albury distribution agreement.

41 As referred to earlier in this judgment AG&S' computer software programme, Multibuild, enabled Sylvan to design sheds to customer specifications which were shown to a customer in "real time" at Sylvan's retail premises. Once the customer selected a design, a supply order was generated by AG&S and forwarded to an authorised supplier, who in turn delivered the product to the customer in kit form.

42 Given the above circumstances there can be no doubt that Sylvan performed work in an industry.

Was the work performed under the impugned contracts?

43 The recitals in the Shepparton agreement described AG&S as the owner of the computer software programme (Multibuild) as well as plans, engineering drawings, designs, a materials ordering system and pricing concept (referred to collectively as the "the concept"), for the design, costs and listing of components for sheds garages barns, carports, and "like products" (the products). Under the recitals Sylvan, was nominated as the sole distributor to use the concept within a nominated territory and sell the products.

44 Under clause 1 and schedule 4 of the agreement Sylvan paid a fee of $1,100 inclusive of GST for distribution rights and access to the concept. In consideration for this fee AG&S granted a non-exclusive right to establish a sales site with the nominated territory for the promotion of the products. AG&S also agreed to exclusively supply Sylvan within the nominated territory except for reserving its right to establish other distributorships within the territory if Sylvan failed to achieve a turnover of $10,000 per month exclusive of GST (per Schedule 5 of the agreement and Annexure 1(b)). In the event that another distributorship was established by AG&S within the nominated territory (and the agreement was not terminated) then the expected turnover of $10,000 per month would be reduced to nil.

45 Clause 2 provided for technical advice and "other services" to be provided by AG&S to Sylvan in relation to the designs and plans used in the concept and to provide assistance in the use of the concept to generate sales. The provision of this advice and services was contingent upon Sylvan having received a minimum of two days training with AG&S in the use of the concept. Training fees were set out in annexure 1(c). Fees for training on the use of the computer programme were set at $250 per day for up to four persons. All flight and accommodation costs, if any, associated with the training were to be borne by Sylvan. AG&S house videos cost $100 for the first copy and thereafter $10 per copy including postage, or $7 per unit if collected directly from the AG&S office. Under clause 2(a)(ii) Sylvan acknowledged that:

AG&S will not advise the Distributor on how to operate his Distributorship and that AG&S is not responsible for or obliged to assist with the management of the Distributorship. It is similarly acknowledged by AG&S that the Distributor is entitled to operate the Distributorship in any manner without interference or restriction from AG&S but subject to the express provisions of this Agreement.

Under clause 2(b) AG&S agreed to provide Sylvan with office stationery for the running of the concept and for advertising materials, on conditions that Sylvan pay for the materials, and that any of the stationery or other documents used by Sylvan should expressly note that Sylvan is an entity independent from AG&S. Under clause 2(f) AG&S undertook to endeavour to rectify any damage or shortage to goods and materials caused by the manufacturer, supplier and their delivery carriers.

46 Clause 3 contained a number of provisions outlining Sylvan's duties under the agreement. Under clause 3(a) Sylvan agreed to commence the distributorship within 14 days of the signing of the agreement. Under clause 3(b) Sylvan agreed to pay AG&S commissions in consideration of its "continuing right" to use the concept. A scale of commissions payable for the use of the designs and plans was set out in annexure 1(e). Under annexure 3(d) orders would not be processed by AG&S until the correct commission was received and banked into the account of AG&S. Under annexure 3(h) failure by Sylvan to pay for components supplied by the supplier by close of business on the last business day of the week would result in stoppage by the supplier of all orders and deliveries until the account was cleared.

47 Clause 3(c) contained an acknowledgement by Sylvan that it must purchase all goods and materials for the products and any similar products and derivatives thereof from AG&S except in the event that AG&S was unable to supply the goods within 28 days of receiving an order. Where this occurred AG&S agreed, upon written approval, that Sylvan may purchase the goods and materials from other suppliers.

48 Clause 3(f) headed "Indemnify AG&S" provided:

The Distributor covenants and agrees with AG&S that the Distributor will assume sole and entire responsibility for the generality of the day to day conduct of the Distributorship and all expenses relating thereto in particular but without limiting the generality, product advertising, office and commercial premises rental and all operating expenses including salaries/wages/commissions to employees/agents, superannuation, Workcover or similar legally required Worker's Compensation Insurance, National or Local taxation, all insurance and stationary and other costs however incurred and indemnify and save harmless AG&S from any and all claims, liabilities, losses, expenses, responsibility, and damages by reason of any claim, proceedings, action liability or injury arising out of the Distributor's management of the Distributorship or as a result of the Distributor's relations with his customers and other third parties or because of any breach of this Agreement by the Distributor.

49 Clause 3(i) dealt with the standard of conduct by Sylvan in relation to the concept. Under the clause Sylvan agreed to "observe and maintain the standards in the use of the concept as set out in Annexure 3 and elsewhere in this Agreement". Annexure 3 set out the recommended methods, standards and procedures for conducting the distributorship. Sylvan agreed to follow the procedures set out in the annexure. The procedures set out dealt largely with the cost of products, various associated charges, methods of placing orders and payments and terms of payment. Under annexure 3(k) it was agreed that Sylvan "need not guarantee any particular hours of trading nor can AG&S insist on any hours of trading". Under clause 3(i)(ii) Sylvan acknowledged that AG&S had the right to modify some standards and procedures. Under clause 3(i)(iii) Sylvan agreed that if it failed to manage the distributorship in accordance with the standards and procedures set out in annexure 3 and elsewhere in the agreement this failure would be deemed in breach of the agreement and entitle AG&S to terminate the agreement.

50 Under clause 3(l) Sylvan, with the written approval of AG&S could establish sub-distributorships within its territory to facilitate it to sell the products. AG&S had to approve the location and any sub-distributorships established by Sylvan must use software authorised by AG&S and pay the commission designated in annexure 1(e) of the agreement and reasonable costs.

51 Under clause 3(a) Sylvan covenanted to "actively and diligently promote the sale of the products".

52 Under clause 3(p) headed "Independent Proprietor" Sylvan acknowledged that it may conduct the distributorship and its business generally as an independent proprietor. Sylvan also agreed under the clause that the parties "...are completely separate entities and are not partners, joint venturers or agents of the other in any sense and neither party has the power to obligate or bind the other party".

53 Clause 3(r) required Sylvan to "be of good character and not to indulge in unethical conduct and/or acts or moral turpitude during the term of the Agreement".

54 Under clause 3(w) headed "Sales Location", Sylvan acknowledged that although it could only have one sales location it could nominate other delivery sites (other than at the sales location) to assist in the servicing of any sub-distributorships established under clause 3(l). Under clause (x) Sylvan acknowledged that it could change the sales location of the distributorship but only with the written approval of AG&S.

55 Clause 3(hh) headed "Fiduciary Relationship" contained an acknowledgement by Sylvan that, "whilst he is an entity independent to AG&S that he is in a fiduciary relationship with AG&S".

56 Clause 5 provided for an arrangement under which Sylvan acknowledged that the benefits and obligations of the agreement were "freely assigned" by AG&S upon the giving of notice. Sylvan could not sell, assign, transfer or encumber the agreement, of any right or interest without the proper consent of AG&S although under the clause such consent "shall not be unreasonably withheld".

57 Clause 7 dealt with the termination of the agreement. In the event of a breach by Sylvan of any of the covenants and contained in clause 3, AG&S "in its absolute discretion" could terminate the agreement: clause 7(b). Under clause 7(h) the agreement could be terminated by Sylvan if Sylvan did not "commence the distributorship" on or within 14 days of the commencement date of the agreement.

58 Under clause 10(c) Sylvan acknowledged that AG&S did not guarantee to provide a rate of return on investment or profit or return on investment and profit or return on investment to Sylvan depended on its own efforts.

59 In my opinion it is clear from the recitals and clause 1 that under the agreements AG&S granted the right to Sylvan to use the concept and sell the products. Under the agreements Sylvan paid AG&S a fee for distributorship rights and access to the concept. A superficial reading of these provisions does not suggest that the agreements constituted contracts which led directly to the performance of work.

60 In Production Spray Painting & Panel Beating Pty Ltd v Newnham (1991) 27 NSWLR 644, Priestley and Handley JJA said at 657C-D:

It is not sufficient to establish jurisdiction that a contract "involves the provision of goods and services, with a consequent performance of work in an industry": Ex parte VG Haulage Services Pty Ltd (at 88) (our emphasis). The impugned contract, etc, therefore must directly, that is under or pursuant to its terms, provide for the performance of work in an industry. Accordingly the contrast drawn by this Court in Ex parte V G Haulage Services Pty Ltd and approved by the High Court in Stevenson v Barham is between a contract which leads directly to the performance of work in an industry on the one hand, and on the other a contract which does so only indirectly or in a remote or consequential manner.

61 Similarly, the agreements under present consideration which granted Sylvan the right to obtain direct access to and use the concept, and sell the products of AG&S, must directly under or pursuant to their terms, provide for the performance of work in an industry, in order to establish jurisdiction.

62 The affidavit of Mr Norris suggests that a number of the provisions in the agreements imposed requirements in relation to the operation of the sales locations including many of the provisions in clause 2, and clause 3. In submissions Sylvan contended that these provisions imposed an ongoing obligation for the performance of work and gave AG&S considerable control over significant aspects of the performance of that work. Moreover that the contemplation of employment is strongly in evidence in a number of these provisions.

63 Clause 2(a)(ii) contains acknowledgements by Sylvan that AG&S will not advise it on how to operate the distributorship; that AG&S is not responsible for or obliged to assist Sylvan with the management of the distributorship, and, that Sylvan is entitled to operate the distributorship in any manner without interference or restriction from AG&S subject only to "the express provisions of the agreement".

64 Contrary to Sylvan's contentions, the clause on its face imposes no express requirements on Sylvan in relation to the operation of the business, nor does it suggest any ongoing obligations which must be met, nor any controls on the part of AG&S in relation to the performance of the work or any significant aspects of that work. What the clause indicates is an agreement between the parties that Sylvan should operate the distributorship freely and independently of any restrictions, obligations or controls that may otherwise be imposed by AG&S, subject only to any express provisions contained elsewhere in the agreement.

65 Other provisions said by Sylvan to be indicative of the imposition of requirements, obligations and control include clause 3(c) which provided that Sylvan must purchase all goods and materials for the products from AG&S. Clause 3(i) was another such provision. This clause provided that Sylvan must observe and maintain the standards set out in annexure 3. Annexure 3 set out the recommended methods, standards and procedures for conducting the distributorship which Sylvan agreed to follow. Other provisions including clauses 3(b) (d) and (h) dealt with commissions payable, and the processing of orders. According to these provisions, orders would not be processed until commissions were paid into the bank account of AG&S.

66 In my opinion while these provisions imposed certain obligations on Sylvan they cannot be said to lead directly to the performance of work by either party. The obligation to purchase goods and materials for the products, for example, is directed to effecting one of the primary aims of the agreements, namely the purchase of the products for sale by Sylvan from AG&S. The requirement to observe certain methods, standards and procedures is concerned with instructions as to the various procedures required to be followed by Sylvan in relation to the use of the concept and sale of the products. It is not concerned with the performance of work. The processing of orders and the payment of commissions by Sylvan to AG&S does result in work being performed but it is not sufficient for a conclusion that the agreement led directly to the performance of work. The requirements in relation to the payment of commissions and the processing of orders are directed towards the continuing right to use the concept under the agreements and not to the performance of work.

67 Similar provisions were analysed in Euphoric v Ryledar where it was held that the impugned contract, a written contract for the sale of petroleum products, was not one under which work was performed. At [43] [45] [46] Schmidt J, with whom Wright J, President and Walton J, Vice-President agreed said:

[43] I turn then to the respondents' contentions. The view that Marks J was correct in concluding that the contract did not impose any obligations upon the respondents for the performance of work, cannot be avoided. Obviously enough, work was required to be performed by the respondents as a result of the contract. For example, the respondents' orders had to be placed with the appellant, the appellant’s invoices considered and payment of them later made. Such consequences are, however, not sufficient to enliven the Court’s jurisdiction under the section.

. . .

[45] The right granted the appellant in clause 7.1, to give ‘reasonable and lawful instructions’ was particularly relied upon by the respondents. That was, however, not a right concerned with the performance of any work, but rather, with instructions as to ‘procedures to be followed’ to ensure the safety of persons or property; the preservation of the quality of the petroleum products sold and the protection of the environment. Such procedures, when followed, might of course require the performance of work. Nevertheless, the right to give instructions about such procedures imposed no requirement for the performance of any work, nor could that right itself be viewed as one of the purposes of the parties’ contract.

[46] Similar conclusions flow in relation to clause 7.2, which was concerned with the hazards associated with petroleum products and the steps which the respondents were obliged to take in relation to the consequences of such hazards. These were undoubtedly important obligations under the contract, having in mind the statutory obligations resting upon both the appellant and the respondents in relation to safety risks and environmental matters. This was a contract with a life of 2 years, during which such products were to be supplied by the appellant. That such provision might be made in such an ongoing sale contract is not surprising, but it does not evidence the necessary jurisdictional fact – the performance of any work under the contract.

68 In oral submissions, counsel for Sylvan, Mr Catlin contended that the agreement "blows hot and cold" because it uses expressions which on their face seek to distance the relationship between AG&S and Sylvan but in reality, when the agreement is read as a whole, it exerts considerable control. Clause 1(a)(ii) for example granted Sylvan an exclusive right to establish a sales site but clause 1(b) provided that that exclusivity was lost if Sylvan failed to achieve a turnover of $10,000 per month. According to Mr Catlin the value of the right is in the exclusivity. Mr Catlin also relied on clause 3(hh) (the "fiduciary clause") as indicative of the "hot and cold" nature of the agreement, that is, in the face of a number of provisions which seek to emphasise the independence of the relationship between the parties, clause 3(hh) is indicative of a close relationship, one of trust and honesty.

69 In my view a significant number of clauses in the agreement clearly exhibit a business relationship that is intended to be independent and at "arms length". To some of these provisions I have already referred. In relation to the provision relating to turnover there was no evidence available which would enable the Court to infer that a loss of exclusivity may lead to a diminution of the right. What the agreement provided was that if Sylvan failed to achieve its turnover then AG&S reserved its right to establish further distributorships within the nominated territory and that in the event this occurred the agreement remained valid and the expected turnover would be reduced to nil: clause 1(c). In other words if the right was lost because of the failure to achieve the expected turnover Sylvan still continued to operate in the nominated territory but as a non-exclusive distributorship without the necessity to generate any turnover.

70 Other provisions in the agreement which in my view emphasise the independence of the relationships between the parties include the training provisions. Under clause 2(i) Sylvan was required to receive a minimum of two days training in the use of the concept as a pre-condition to receiving technical assistance from AG&S. The training costs however had to be met by Sylvan as per the rates set out in annexure 1(c). Under clause 3(l) Sylvan was entitled to establish its own sub-distributorships within a nominated territory, with the written approval of AG&S. Under clause 3(p) Sylvan agreed that the parties are "completely separate entities...". Clause 5 entitled Sylvan to sell, assign or transfer the business generated by the distributorship, with the consent of AG&S. All benefits and obligations under the agreement were "freely assignable" to any third party. This provision in its broad terms suggests that any goodwill generated by Sylvan as a result of the operation of the distributorship was assignable, and again, emphasised the independence of the relationship. Under clause 10(c) all profits or return on investment made by Sylvan were said to "depend upon his own effort". Under clause 2(b) Sylvan acknowledged that all stationery and other documents used by it in, "the running of the concept" must expressly note that it is entirely independent from AG&S.

71 Clause 3(f) (the indemnity clause) according to Mr Catlin strongly contemplated employment because of its references to salaries and wages being paid and workcover expenses. According to counsel appearing for the respondents, Mr Sirtes, the provision is indicative of the independence of the relationship between the parties since under it Sylvan agreed to indemnify AG&S against any claims or losses etc arising out of its management of the distributorship or as a result of customer or third party relations. Clause 3(f) provided that Sylvan will assume "sole and entire responsibility for the generality of the day to day conduct of the distributorship and all expenses relating thereto...", including the payment of salaries, wages and insurance. I agree with the respondents' contention that the provision emphasised the independence of the relationship between the parties. On the clear terms of the provision, wages and salaries and other work related expenses were to be borne solely by Sylvan in relation to its own staff and the operation of its business. The reference to such matters as the payment of wages and salaries are matters "in house" and solely within the province of Sylvan's operations.

72 As to the fiduciary clause I do not agree that it demonstrates a close relationship between the parties which in turn is indicative of an employment relationship between the parties. In Gough v Gilmour (No 11) in the passages referred to earlier in this judgment Boland J characterised an "unusually close (business) relationship" between the parties to an agreement as one commonly associated with franchise agreements. Sylvan relies on this judgment to support its contention that the agreement with AG&S was akin to a franchise because it demonstrated in its terms, in particular the fiduciary clause, a close relationship between the parties. Sylvan also relied on the observations of Handley JA in Majik Markets at 464-465). These observations have also been earlier referred to. The impugned agreements in that decision were franchises for the conduct of a retail business on the franchisor's land, selling motor fuel purchased by the franchisees from the franchisor. A decisive factor in the finding in Majik Markets that the application under s 106 was within jurisdiction because the agreements led to the performance of work was that the form of agreement required the franchisees or their employees, "...to work in the business both in consequence of the agreements and in fulfilment of them. The form of agreement required 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": (at 464-465). In Production Spray Painting after analysing the majority judgment in Stevenson v Barham, Priestly and Handley JJA said (at 654E):

It is clear therefore that the majority held that the share-farming agreement led directly to the performance of work in an industry because the agreement required the share-farmer either to do the work himself or to employ others for that purpose. Moreover the share-farmer would not simply be working for himself, he would be working for the farm owner as well.

The majority conclusion that a contract which leads directly to a person working in an industry is within the section must be understood with reference to the facts of that case. The contract was one under which the share-farmer would do or provide work for the benefit of the farm owner. In our opinion the majority judgments in Stevenson v Barham, properly understood, do not directly support any wider proposition.

73 It is the critical factor in these decisions that in order for an agreement to fall within s 106 it must lead directly to a party performing work or employing others to perform the work. The impugned agreements in these proceedings however, for reasons outlined above cannot be so characterised. They did not either as a whole or in their particular terms require or lead directly to the performance of work. Rather they are agreements which granted the right to use the Multibuild concept and to sell the products. Naturally enough the obligations imposed under the various provisions of the agreements resulted indirectly in work being performed. Those obligations were directed towards ensuring that the Multibuild concept was used and the products sold in accordance with the terms of the agreements. They were not directed towards work being performed: see Euphoric v Ryledar at [42].

74 Returning to Sylvan's submission that the close relationship between the parties, demonstrated in particular by the presence of the fiduciary clause in the agreements, I note that Boland J in Gough v Gilmour (No 11) found that although a close relationship (his Honour said "unusually close") may be indicative of a franchise arrangement the fact that a relationship between parties to a contract may be akin to a franchise is not determinative of whether the relevant jurisdictional fact exists, that is, whether the relationship is one whereby work is performed.

75 Having come to the conclusion that the distribution agreements between Sylvan and AG&S as a whole or as to any of the particular provisions did not lead directly to the performance of work it becomes unnecessary for me to decide whether the relief sought in the summons was closely connected to the performance of work in an industry: see Spigelman CJ in McDonalds at [78].

76 Orders 1 and 3 in the amended notice of motion are therefore granted. In my earlier judgment in which the respondents' notice of motion sought that the proceedings be dismissed on the ground that the summons had been filed out of time, I dismissed the motion and reserved costs (at [28]). I therefore intend to make a further order in these proceedings that the respondents pay the applicant's (Sylvan's) costs of that notice of motion.

Orders

77 I make the following orders:

(1) Orders 1 and 3 of the respondent's notice of motion filed on 15 November 2005 are granted.

(2) The respondents are to pay the applicant's (Sylvan's) costs in relation to the notice of motion filed on 5 May 2005 and dismissed by the Court on 18 October 2005.

________________________



LAST UPDATED: 2 January 2007