Sydney Design and Developments Pty Ltd and Anor v Winter [2008] NSWIRComm 149 (15 August 2008)

Last Updated: 5 September 2008

NEW SOUTH WALES INDUSTRIAL RELATIONS COMMISSION

CITATION :
Sydney Design and Developments Pty Ltd and Anor v Winter [2008] NSWIRComm 149



FILE NUMBER(S):
IRC 3171

HEARING DATE(S):
6 August 2008

DATE OF JUDGMENT:
15 August 2008

PARTIES:
FIRST APPLICANT:
Sydney Design and Developments Pty Ltd

SECOND APPLICANT:
Michael Avinou

RESPONDENT:
Andrew Winter

CORAM:
Schmidt J


CATCHWORDS: Unfair contract - claims settled with first and second respondents at conciliation - orders sought against one remaining respondent - ex parte hearing - termination of original contract without notice - remuneration and notice provisions of new contract found unfair - parties' conduct under relevant contractual terms considered - respondents' culpable association - unfairness found considered - nature of consequential money orders considered - contract varied and money orders made against respondent

LEGAL REPRESENTATIVES
APPLICANTS:
Mr PW Bates of counsel
SOLICITORS:
Autore & Associates
RESPONDENT:
No appearance

CASES CITED:
Brown v Rezitis [1970] HCA 56; (1970) 127 CLR 157

LEGISLATION CITED:
Industrial Relations Act 1996


TEXTS CITED:




JUDGMENT:

- 1 -

INDUSTRIAL COURT OF NEW SOUTH WALES

CORAM: Schmidt J

15 August 2008

Matter No IRC 3171 of 2005

SYDNEY DESIGN AND DEVELOPMENTS PTY LTD AND ANOTHER v ANDREW WINTER
Application under s.106 of the Industrial Relations Act 1996

JUDGMENT

[2008] NSWIRComm 149

1 These proceedings were brought in June 2005 pursuant to s 106 of the Industrial Relations Act 1996 ('the Act') the applicants complaining about the unfairness of the contract under which they performed drafting work for Pregard Pty Limited, trading as Armstrong Homes ('Armstrong Homes'). The proceedings were originally brought against Armstrong Homes and two of its directors, Mr Barry Armstrong and the remaining respondent, Mr Andrew Winter.

2 The claims brought against Armstrong Homes and Mr Armstrong were settled, they consenting to the proceedings brought against Mr Winter proceeding. There was no appearance for Mr Winter at the hearing, which proceeded ex parte.

3 Evidence was given by Mr Michael Avinou, the second applicant, and various documents were tendered.

4 The evidence showed that the applicants were conducting a business in Sydney, drawing and designing house plans. Mr Armstrong proposed that the applicants provide such services for Armstrong Homes in Port Macquarie. In August 2002, an agreement was reached, after negotiations involving Mr Avinou, Mr Armstrong and Mr Winter. That agreement required all dealings to be between Mr Winter and Mr Avinou.

5 Mr Avinou then moved to Port Macquarie, with his family remaining in Sydney, to undertake the agreed work. Over the following 18 months, he rented premises there. His family relocating to Port Macquarie was the subject of ongoing discussion between Mr Avinou, Mr Armstrong and Mr Winter. After receiving assurances from them both, as to the security of ongoing work with Armstrong Homes, in February 2004, Mr Avinou and his wife purchased a house in Port Macquarie and his family relocated there.

6 Mr Avinou was given a 5% share in the Armstrong Homes business. In June 2004, Mr Avinou was required to relinquish his share of the business. The applicants were informed that the payments which had earlier been agreed were to be reduced from $120,000 to $60,000 per annum and Sydney Design and Developments Pty Ltd ('Sydney Design') was required to enter a new contract, executed in July. In September 2004, all payments ceased and thereby, the agreement was brought to an end. Mr Avinou and his family later relocated to Sydney, the applicants being unable to find sufficient work in Port Macquarie, to permit them to meet their commitments. Mr Avinou and his wife had difficulty meeting mortgage obligations and eventually sold their Port Macquarie house. At one point, Mr Avinou had to obtain permission to use his superannuation, to meet mortgage commitments.

7 The claim pressed in these proceedings related to the unfairness of the contract entered in July 2004. It had a three year term, but also envisaged that it could be terminated by either party, at any time, for any reason. The applicants sought orders of variation, fixing a period of notice of 12 months; six weeks' redundancy pay and consequential money orders in relation to removal costs, value of plans and interest.

8 At the hearing, orders were pressed in relation to notice and payment under the July 2004 contract.

9 It was conceded that in making any money orders against Mr Winter, account would be taken of the settlement reached with the other respondents.

10 The claims were brought under s 106 of the Act. It provides:

106 Power of Commission to declare contracts void or varied

(1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract.

(2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason.

(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.

(3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time.

(4) In considering whether a contract is unfair because it is against the public interest, the matters to which the Commission is to have regard must include the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force.

(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.

(6) In making an order under this section, the Commission must take into account whether or not the applicant (or person on behalf of whom the application is made) took any action to mitigate loss.

11 An 'unfair contract' is defined in s 105 as:

unfair contract means a contract:

(a) that is unfair, harsh or unconscionable, or

(b) that is against the public interest, or

(c) that provides a total remuneration that is less than a person performing the work would receive as an employee performing the work, or

(d) that is designed to, or does, avoid the provisions of an industrial instrument.

Consideration

12 I am satisfied that the applicants' complaints as to the unfairness of the contract were made out on the evidence. The original agreement was terminated unilaterally and without notice, in circumstances where Mr Avinou had been required to relinquish his share of the Armstrong Homes business and the amount paid under the original agreement, was halved. Some three months' later, again without any notice, Armstrong Homes ceased making any payments at all, thereby bringing the agreement to an end.

13 On the evidence, that conduct and the contract which permitted it, were plainly unfair, as the applicants complained. That the other original parties to these proceedings settled the claims brought against them, in these circumstances, was not surprising.

14 The claim brought against Mr Winter was not settled. He did not appear to defend the claims pressed against him, for reasons which he explained in correspondence forwarded to the Court. Despite what was there said, that left the proceedings in a position where the hearing had to proceed ex parte, to be determined on the evidence led.

15 That evidence established that Mr Winter was the general manager of Armstrong Homes and one of its directors, when the original agreement was made. He was involved in the negotiations with Mr Avinou, which led to that agreement, including the annual payment of $120,000. The agreement expressly required that the applicants conduct all of their dealings with Mr Winter.

16 Mr Avinou initially agreed to a six month trial, relocating to Port Macquarie, without his family, for that purpose. Later his wife took early redundancy from her employment, when the family moved to Port Macquarie to join him in January 2004. On the evidence, their relocation and the purchase of a house in Port Macquarie, involved significant expenditure and debt. They retained a mortgage on their Sydney residence, which they could not sell, given its location on a property owned by other family members.

17 Mr Avinou had repeated conversations with Mr Armstrong and Mr Winter, as to the security of his arrangement, before incurring these expenses. It was shortly after his family relocated in early 2004, that he was given a 5% share in the Armstrong Homes business. When he was required to return that share of the business in June and to sign the second agreement, halving the applicants' agreed annual payments, Mr Avinou was given no explanation, or notice. When he made enquiries of Mr Winter, he was told that:

It's now between you and Barry. I don't want to have any more to do with this. You will have to deal with Barry.

18 Mr Avinou learned that Mr Winter had resigned from his position as a director. On 11 July, he was told that Mr Winter would be leaving at the end of the year.

19 In September, Mr Armstrong informed him that he could not afford to pay him any more and the agreement then came to an end. There was no evidence as to why it was, that this decision was made. The evidence did not show any fair basis for the terms of the agreement imposed upon the applicants in July 2004, nor the subsequent unfair conduct, which it permitted.

20 Significant consequences flowed for the applicants. The applicants' attempts to get other work in Port Macquarie, failed to produce sufficient work, to enable them to meet Mr Avinou's commitments and the family relocated to Sydney, where both the Mr Avinou and his wife pursued work. Until they were able to sell the Port Macquarie house, they had to finance two mortgages, and had to sell furniture and take loans from their parents, in order to meet their commitments. Mr Avinou also had to gain early access to his superannuation, in order to meet these obligations.

21 There was also an ongoing dispute between the applicants and Armstrong Homes as to the use which Armstrong Homes continued to make of plans produced by the applicants under the earlier agreements.

22 I am satisfied that it has been established, on the evidence, that a finding that the agreement entered in July 2004 was relevantly unfair must be made, as well as orders of variation of that agreement. The halving of the agreed payments under the original contract, unilaterally and without explanation, even when sought from Mr Winter, the General Manager, was plainly unfair. Parties are not entitled to unilaterally impose such terms. The original contract required the giving of a month's notice of termination. No notice was given and the terms were imposed, not negotiated. The steps taken were plainly unfair, in the circumstances. There was nothing in the evidence which could lead to any conclusion, other than that the originally agreed sum should be restored, as a matter of justice.

23 The terms of the unilaterally imposed 2004 agreement, which permitted a termination 'at any time, for any reason', was also unfair, given the three year term of the agreement; the original terms which the parties had agreed and the representations which had been made to the applicants, during the course of this relationship, especially by Mr Winter.

24 It follows that orders of variation, remedying the unfairness found, must be made.

Consequential money orders

25 I thus now turn to consider the conduct relied upon, particularly the representations made by Mr Winter, in the context of what consequential money orders should be made, in all of these circumstances.

26 Annexed to affidavits in evidence were various emails sent by Mr Winter to Mr Avinou. They painted a picture of Mr Avinou working hard; Armstrong Homes facing challenges and a plan whereby Mr Winter and Mr Avinou would become principals in the business, which Mr Winter believed could be turned around, from a position where it had been making losses, to their mutual profit.

27 In November 2002, Mr Winter wrote to Mr Armstrong, Mr Avinou and a Ms Tracey Menser. The email concerned a proposed restructure of Armstrong Homes, envisaged for July - August 2003. Even at this early stage, Mr Avinou was deeply involved in Mr Winter's plans for the future. The email concluded:

There is a bit of trust involved in your part. This is the stuff that I am good at and I enjoy doing. Also I am very focused on the financial well being of the company. If you allow me to drive it with the strategy I have outlined then you can count on me to get it done. Whatever involvement you wish to have is off(sic) course welcome but it comes down to my favourite saying: "Is it an effective use of your time?" Do we need four key people to do what one can do alone? It's not a control thing. It's just that I can move faster this way.

Please let me know what your thoughts are.

28 What responses were given to this communication, was not in evidence.

29 In December 2002, Mr Winter wrote to Mr Avinou, saying amongst other things that 'while we may be hanging on by a thread at the moment I thought I would take the time to let people like yourself know that all is looking good'. He was advised that 'In the New Year Tracey and yourself will become financial participants in this company'; that Mr Armstrong would 'wind back' and that 'the future of this business will lie in the hands of at least 3 (you, I & Tracey) but more likely 4 or 5 good people. That is a very exciting and powerful thing for people like us.'

30 In July 2003, Mr Winter wrote to Mr Armstrong, Mr Avinou and others, about demand for new drawings outstripping Mr Avinou's ability to supply them; difficulties with plans in Council and pricing. Mr Winter wrote again on 11 July, to Mr Armstrong, Mr Avinou and Ms Menser, about their future plans and why the proposed restructure, had not yet occurred. It was proposed now for October. There was to be a 12-18 month action plan, to improve the net value of the company and advice that:

The down side continued: Pregard will report another operating loss for the last 12 months. Thats(sic) two years running now so you can count on it that the banks and insurers work on the premise that three strikes and you are out so this is definitely the year for us to turn it around and we have 345 days to do it.

31 Mr Winter also discussed 'the upside' and that after a couple of tough months, he expected that they would be in good shape. Mr Winter said that he was to come back on board 'as full time General Manager', but that he proposed to resign at the end of the year, as did Mr Armstrong, to become 'roving consultants', mainly for tax reasons. Mr Winter also advised that he was technically bankrupt, if all of his debts were called in and he proposed to change that situation. He advised:

Think about this. By the end of this financial year we will have a completely systemised business. Over 100 master plans fully priced and detailed. Picture programs of every aspect of construction. Automated flow chart client management through Lotus Notes. Sales plans that will be set out 12 months in advance with between 70-80 slots filled. Supervisors on contract and on bonus payment schemes. Automated accounts payable and receivable systems. Automated HR, OHS and Employee Management Systems. A new office which will be highly productive. An interactive web site for client interaction. Even maybe sales agent alliances in Sydney??? Who knows. But in 345 days from now I will resign as General Manager of Pregard because Pregard won't need one. Not on a day to day basis and that will be done in the knowledge that I set out to do what I promised. Fix and build an automated money making machine.

and

The bottom line guys is that it all hinges on one good year and this is it. The realisation for me came during the writing of the plan and the working out of the numbers. Next years will be better still believe me. I will show you how to do more with less. It's a compounding process.

32 On 22 July 2003, Mr Winter sent another email to Mr Avinou, saying, amongst other things:

Opportunities will be coming to us in droves over the next few years. We are going to revel in those opportunities and our success and professionalism will be a testament to those that said we couldn't do it. I am more confident now than I ever have been since I came to this company and know that more than anything else my friends are close by. Managing is made so much easier when I have great people around me who are smarter than I am. Keep it up my friend, the light is getting brighter at the end of the tunnel.

33 On 27 July, Mr Winter sent an email to Mr Armstrong, Mr Avinou and others, requiring approaches to Mr Avinou to go through him. Mr Winter was to be 'the control point for work to be completed as I am now very focused on profitable work going out to the field in a timely manner.'

34 In August 2003, Mr Winter sent another email to Mr Armstrong, Mr Avinou and others, dealing with various issues, including that timeliness of payments was becoming an issue, with over $620,000 outstanding in monies owed. Upcoming projects were outlined and an approach to pursuit of payments due, was proposed. The email concluded:

We need to kick the shit out of this over the next three months in order to get our noses in front for once and I need a huge sense of urgency during that period. We only put two jobs into construction in July which is not enough to run our business for the month so into the new financial year we are already in catch up mode. By October we need to be up to date. David, Michael and I will continue at the same pace for several months yet so there isn't going to be any let up I'm afraid. Lets dig in and see what happens. I can assure you it will be worth it.

35 In a separate email sent the same day to Mr Avinou, complimenting him on various work and discussing work in hand, Mr Winter advised that '[a]fter that I have your schedule for the rest of the year and into next year already lined up and its looking pretty bloody good mate'.

36 In an email sent in September 2003, Mr Winter advised of a strategic management meeting and that:

The way I see it is this. Sydney Design and Drafting services has an opportunity to be a growth business and that is what I would like you to start considering as we move forward. I would like to think that at least 40% of your business income is derived outside of Armstrong Homes (not including profit share from your part ownership of Pregard which will happen in a few short weeks).

We need to formulate a specific financial and strategic plan for your company so that you continue to be a part of Armstrong Homes but that you are also in a position to benefit from the market demand for services that you provide. Next week I would like us to sit down, probably at your place and map this out. Will you need to take on any employees in the future? Do you want to? What amount of money does your business need to generate each year to be financial viable for you and Jo and how much of that income will be provided by Armstrong Homes. As you know this has to be at least 20% derived from other sources for you to maintain a neautral(sic) tax position.

Bottom line is this. I would like to know very specifically what you and Jo want from life. How you want it, when you want it and what financial resources do you need as a base from which to get it. You and Jo are now very much an intrinsic part of our business and family. After Barry and I (no disrespect to Tracey) you are the most important director of Pregard and we you know why that is the case.

There are many ways in which this could work.

Barry and I have a number of other entities. We intend to work on those entities becoming cash flow positive businesses over the next few years. We intend to cross pollinate with other businesses etc so that people like you, me, Barry and Tracey have alternative sources of income other than the grind of trying to punch out houses day in, day out.

Map out your life and your future. It is important that you and Jo define "How many ice creams" you need in the words of Ray Stack. After we know you have the right amount then the rest is about the game of wealth accumulation. Barry and I are in the process of doing the same thing. We only have one thing on our mind over the next 12 months. Reducing or eliminating all debt and associating risk from Pregard, shrinking the business so that it becomes easily manageable, assessing all income producing opportunities and working out how the key people can work in and share in those opportunities.

You and I will go a long way together my friend. I don't want you and Jo to make any more sacrifices to make that happen but I believe that you could and should be a virtually self funded entity and that in time you should have people working for you to make this happen. If this is what you want then you and I should work on how we are going to make that happen. I have a number of ideas what I would like to discuss with you about this. It really depends on what you and Jo want but I know this. Barry and I have become very clear about what we want and it is dramatically different to what it was 12 months ago. Let's get together next week and share some ideas away from the hussel(sic) and bussle(sic). I thing you might be interested in what I have to say.

37 In an email of October 2003, Mr Winter discussed with Mr Avinou, the costs of Sydney Design employing an apprentice and the consequences for its profitability, suggesting that income would become $176,000 per year, when various changes were implemented by the applicants.

38 In May 2004, Mr Winter sent Mr Avinou a draft of a document, to consider putting to Mr Armstrong. He concluded '[t]his is my best shot at meeting what I believe are the core elements of both companies needs. If you guys cannot take it from here then I fear for you both.' The document discussed the topic of the ownership of designs and any future 'master designs'. Mr Avinou proposed that the applicants' rights to eight existing designs and three more to be drawn from designs to be supplied by Mr Armstrong, be 'relinquished' to Armstrong Homes. The applicants would supply services to produce a maximum of 30 designs a year, and a guaranteed seven day turn around for work, was to be given, with outside work to be negotiated. The document concluded:

I think that this way we both get some security for the next twelve months without being a risk to each other. That way the barriers are removed and maybe again we can get down to focusing on business and working hard to get this thing back on track. From what Andrew has told me it can work and I understand your determination in wanting it to work. If it doesn't then we can't say we didn't' try but if ended up spending any more time argueing(sic) over these issues we are going to waste time that could be better spent being productive.

39 The details of how this difficulty between Mr Armstrong and Mr Avinou as to ownership of designs had arisen, was not revealed on the evidence. On 21 June 2004, Mr Winter sent another email to Mr Armstrong and Mr Avinou, saying:

I have tried to look at the big picture and determine within my own moral values what would be a fair and reasonable long term outcome that both parties derive something positive from. I am sending it to you both. Do not bring this back to me for changes. Work it out between yourselves. You both have a hard copy. I have tried to address the issues that both parties are seeking. If, as usual, my best is not good enough then don't blame me just go away and sort it out. Otherwise get the lawyers involved and get your cheque books out in order to pay for them.

40 The attached document was a draft agreement, dealing with similar issues to those dealt with in the document Mr Winter had drafted in May for Mr Avinou to give to Mr Armstrong.

41 What happened between Mr Armstrong, Mr Avinou and Mr Winter was not explored. Why it was, that Mr Armstrong required Mr Avinou to return his 5% share of the business, and the new agreement to be entered and why he then terminated the agreement entirely, in September 2004, was not revealed. Nor was there any evidence which explained why Mr Winter had earlier resigned as director by letter of 14 May. Thereby he also relinquished his share of the Armstrong Homes business. When, and if he ceased his position as a General Manager of Armstrong Homes, was also not revealed. Mr Avinou understood that Mr Winter intended leaving in December 2004. He had earlier foreshadowed such a step 'for tax reasons'. The evidence suggested, however, that Mr Armstrong's requirement in June that Mr Avinou's share of the business be returned, followed Mr Winter's actions in May, which preceded his last email in July.

42 What these documents did suggest, was that the plans being pursued by Mr Winter in 2002 and 2003, which anticipated that in the 2003/2004 financial year Armstrong Homes would begin producing profitable outcomes in which the applicants would share, did not succeed. That there was a falling out between Mr Avinou and Mr Armstrong over ownership of drawings which the applicants had produced, was apparent. That was an issue pursued by the applicants in these proceedings. Mr Winter tried to help Mr Armstrong and Mr Avinou to resolve their differences, but plainly failed to do so. Mr Winter resigned his directorship and returned his share of the business in May 2004, but had not then left his position of General Manager. When, if and why he left, was not clear. Nevertheless, plainly Mr Armstrong, by his actions, first in June 2004 and then in September, brought the agreement with the applicants to an end.

43 Plainly, in all of the circumstances in evidence, that must have the result, in these proceedings, that the June 2004 agreement be varied by the Court's order, to restore the agreed payment of $120,000 and to provide for a fair notice period, if the demonstrated unfairness of the contract is to be remedied.

44 Termination without the giving of any notice, was plainly an unfair contractual term, in the circumstances of this case. It replaced an agreed term of one month, originally agreed in the context of a six month trial, about which no complaint was made in these proceedings, other than inferentially. The applicants claimed that in all of the circumstances, in fairness, a 12 month notice period should have been provided. I am unable to accept that fairness could result in such an outcome.

45 The documents in evidence showed that the applicants took some calculated business risks, in the venture which they embarked on with Armstrong Homes. The agreement was first made in August 2002. Mr Avinou's evidence was that it was initially on the basis of a six month trial. A one month notice period was then agreed and that did not alter, when the applicants elected to continue, after the initial period.

46 Even earlier however, in July 2002, Mr Winter was writing to Mr Avinou and continued to write to him, even during the trial, both about the challenges which the business faced, as well as the opportunities which he saw and in which the applicants were invited and urged to participate. As at July 2003, the business had made losses during the previous two years. While Mr Winter had high hopes for a turnaround, there were ongoing problems with work being generated and payments being received, as his emails in the latter half of 2003 revealed.

47 It seems to me that fairness would not permit the decisions made by Mr Avinou, to relocate his family to Port Macquarie in 2004, and to purchase a house there, and the resulting risks which the applicants took, to be all sheeted home to Mr Winter. Some regard must be taken of the business risks which the applicants freely took - the emails do not suggest that in 2003 Mr Winter was hiding the problems Armstrong Homes faced, even while painting a rosy future.

48 The applicants did not explain in their case, what role the disagreement with Mr Armstrong, over the ownership of the designs provided by the applicants, played in the final termination of the agreement in September. They claimed that there had been a redundancy. That was not established. That is a concept known in employment law, as opposed to the type of arrangement here in issue. In any event, the well established test of what amounts to a redundancy, is that the employer no longer wishes to have the work done by the employee, done by anyone. That this was such a case, was not established. Indeed, the pursuit of the dispute as to ownership of the drawings produced by the applicants, suggested that Armstrong Homes had a continuing use for such drawings, which the applicants wished to preclude.

49 There was no evidence that the Armstrong Homes business ceased, or even altered, despite the termination of the July 2004 agreement.

50 That still leaves the question of what notice of termination ought in fairness to have been given, in this case. Having regard to the nature of the relationship; how it came about; the relatively short period it persisted and the circumstances in which it came to an end, I have concluded that fairness required the giving of a period of three months' notice.

Should money orders be made against Mr Winter?

51 These conclusions would result in money orders calculated at the rate of $60,000 per annum for the period from 5 July 2004 to 28 September 2004 (that being the original agreed rate of $120,000, less the reduced rate of $60,000); as well as $30,000, for three months' notice. The applicants also properly accepted that in formulating any money orders, account must also be taken of the settlement reached with the other respondents. I agree. That consideration must reduce the orders which might otherwise be made.

52 Also to be considered however, is the culpability of Mr Winter, for the unfairness found, he not being a party to the contract in question.

53 On the evidence, the July 2004 agreement was forced on the applicants by Mr Armstrong, at a time when Mr Winter remained the General Manager, but had resigned as a director and had returned his share of the business. While he told Mr Avinou that he would have nothing to do with the terms imposed, he was then plainly still involved in the ongoing discussions, given the terms of his June email. He appears to have had nothing to do with the final termination, at least so far as its implementation was concerned, although there was no evidence which suggested that Mr Winter was not then the General Manager. That, in fairness, Mr Winter could simply wash his hands of these matters, as he purported to do, given his involvement in this relationship from the outset, is difficult to see. I am satisfied on the evidence that he had a culpable association with the way in which this relationship finally unravelled, given his ongoing representations as to future prospects, in which the applicants and he would share, which finally came to nothing and the terms of the agreement which I have found to have been relevantly unfair.

54 Also to be considered is that in Brown v Rezitis [1970] HCA 56; (1970) 127 CLR 157, the High Court warned against respondents not themselves parties to the contract in question, being made liable for money orders made by the Court, in proceedings such as this, particularly orders made on a joint and several basis. Orders made against persons not party to the contract in question, must properly reflect the culpability in question and the unfairness found.

55 On the evidence, the termination of the original agreement, the imposition of the July 2004 agreement and its eventual termination, all arose after an unresolved falling out between Mr Avinou and Mr Armstrong, which Mr Winter effectively sought to wash his hands of, when they did not resolve their differences on the basis he had suggested. Yet, on the evidence, all of this followed the failure of Mr Winter's plans; his resignation as a director, and the return of his share of the business, while he continued as General Manager. As a matter of justice, given Mr Winter's involvement in the Armstrong Homes business and all of the dealings between the applicants and Armstrong Homes, and particularly Mr Avinou's involvement to that point, that was something which fairness could not permit.

56 I accept that Mr Winter played a significant role in the way in which the applicants' involvement with Armstrong Homes developed and came to unravel. It was he who, as General Manager, set the business on a particular course and held out to Mr Avinou, representations of a future, which came to nothing, in the end. Indeed, on his own emails, it would appear that Mr Winter was the architect of the course on which the applicants embarked with Armstrong Homes, which came to nothing in the end, under Mr Winter's General Managership. The relationship unravelling, coincided with Mr Winter's resignation as a director and return of his share of the business. He must take a proper responsibility for his part in the unfairness which then unfolded.

57 To be balanced with these considerations, it seems to me, is that it must also be accepted that the applicants took certain business risks and that it was Armstrong Homes and Mr Armstrong, who must finally take the greatest share of responsibility for what occurred, when the July 2004 agreement was imposed and later terminated. That cannot relieve Mr Winter, of any responsibility for the contractual unfairness found, particularly given that the evidence showed that even despite resigning as a director, he continued in the position of General Manager. Yet it must result in money orders which properly reflect his role in the unfairness found.

58 In all of the circumstances, having weighed all of the matters I have mentioned, I have concluded that a money order of $10,000 against Mr Winter, properly weighs all of the considerations I have outlined. As a matter of justice, in these circumstances, the applicants should also have an order for interest and costs in their favour, on the basis sought, after the amendment of the summons, following upon the settlement with the other respondents.

Orders

59 For the reasons given, I find the agreement of 5 July 2004 between Sydney Design and Armstrong Homes relevantly unfair and vary it to provide for a payment of an annual sum of $120,000 and a three month termination provision, requiring on termination, either the giving of three months' notice, or a payment in lieu thereof. I make consequential money orders against Mr Winter of $10,000, plus interest, calculated at Supreme Court rates, from the date of termination, to the date of this judgment.

60 The applicants should also have a share of their costs of the proceedings borne by Mr Winter. The applicants should have such an order, in their favour, from the time of the final amendment of the summons, such costs to be as agreed, or assessed.

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LAST UPDATED:
15 August 2008