Twohill v Mental As Anything Touring Pty Ltd & ors [2008] NSWIRComm 17 (14 February 2008)

Last Updated: 30 May 2008

NEW SOUTH WALES INDUSTRIAL RELATIONS COMMISSION

CITATION :
Twohill v Mental As Anything Touring Pty Ltd & ors [2008] NSWIRComm 17
This decision has been amended. Please see the end of the judgment for a list of the amendments.


FILE NUMBER(S):
4627

HEARING DATE(S):
19, 20 & 21 November, 14 December 2007 (submissions) & 11 February 2008 (submissions)

DATE OF JUDGMENT:
14 February 2008

PARTIES:
APPLICANT:
David Francis Twohill

FIRST RESPONDENT:
Mental As Anything Touring Pty Ltd
SECOND RESPONDENT:
Martin Edward Murphy
THIRD RESPONDENT:
Andrew Macarthur Smith

CORAM:
Marks J


CATCHWORDS: S106 proceedings - unfair contract - permanent members of a band - applicant excluded from band without notice or reasons - no evidence that applicant was warned his conduct may lead to exclusion from the band - applicant and individual respondents established company - sole directors and shareholders of company - band functioned and operated through corporate entity - applicant asserts he was an employee of the company - regular payments made to each permanent band member from company - group certificates labelled recipients as employees - respondents regarded band members as partners - employment relationship established - contract of employment attended with little formality - implied provision for termination - failure to demonstrate conduct which justified summary dismissal - contract found unfair - appropriate period for notice of termination is six months - sufficient culpable association of individual respondents - contract varied from inception - respondents jointly and severally liable

LEGAL REPRESENTATIVES
APPLICANT:
Mr A Britt of counsel
Solicitor: Mr J Laxon
Hillman Laxon Tobias Lawyers
RESPONDENTS:
Mr J De Meyrick of counsel
Solicitor: Mr J Kenny
Kenny & Co Solicitors

CASES CITED:
Boniface v SMEC Services Pty Limited and anor [2007] NSWIRComm 301
Byrne v Australia Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410
Dayton v Woolworths Limited [2006] NSWIRComm 215
Degiorgio v Dunn [2004] NSWSC 767
Fayle v Diveda Pty Ltd and ors [2004] NSWIRComm 257
Lennard’s Carrying Co Ltd v Asiatic Petroleum Co Ltd (1915) AC 705
Schwartz v Central Sydney Area Health Service & Anor [2002] NSWIRComm 79
Sydney Water Corporation v NSW Industrial Relations Commission and anor [2004] NSWCA 436; (2004) 61 NSWLR 661

LEGISLATION CITED:
Industrial Relations Act 1996 ss105 and 106
Partnership Act 1892 ss1, 2, 25, 26, 32 and 35


TEXTS CITED:




JUDGMENT:

INDUSTRIAL COURT OF NEW SOUTH WALES

CORAM: Marks J

Thursday 14 February 2008

Matter No IRC 4627 of 2005

Twohill v Mental As Anything Touring Pty Ltd and ors

Application under s 106 of the Industrial Relations Act 1996

JUDGMENT

[2008] NSWIRComm 17

1 These are proceedings brought under s 106 of the Industrial Relations Act 1996 (“the Act”), which are constituted by an amended summons for relief.

2 Relevantly, ss 105 and 106 are in the following terms:
s 105 Definitions

In this Part:

"contract" means any contract or arrangement, or any related condition or collateral arrangement, but does not include an industrial instrument.

"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.

s 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.

3 The applicant is David Francis Twohill. The first respondent is a corporation Mental As Anything Touring Pty Ltd (“Touring”). The second and third respondents are Martin Edward Murphy, also known as Martin Plaza (“Murphy”), and Andrew MacArthur Smith, also known as Greedy Smith (“Smith”).

4 As will be seen, the applicant, Murphy and Smith were members of a musical band known as “Mental As Anything”. The band operated, to an extent that was contentious in the proceedings, through Touring. Because the parties were unable to reach agreement for the purpose of this litigation about the precise relationship between them, the amended summons seeks relief firstly with respect to a contract of employment between the applicant and Touring and secondly with respect to a contract of partnership between the applicant, Murphy and Smith. In each case, it is asserted, in general terms, that the contract was unfair in that it permitted Murphy and Smith to exclude the applicant from the band without giving him any notice and without affording him what I shall describe, for present purposes in general terms, as “procedural fairness”, that is, without informing him about any concerns that they had, and giving him an opportunity of dealing with those concerns.

5 The factual background as revealed by the evidence is largely non-controversial. The parties were at odds as to the legal effect of the evidence and as to the consequences for the proceedings.

Factual background

6 The band first performed on 16 August 1977. Thereafter, the applicant, Murphy and Smith remained permanent members of the band. Initially there were two other permanent members, but they left some time later.

7 On 28 August 2000, the applicant, Murphy and Smith, acting on professional advice, established a unit trust, the trustee of which was Syray Pty Ltd (“Syray”). The intent was that the intellectual property, including common law and registered trade marks and copyright in musical works, sound recordings and certain artistic works of the band, was either owned or licensed by the unit trust. Each of the applicant, Murphy and Smith were directors and equal shareholders of Syray and each of them held equal units in the unit trust. However, not all of them received equal payments from the unit trust, the preponderance of payments going to those members who were recognised as being the composers of particular songs, for royalties accruing in connection with those songs. Syray did not receive any income from live performances by the band.

8 Touring was incorporated in about July 1989. The applicant, Murphy and Smith were the sole directors and shareholders of Touring. The company was established on the advice of the then manager of the band and the band’s accountant, Mr Barry Moore. It was Mr Moore’s evidence that the operation of the activities of the band would be channelled through Touring. This allowed the members of the band to accumulate earnings through Touring as employees of the company and distribute these by way of regular payments each week to each band member of a set amount, thus assisting them with respect to their own personal finances. Furthermore, the creation of an employment relationship between Touring and each of the three permanent individual members of the band was said by Mr Moore to create certain taxation advantages for them. In addition to these regular payments from Touring, the band members received distributions on occasions, which were recorded as dividends. Mr Moore said he wished to avoid regular payments being made to the band members being characterised as dividends because this “can result in higher tax being payable if unfranked; payment of company tax rates before distribution; and possible franking problems as well as tax-timing considerations.”

9 Mr Moore cited as additional taxation benefits the availability of “ATO approved tax-free travel allowances able to form part of the members’ distributions, which are of particular benefit to touring bands who spend a lot of days away from home overnight. Also Touring is able to make tax deductible superannuation contributions on behalf of the Members for their future retirement benefit.”

10 I infer from the totality of the evidence in the proceedings that all of the earnings of the band from performances were paid into Touring. There was paid out of Touring all relevant expenses including manager’s fees, payments to other casual and regular performers, touring expenses and the like.

11 There were admitted into evidence a number of documents including taxation returns. These show that Touring treated in its books the regular payments made to each of the applicant, Murphy and Smith as salary or wages, taxation was deducted accordingly, and group certificates were issued which referred to the recipients as an “employee”.

12 As Taxation Ruling 2005/16 makes clear, PAYG deductions and remittances are payable with respect to persons who are employees at law. This proposition is in turn derived from the provisions of the income tax legislation to which there is no necessity to refer in any particular detail.

13 In his affidavit, Mr Moore referred to the members of the band as having been “treated notionally as ‘employees’ for tax purposes....”.

14 During the course of oral evidence, I asked Mr Moore what he meant by this concept. His evidence was to the following effect:

“HIS HONOUR Just so I understand the evidence, what do you mean by a notional employee?

A. Well, I just meant that there's probably a whole lot of definitions for employee. Basically I mean the ATO definition.

HIS HONOUR Well, assuming that they talk about persons who are employees at law, you understand that concept, some people would be regarded by any lawyer as an employee, do you regard these people being employees at law?

A. Not under conventional definition, no, because they own a business. They are directors of the business.”

15 In his case, the applicant asserted that he was an employee of Touring. Mr Murphy in his evidence said that he believed that none of himself, Smith and the applicant were employees of Touring. He always regarded the three of them as being equal partners apart from receipt of publishing royalties.

16 The affidavit evidence of Mr Smith was to similar effect. He said that the band was constituted “in every way and in every sense....a partnership in which we each shared equally in respect of income, with the exception of song writing royalties....” He further said, “It is true that each member of the band received the same drawings from its earnings, and not wages, and also shared equally in meeting the band’s expenses. The only reason why those drawings were ever referred to as wages was that this was the simplest and most appropriate way of dealing with them for taxation purposes. Nothing more. The same applied to superannuation so that the Band could take advantage of the taxation benefits involved. This arrangement was introduced by our accountant. It had nothing to do with the way the Band was actually constituted or functioned.” Furthermore, Mr Smith asserted that none of he, Murphy or the applicant was “treated as, or was regarded to be, an employee....”

17 I note, for completeness, that there was never established in the books of account of Touring any provision for the payment of annual holidays entitlements or long service leave entitlement, which one would normally expect to be referred to in the taxation records of an employer corporation.

Was the applicant an employee of Touring or a partner of Smith and Murphy?

18 A partnership is defined in s 1(1) of the Partnership Act 1892 as being “the relation which exists between persons carrying on a business in common with a view of profit....”. S 1(2) provides that “the relation between members of any company or association which is....incorporated under the Corporations Act 2001 of the Commonwealth....is not a Partnership within the meaning of this Act.”

19 S 2 of the Partnership Act contains “rules” for determining the existence of a partnership. It is in the following terms.

2 Rules for determining existence of partnership

(1) In determining whether a partnership does or does not exist, regard shall be had to the following rules:

(1) Joint tenancy, tenancy in common, joint property, or part ownership does not of itself create a partnership as to anything so held or owned, whether the tenants or owners do or do not share any profits made by the use thereof.

(2) The sharing of gross returns does not of itself create a partnership, whether the persons sharing such returns have or have not a joint or common right or interest in any property from which or from the use of which the returns are derived.

(3) The receipt by a person of a share of the profits of a business is prima facie evidence that the person is a partner in the business, but the receipt of such a share, or of a payment contingent on, or varying with the profits of a business does not of itself make the person a partner in the business; and in particular:

(a) The receipt by a person of a debt or other liquidated demand by instalments or otherwise out of the accruing profits of a business does not of itself make the person a partner in the business or liable as such:

(b) A contract for the remuneration of a servant or agent of a person engaged in a business by a share of the profits of the business does not of itself make the servant or agent a partner in the business or liable as such:

(c) A person being the widow, widower or child of a deceased partner, and receiving by way of annuity a portion of the profits made in the business in which the deceased person was a partner, is not by reason only of such receipt a partner in the business or liable as such:

(d) The advance of money by way of loan to a person engaged or about to engage in any business on a contract with that person, that the lender shall receive a rate of interest varying with the profits, or shall receive a share of the profits arising from carrying on the business, does not of itself make the lender a partner with the person or persons carrying on the business or liable as such: Provided that the contract is in writing and signed by or on behalf of all the parties thereto:

(e) A person receiving by way of annuity or otherwise a portion of the profits of a business in consideration of the sale by the person of the goodwill of the business is not by reason only of such receipt a partner in the business or liable as such.

(2) This section does not apply to or in respect of an incorporated limited partnership.

20 In general terms, such evidence as there is in the proceedings is that all of the touring and performing activities of the band were conducted through Touring. In no sense does the evidence suggest that the activities of the band were conducted personally by the applicant, Murphy and Smith acting in concert. All earnings were received by Touring, and Touring paid all outgoings. In circumstances where each of the three individuals chose, albeit on professional advice, to ensure that the band operated through a corporate structure and that income and expenses were channelled solely through this corporate structure, I cannot comprehend how it can be asserted that, in effect, the three relevant members of the band were in partnership in some way. It would be inappropriate on the state of the evidence to treat the corporate structure, established by Mr Moore and adhered to by the creation of payments through Touring and the creation of documents showing the applicant, Murphy and Smith as employees, as being a sham.

21 In one sense, and on a practical level, the interposition of Touring changed nothing. The same individuals were involved in making the same decisions and doing the same things in connection with the band after the interposition of Touring. On a personal basis, therefore, I can appreciate that Murphy and Smith might feel that they remained “in partnership” because they, together with the applicant, constituted the controlling mind and operator of the band. However, as a matter of law I believe that the band at all relevant times functioned and operated through the corporate entity constituted by Touring.

22 In one sense, the trading and other operations of the corporation have a certain artificiality about them because they are conducted by natural persons. The description of a corporation and the manner in which it operates was stated many years ago in language which remains appropriate today by Viscount Haldane LC in Lennard’s Carrying Co Ltd v Asiatic Petroleum Co Ltd (1915) AC 705. At 713, his Lordship said,

“My Lords, a corporation is an abstraction. It has no mind of its own any more than it has a body of its own; its acting and directing will must consequently be sought in the person of somebody who for some purposes may be called an agent, but who is really the directing mind and will of the corporation, the very ego and centre of the personality of the corporation. That person may be under the direction of the shareholders in general meetings; that person may be the board of directors itself, or it may be, and in some companies it is so, that that person has an authority co-ordinate with the board of directors given to him under the articles of association, and is appointed by the general meeting of the company, and can only be removed by the general meeting of the company.”

23 Seen in this way, the decisions that each of the applicant, Murphy and Smith continued to make and the functions which they continued to perform after the commencement of the use of Touring did not reflect the continuation of a partnership. They reflected the interaction of the three of them as the directors of Touring conducting the affairs of Touring. This is consistent with the provisions of s 1(2)(a) of the Partnership Act 1892. It was submitted on behalf of the respondents that there was, in fact, no contract of employment because there was, in fact, no control of the employees by the employer. Such a submission ignores the reality of what had happened. It ignores the fact that the controlling minds of the employer were the applicant, Murphy and Smith. They were also, relevantly, employees. To seek to ascribe some concept of control in these circumstances ignores, in my opinion, the reality of the factual situation.

24 As a matter of interest I note that this is not the first occasion in which members of a band have been at odds as to whether they have been in partnership. The existence of a partnership in the context of the operation of a musical band was considered by Barrett J in the Supreme Court of New South Wales in Degiorgio v Dunn [2004] NSWSC 767. Those proceedings concerned the dissolution and formation of a “tribute band”. His Honour applied the provisions of the Partnership Act to the particular circumstances of those proceedings.

25 I am somewhat puzzled as to why Mr Moore, who professes to be a chartered accountant and registered tax agent, would seek to assert that, in some way, he had misrepresented to the Australian Taxation Office the true circumstances pertaining to Touring and, in particular, the employment relationships in the manner in which he had caused income tax returns and other documentation to be created if he did not believe those employment relationships to exist in law. At one stage I seriously considered whether Mr Moore’s evidence in these proceedings should be referred to the appropriate taxation authority. However, given that I have found that as a matter of law there is an employment relationship as represented in the documentation that Mr Moore caused to be created, no question of misrepresentation arises and there is no need to consider this aspect further.

The exclusion of the applicant from the band

26 As will be discussed later in these reasons for judgment, the band had been on tour in Western Australia in late August and early September 2004. The members of the band flew back from Perth to Sydney, arriving at about 11pm on 6 September 2004. Whilst the applicant was smoking a cigarette outside the terminal waiting for his luggage to arrive on the carousel, Mr Murphy came over to the applicant and berated him verbally, after which he said to the applicant “I can’t do this anymore.” The applicant then went back into the terminal but was unable to speak to Mr Murphy who was visibly very upset. After speaking to some other persons who had been on the tour, the applicant then approached Mr Smith who said to the applicant “We’ve had a meeting. You played your last show last night.”

27 Thereafter, the applicant was excluded from the band.

28 There is no evidence in any of the affidavit material filed by Murphy and Smith or by any other witness who gave evidence on behalf of the respondents that the applicant was ever warned that his conduct was such that it might lead to his exclusion from the band. In cross-examination, Mr Murphy said that the applicant had been warned. However, when reminded that there was no evidence about that in his affidavit, Mr Murphy said that that evidence had been “deleted.” It transpired that statements had been given by Murphy and Smith to their solicitor, which they asserted contained some detail concerning warnings given to the applicant and evidence of specific areas of concern about the applicant’s conduct particularly during the Western Australian tour. Apparently, they had been advised to keep their allegations “general” and to delete them from their affidavit evidence filed in the proceedings. I shall revert to this matter later in these reasons for judgment.

29 It is clear from the evidence that no reason was given to the applicant by anyone on 6 September 2004 as to why he had been excluded from the band.

30 A few days later, the applicant telephoned the band manager, Mr Bartlett. He alleges that he had a conversation with Mr Bartlett who expressed surprise that he had been excluded from the band and had denied that the applicant had played badly in Western Australia. The applicant was told that another drummer had been engaged for a performance the following night and that the applicant should pick up his drums, which he did.

31 Mr Bartlett denied that part of the conversation which related to whether he had been surprised at what occurred and as to whether the applicant had played satisfactorily on the Western Australian tour. He had not attended that tour. Mr Bartlett said that he informed the applicant that he did not become involved in “group politics.”

32 The evidence is to the effect that the applicant was excluded from the band without notice and without being given any reasons therefor.

Events leading up to the dismissal

33 The respondents’ evidence was that the applicant conducted himself inappropriately and performed badly during the Western Australian tour. Mr Smith said that: “Long before that tour, the applicant’s conduct, attitude and most importantly his standard of performance, had significantly deteriorated over recent years and was a matter of serious concern to the band.”

34 Mr Caen joined the band in 2002 as a casual player. He is now a permanent member of the band. He gave evidence about a performance in Nowra on the June long weekend in 2003. After the performance, Mr Caen said that he told the applicant “You’re really pissed. You played like shit and I was embarrassed.” There was then an unpleasant exchange. The applicant conceded that Mr Caen referred to his playing but not as to the applicant’s state of sobriety or that Mr Caen was embarrassed. He said that Mr Caen later telephoned and apologised. Mr Caen conceded that he had later approached the applicant and told him that he was sorry for what he said. This was said to fall short of a retraction and was conveyed to the applicant because Mr Caen was anxious to rebuild his relationship with the applicant in case it might impact adversely on the performance of the band.

35 There was also evidence about an incident that occurred in July 2003. The applicant alleged that the manager, Mr Bartlett, had made a booking for the band to perform at a charity event for a Variety Club function in circumstances where the band had been required to fly from Cairns to Victoria, then fly back to Sydney to play at the Variety Club function in the afternoon and then return to Melbourne for a late night performance the same day. The applicant said that Mr Bartlett had given him insufficient notice of the Variety Club performance and that it involved too much travelling. The applicant refused to perform at the Variety Club function and the band was forced to use the services of a contract player as drummer. The applicant said that this was an example of general poor management that was occurring at that stage. Mr Bartlett denied that he had given details of the Variety Club performance at short notice. The other members of the band all performed at the Variety Club function.

36 There were general allegations made by the respondents that the applicant was uncooperative in carrying and moving the band’s luggage. The applicant responded that the luggage was, in general terms, moved by “roadies” who were employed to transport what I understand to be a considerable amount of equipment associated with a band including not only instruments but also amplification and other associated equipment.

37 The applicant had become friendly with one of the roadies, Mr Darren Brain, whose services were terminated by Mr Bartlett in about August 2004 without consultation with the applicant but, apparently, with the consent of Murphy and Smith. Mr Brain gave evidence in the proceedings. He was employed as a stage technician, tour manager and roadie for the band between early 2000 and mid 2004. He said that he worked closely with all band members including the applicant, Murphy and Smith.

38 Despite his close association with the other members of the band, particularly whilst touring, Mr Brain said that he had never heard any one of them refer to the applicant in disparaging terms, particularly as being “extremely difficult and disagreeable.” In his opinion, the applicant made an effort to behave in an agreeable and constructive fashion. To the contrary, Mr Brain was of the opinion that Mr Murphy’s “general behaviour and performance standards were far worse than the behaviour I observed from the applicant.”

39 Although there was a perception on the part of Murphy and Smith of general dissatisfaction with the applicant prior to the Western Australian tour, it was their evidence that what occurred on that tour caused them to agree that they should exclude the applicant from the band at the conclusion of the tour.

40 In his affidavit, Mr Murphy talked of the applicant’s “aberrant behaviour and erratic performances” during the Western Australian tour. He further said, “The plain fact is, by the end of the Western Australian tour in 2004, the situation was so bad that not only had the two contract musicians in the band indicated that they were pulling out because they could not work with, and put up with, the applicant any longer I too began contemplating my own withdrawal. Something had to happen to resolve these difficulties. The Band could not continue to operate as touring, song writing and recording artists with these personal tensions.”

41 In his affidavit, Mr Smith referred to the applicant’s “conduct and attitude” during the Western Australian tour and said that “His performance was well below standard and seemingly deliberate and intentionally disruptive.”

42 Mr Smith, in his oral evidence, said that complaints had been received by the band from the promoter of the Western Australian tour, a Mr John Starr, about the applicant’s performance. Mr Smith was unable to give any evidence as to why Mr Starr might not be available to give evidence in these proceedings.

43 Mr David Barraclough is a bass guitarist with the band and is a regular member of it. He gave general evidence concerning dissatisfaction with the applicant’s conduct and performance, accusing him of generally creating dissension in the band because of his “behaviour and his attitude, both on stage and off”. He was supportive in the most general terms of allegations that the applicant had not performed and conducted himself appropriately during the course of the Western Australian tour.

44 Mr Michael Caen gave evidence about the Western Australian tour. He said that the applicant played so badly when rehearsing a particular song that the band was unable to perform it. He said that by the time of that tour “the atmosphere between the applicant and the rest of the band was very strained and uncomfortable. I avoided his company for fear of causing or witnessing some unpleasant insult or outburst.” He gave specific evidence about an incident at Derby where the applicant had allegedly refused to participate in a rehearsal, keeping the remainder of the band members “waiting on stage in the sun.”

45 As will be observed, each of the allegations made by each of the respondents’ witnesses with respect to the applicant’s conduct and performance during the Western Australian tour was of a most general kind. Apart from the incident at Derby, which the applicant denies, there is no evidence of any specific incident. There is no reference to the playing of any particular piece on a particular occasion that would be demonstrative of his poor or inappropriate performance. There is no specific allegation about any particular incidents concerning the applicant’s attitude or conduct during the Western Australian tour which would substantiate the general accusations which were made against the applicant.

46 Each of the respondents’ witnesses who gave evidence about the Western Australian tour was cross-examined concerning their own performance and conduct and conceded that on occasions their own performance and conduct might be seen to be lacking.

47 For his part, the applicant denied that in general terms the standard of his performance or his conduct were inappropriate but conceded that on occasions they might have been.

Events following exclusion of the applicant from the band

48 On 22 September 2004, Murphy and Smith incorporated Mental As Anything Touring No 2 Pty Ltd (“Touring No 2”). Thereafter, the band continued to perform but with another drummer replacing the applicant. Thereafter, all revenue earned by the band as reconstituted was paid into Touring No 2 and as at 18 October 2004, the applicant was informed by the respondents’ solicitor that Touring had ceased to trade. Notwithstanding this, the applicant continued to receive the same amount of regular payments that had been made to him by way of salary from Touring until 4 October 2004, a period of four weeks after his exclusion from the band.

49 Thereafter, Touring No 2 entered into a licence agreement with Syray, as trustee for the unit trust, for the provision of payment of licence fees to that trust which would become payable as a result of the performance activities of Touring No 2. The Syray unit trust remains in place and the applicant continues to hold his units in that trust. Therefore, the applicant’s entitlement to his share of licence fees and royalties is preserved by this arrangement.

Was there relevant unfairness?

50 When determining matters of unfairness under s 106 and application of its provisions, it is clear that any value judgement exercised must be made on an objective basis having regard to, and reflecting, contemporary community values and standards. I have discussed my understanding of these matters in Schwartz v Central Sydney Area Health Service & Anor [2002] NSWIRComm 79 at paragraphs [71- 73] and [81- 82].

“[71] It is a trite observation that a pre-condition for the exercise of any power under s 106 is a finding that the relevant contract is unfair. A helpful discussion as to the approach of the predecessor tribunals to this Court to the determination of whether a contract etc is unfair is contained within the joint judgment of Fisher CJ and Hungerford J in the Industrial Court of New South Wales Full Court in Baker v National Distribution Services Ltd (1993) 50 IR 254. At 271 their Honours said:

“The test of unfairness within the meaning of s 88F of the Industrial Arbitration Act, and hence s 275 of the present Act, has received much attention by the Court and by the previous Industrial Commission over very many years, but, in our review of the cases, the approach stated by Sheldon J in Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371 over 26 years ago has endured; his Honour commented (at 374) that unfairness of a contract or arrangement was to be determined according to ‘the common sense approach characteristic of the ordinary juryman ....It is a plain matter of morals not law.’ His Honour cautioned, however, (at 374,375) that the section’s ‘massive power makes it imperative that it should be exercised with proper restraint ... it should not permit itself to become a refuge for those who are merely disgruntled with a bargain entered into on even terms. ... the discretion should be exercised to protect victims of wrong dealing not to prescribe anodynes.’ Those words by his Honour echoed what had been said earlier by Beattie J in Agius v Arrow Freightways Pty Ltd [1965] AR (NSW) 77 at 89 that it was a matter of deciding ‘in each particular case by the application of the tribunal’s common sense and sense of justice whether a particular transaction is unfair, harsh and unconscionable’.

The nature of the unfairness attracted by s 88F was considered later by the Industrial Commission in Court Session (Perrignon and Dey JJ, Cahill J dissenting) in A & M Thompson Pty Ltd v Total Australia Limited [1980] 2 NSWLR 1 at 13 as follows:

‘It has been said that fairness is determined by the commonsense approach of a juryman and that it is a moral and not a legal issue (Davies’ case). Whether this be so or not, it does seem that in distinguishing between what is fair and what is not fair the Judge must apply standards which appear to him to provide a proper balance or division of advantage and disadvantage between the parties who have made the contract or arrangement. In doing so he would always have to bear in mind the conduct of the parties, their capability to appreciate the bargain they had made and their comparative bargaining positions when entering into the contract or arrangement.’ (At 271-2).

[72] It is my understanding that in determining whether there is unfair conduct for the purpose of proceedings brought under s 106 and especially under sub s(2), the Court is required to exercise a value judgment reflecting contemporary community values. The contemporary values may be derived from the commonsense approach characteristic of the ordinary, reasonable, hypothetical “standard” member of the community. Such a person will be neither an employer nor an employee, must be careful to weigh up the competing interests of the applicant as an employee and the respondent as an employer and those interests must be accommodated and viewed objectively and balanced within the context of the factual matrix which applies to them. Such a process will accommodate the reasonable requirements and understanding of an applicant as an employee and the reasonable requirements and understanding of a respondent as an employer in the context of the needs of the employer to undertake its activities in an efficient, effective and competent manner.

[73] Of course the identification of contemporary community values is not without its own difficulties. Some insight as to the difficulties involved may be gained from the discussion by Professor John Braithwaite in the article entitled ‘Symposium on Community Values in Law’ published in vol.17 of the Sydney Law Review at 351. Professor Braithwaite draws on a body of literature to make a distinction between community attitudes and community values, the former not necessarily assisting a court in determining a matter, the latter having much greater relevance. An obvious example of an attitudinal matter is the debate concerning abortion. The corollary and underlying value against which such debate is conducted is ‘respect for human life, health, freedom of choice’.”

“[81] I have already referred to the process which is involved in determining whether a contract or arrangement etc or conduct is unfair. In the context of this process it is important to observe that there will be many cases where there is no absolute defining boundary which delineates what is fair from what is unfair. Often a range of conduct or activities may be said to fall within the limits of what is assessed to be fair, and, by corollary not unfair. This is because of the lack of absolute and scientifically determined criteria which differentiate the concepts of what is unfair.

[82] The assessment which is to be made judged by the standard of the ordinary, reasonable, hypothetical ‘standard’ member of the community is not capable of precise analysis and delineation. There will be a variety of opinions held by such a person. The exercise of a value judgment in these circumstances is obviously made more difficult, but it is a difficulty which is not confined to judges of this Court. By way of analogy, evaluations of what is ‘reasonable’ are made daily by judges in all courts determining claims based on breach of duty of care in negligence, and those brought under certain provisions of the Trade Practices legislation.”

51 There are a number of matters which in my opinion ought to be taken into account in considering the particular circumstances of the particular contract that is sought to be impugned by the applicant, namely his contract of employment with Touring. These are:

1) The contract of employment did not involve the usual processes of offer and acceptance nor is there any explicit suggestion of any intention to enter into a legal relationship. I infer from the evidence that the contract of employment was, in effect, created by Mr Moore as the person entrusted by the applicant, Murphy and Smith, both in their own personal capacity and as directors of Touring, to create a state of affairs which was believed by them to be to their own personal advantage. Accordingly, in proposing the incorporation of Touring and the structure that was ultimately put into place and in gaining the consent of those individuals to what was occurring, Mr Moore, effectively as their agent, created the contracts of employment to which they were each a party. In doing so, there would appear to have been, on the basis of such evidence as is available to the Court, scant regard paid to any of the niceties or detail which usually accompanies the creation of a contract of employment. Certainly, Mr Moore does not appear to have advised any of the individuals concerned about, nor does he appear to have established any provision for, annual leave and long service leave, as I have previously noted. Certainly, no consideration appears to have been given to questions of termination and notice upon termination of any of the contracts of employment. Superimposed upon these observations is the underlying and undoubted position that the three individuals conducted themselves as such with little apparent regard for formality in the operation of the affairs of Touring. Given that, of course, they were the principals of the band, this is understandable. Accordingly, on the basis of such evidence as is before the Court, or perhaps, more accurately, the lack of such evidence as is before the Court, it may be inferred that the applicant’s contract of employment with Touring was attended with little if any formality, apart from the payment of salary, the remittance of taxation and the making of contributions to a superannuation fund.

2) The circumstances of the contract of employment as they pertain to the work performed by the applicant were, if not unique, highly unusual. In the ordinary employment situation, the only relationship between the employee and the employer is that of the employment itself. Here, as I have previously observed, the three individuals as employees were the controlling minds of the employer corporation. Furthermore, the employees were not only expected to work as part of a team, a situation encountered from time to time within the general employment milieu, but it was essential that the work of each of them complemented in a number of respects the work of each other of them. Accordingly, each of them was required when performing to ensure that their individual performances enhanced rather than detracted from the overall presentation of a particular musical number. Obviously, there are matters such as sound production, rhythm, volume as well as artistic interpretation that are all significant in combination and which add to or detract from the overall performance of any musical number. I have not included matters of tonal quality and the like because there was no evidence about these matters given in the proceedings. In addition to these matters, it is obvious that any individual performance must be consistent with any agreed strategy as to the presentation of any musical number and any agreement reached as to any permissible variation during the course of a performance. These matters are in addition to other matters which are obvious such as the necessity to rehearse, if appropriate, conduct oneself so as to engage with and seek the approval of an audience and to attempt to perform to the best of one’s ability.

3) There is no evidence, as I have said, that the parties or anyone on their behalf directed any attention to the circumstances in which any of the contracts of employment might be terminated. Notwithstanding this, the law will imply a provision allowing for termination. “In the absence of any provision in the award and of any express provision in the contract of employment, the law would regard it as a legal incident of the contract that it should be terminable upon reasonable notice or summarily for serious breach.” (Per Brennan CJ, Dawons and Toohey JJ in the High Court of Australia in Byrne v Australia Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 at 423). In Byrne, McHugh and Gummow JJ, in describing the basis for the implication of terms into contracts said,

“However, the more modern and better view is that these rules of construction are not rules of law so much as terms implied, in the sense of attributed to the contractual intent of the parties, unless the contrary appears on a proper construction of their bargain. There is force in the suggestion that what now would be classified as terms implied by law in particular classes of case had their origin as implications based on the intention of the parties, but thereafter became so much a part of the common understanding as to be imported into all transactions of the particular description. The matter is put as follows in Halsbury:

‘Perhaps the truth is that the ambiguous terminology enables the courts in the first instance to imply terms on the basis of the intention of the parties ... but later there comes a time when the particular implied term has become so much a part of common practice that the courts begin to import it into all transactions of that type as a matter of course; and the result is a rule of law of the type considered in this paragraph.’

This understanding of the matter is consistent with the proposition that terms of this kind, although treated as implied by law, may be excluded by express provision made by the parties and also as a result of inconsistency with terms of the contract. The result is that, even if treated as rules of law, they only apply in the absence of an expression of contrary intent.” (At 449-450, footnote references omitted).

It may be presumed, therefore, that there was implied into the applicant’s contract of employment with Touring a provision allowing for termination upon reasonable notice or summary termination by Touring without notice in the case of “serious breach.”

4) All of these matters, it seems to me, are important to take into account in having regard to the special circumstances of the contract of employment between the applicant and Touring in assessing the conduct of the parties and in assessing, ultimately, whether the applicant is entitled to succeed to any extent in having a finding of unfairness made.

5) Although the contract of employment post dated the commencement of the band by many years, there is no doubt that the three principal individuals had been together, performed together and, I assume, gained a worthwhile reputation as a band over a long period of time, namely 27 years.

6) Although, as will be seen, I have concluded that the respondents have failed to discharge the burden of demonstrating particular conduct on the part of the applicant which would justify summary dismissal, it is clear on the basis of the evidence that the respondents, Murphy and Smith, no longer wished to perform with the applicant. Whatever the basis for their feelings in this regard, and whether or not those feelings might be judged as being attributable to the conduct of the applicant, the fact remains that clearly at the conclusion of the Western Australian tour the level of animosity was such that the band, as then currently constituted, could no longer continue to perform. This situation is more analogous to circumstances where individuals who are partners reach a stage where they can no longer continue in partnership. At that stage, the partnership needs to be dissolved in a practical sense. The only contribution made by each of the three principal members of the band in terms of performance by the band is their own individual contribution to that performance. There is no question of anyone taking with them a client base, particular know-how or any other tangible or indeed intangible property. No doubt the band itself had further engagements. It is clear that there was one such engagement to be performed within a few days of the exclusion of the applicant. However, there is simply no other evidence about any further engagements and the period over which those engagements might be performed.

Was the contract of employment unfair for the purposes of s 106?

52 The respondents did not rely in their Reply document, but did so in submissions, on the decision of the New South Wales Court of Appeal in Sydney Water Corporation v NSW Industrial Relations Commission and anor [2004] NSWCA 436; (2004) 61 NSWLR 661 to submit that this Court lacks jurisdiction to deal with these proceedings. In general terms, Sydney Water held that in order to found jurisdiction and power under s 106, a contract of the requisite kind must through its provisions be unfair either by reason of that which is prescribed or that which is omitted to be prescribed.

53 Although, as I have found, the applicant’s contract of employment contains a provision for termination upon reasonable notice, implied as a matter of law, there are few express provisions other than the regular entitlement to payments of certain monies. In that there was no express provision, or indeed a provision which was asserted by the respondents that could be implied dealing with the circumstances surrounding termination, it is appropriate to examine this lacuna in terms of whether it produced any relevant unfairness. In my opinion, the paucity of any provisions which would have allowed for some form of protocol by which the principals who constituted the controlling mind of Touring might discuss with a fellow principal and employee any concerns with respect to performance and other matters which might ultimately impact upon the continuing employment relationship, the contract may be characterised as being unfair. In so concluding, I am conscious, as I have endeavoured to point out, that the applicant’s contract of employment in the circumstances of the operation of the band was a most unusual one when compared with the ordinary employment situation. However, if one takes the partnership analogy as providing some basis upon which the conduct of the principals of the band might be judged, it is important to realise that a partnership as a concept imports obligations of a fiduciary nature.

54 More relevantly for the purpose of these proceedings, however, are the provisions of the Partnership Act 1892 which apply to the circumstances of the dissolution of a partnership and the expulsion of a partner.

55 S 25 of that Act deals with expulsion. It provides that “No majority of the partners can expel any partner unless a power to do so has been conferred by express agreement between the parties.” Accordingly, if the relationship between the three principals of the band was that of partnership, the purported exclusion of the applicant would have been ineffective, there being no evidence of any express agreement for expulsion. Accordingly, the only means available to Murphy and Smith to bring about the exclusion of the applicant from the band would have been by either one or both of them determining a partnership in accordance with s 26(1) or by dissolution by giving notice under s 32(c).

56 I set out the provisions of ss 26 and 32 of that Act hereunder.

PARTNERSHIP ACT 1892

26 Retirement from partnership at will

(1) Where no fixed term has been agreed upon for the duration of the partnership, any partner may determine the partnership at any time on giving notice of the partner’s intention so to do to all the other partners.

(2) Where the partnership has originally been constituted by deed, a notice signed by the partner giving it, shall be sufficient for this purpose.

(3) This section does not apply to or in respect of a limited partnership or incorporated limited partnership.

32 Dissolution by expiration or otherwise

Subject to any agreement between the partners, a partnership is dissolved:

(a) If entered into for a fixed term, by the expiration of that term:

(b) If entered into for a single adventure or undertaking, by the termination of that adventure or undertaking:

(c) If entered into for an undefined time, by any partner giving notice to the other or others of the partner’s intention to dissolve the partnership.

In the last-mentioned case the partnership is dissolved as from the date mentioned in the notice as the date of dissolution, or, if no date is mentioned, as from the date of the communication of the notice.

57 It will be noted that if a notice of intention to dissolve a partnership had been given under s 32(c), dissolution would have occurred as at any date mentioned in the notice or from date of communication of the notice, as the case may be.

58 For completeness, I note the provisions of s 35 of that Act which are in the following terms.

35 Dissolution by the Court

On application by a partner the Court may order a dissolution of the partnership in any of the following cases:

(a) When a partner has been declared in accordance with law to be of unsound mind and incapable of managing the partner’s affairs, or is shown to the satisfaction of the Court to be of permanently unsound mind, in either of which cases the application may be made as well on behalf of that partner by the partner’s committee or next friend or person having title to intervene as by any other partner.

(b) When a partner, other than the partner suing, becomes in any other way permanently incapable of performing the partner’s part of the partnership contract.

(c) When a partner, other than the partner suing, has been guilty of such conduct as, in the opinion of the Court, regard being had to the nature of the business, is calculated to prejudicially affect the carrying on of the business.

(d) When a partner, other than the party suing, wilfully or persistently commits a breach of the partnership agreement, or otherwise conducts himself or herself in matters relating to the partnership business so that it is not reasonably practicable for the other partner or partners to carry on the business in partnership with the partner.

(e) When the business of the partnership can only be carried on at a loss.

(f) Whenever in any case circumstances have arisen, which, in the opinion of the Court, render it just and equitable that the partnership be dissolved.

59 It would have been open to Murphy and Smith to seek a dissolution from the Supreme Court of New South Wales if they were able to establish any of the matters referred to in the various paragraphs of that section.

60 In essence, therefore, if the principal parties were in partnership, it would have been possible to bring about a dissolution without in effect giving any particular period of notice to the applicant.

Appropriate notice of termination

61 This brings me back to a consideration of what would have been an appropriate period of notice to apply in the circumstances of the expulsion of the applicant from the band. I have concluded that there is an employment relationship established, although the employment is more of an “on paper” kind rather than a typical employment situation. Furthermore, the intense personal relationship of each of the principals and the animosity that had obviously arisen created circumstances where it was more appropriate to pay monies in lieu of notice than actually give a period of notice for the expulsion of the applicant. No basis for the expulsion was given by Murphy and Smith to the applicant. They did not purport by way of communication to dismiss him summarily for cause or to terminate upon giving notice. In fact, they do not appear to have engaged in any formality at all, which one would normally attribute to persons acting in their capacity as directors of a corporation. They did not purport to do so because, on the evidence, they simply ignored their association with Touring and the part played by Touring in the structure of the band.

62 On one view of it, it might be possible to characterise what occurred as constituting a repudiation of the contract of employment. Neither party contended that the doctrine of repudiation applied in the circumstances of the proceedings. Perhaps they failed to do so for good reason because repudiation might be characterised as one by way of anticipatory breach in that it applied to the circumstances of the next scheduled performance of the band. If that were the case, it would be necessary to determine whether the repudiation had been accepted and the contract rescinded. This would in turn involve an analysis of whether the applicant had knowledge on his part concerning his right of election to either accept the decision or affirm the contract and whether he communicated any such election. (I discussed the application of the doctrine of repudiation to the circumstances of a contract of employment and its effect on an employee who obviously had not been exposed to the sophisticated legal principles which apply in this area in Dayton v Woolworths Limited [2006] NSWIRComm 215.) Neither party having contended for the application of the doctrine of repudiation, I have concluded that it would be inappropriate to consider its application to the circumstances of these proceedings.

63 In considering what I regard as being an appropriate period of notice, I have taken into account the specific matters to which I have earlier referred in [51]. Notwithstanding the long period of association but having regard to the nature of the operations of the band and the undoubted animosity that had arisen between the principals, I would assess an appropriate period of notice for termination of the applicant’s contract of employment as being six months.

Summary dismissal not justified

64 As I have previously referred to, the respondents asserted that the applicant had been summarily dismissed and justifiably so for the reasons that they gave. However, the respondents bear the burden of demonstrating that summary dismissal was justified. This is a serious matter.

65 The relevant principles which apply in this area are the subject of a decision of the High Court of Australia in Concut Pty Ltd v Worrell [2000] HCA 64. The principles were summarised succinctly in the joint judgment of Gleeson CJ, Gaudron and Gummow JJ in the following terms.

“[25] In Pearce v Foster, Lord Esher MR stated it to be a ‘rule of law’ that ‘where a person has entered into the position of servant, if he does anything incompatible with the due or faithful discharge of his duty to his master, the latter has a right to dismiss him’. In Blyth Chemicals Ltd v Bushnell, in the course of considering the position of the respondent, who was the manager of the appellant's business, Starke and Evatt JJ said:

‘As manager for the appellant, the respondent was in a confidential position. And it is clear that he might be dismissed without notice or compensation if he acted in a manner incompatible with the due and faithful performance of his duty, or inconsistent with the confidential relation between himself and the appellant.’

In the same case, Dixon and McTiernan JJ said:

‘Conduct which in respect of important matters is incompatible with the fulfilment of an employee's duty, or involves an opposition, or conflict between his interest and his duty to his employer, or impedes the faithful performance of his obligations, or is destructive of the necessary confidence between employer and employee, is a ground of dismissal.’”(Footnote references omitted.)

66 In the same proceedings, Kirby J said,

“[51.4] It is, however, only in exceptional circumstances that an ordinary employer is entitled at common law to dismiss an employee summarily. Whatever the position may be in relation to isolated acts of negligence, incompetence or unsuitability, it cannot be disputed (statute or express contractual provision aside) that acts of dishonesty or similar conduct destructive of the mutual trust between the employer and employee, once discovered, ordinarily fall within the class of conduct which, without more, authorises summary dismissal. Exceptions to this general position may exist for trivial breaches of the express or implied terms of the contract of employment. Other exceptions may arise where the breaches are ancient in time and where they may have been waived in the past, although known to the employer. Some breaches may be judged irrelevant to the duties of the particular employee and an ongoing relationship with the employer. But these exceptional cases apart, the establishment of important, relevant instances of misconduct, such as dishonesty on the part of an employee like Mr Wells, will normally afford legal justification for summary dismissal. Such a case will be classified as amounting to a relevant repudiation or renunciation by the employee of the employment contract, thus warranting summary dismissal.” (Footnote references omitted.)

67 Whilst the evidence adduced by the respondents is to the effect that in general terms the applicant was “extremely difficult and disagreeable”, that he behaved in an aberrant manner, his performances were “erratic” and that his performance was, in general terms, below standard, there is no evidence of any specific incident or incidents which occurred on the Western Australian tour, there is no reference to any particular performance at any particular location or to any particular performance of any particular musical piece. There is, in my opinion, a necessity for the respondents to have adduced evidence of a sufficiently specific kind to enable the general allegations that have been made to have been tested by the applicant and to have been considered by the Court. In short, the respondents have failed to adduce sufficient evidence of the requisite kind that would discharge the burden which they have of satisfying the Court that summary dismissal was justified in all the circumstances.

Compensation

68 Accordingly, I conclude that Touring should have afforded the applicant six months’ notice of termination of his employment and should have made a monetary payment in lieu, but allowing for credit of the four weeks’ pay that was actually made.

69 In terms of the amount of monetary compensation, the evidence was that at the time of the exclusion of the applicant from the band, the three principals were receiving payment from Touring of $550 per week and that the applicant continued to receive payment of that amount for four weeks after exclusion. Accordingly, having assessed a period of notice of six months, a payment in lieu would equate to 22 weeks @ $550 per week.

Annual leave

70 The applicant seeks annual holidays’ pay. His evidence was that he took two weeks’ paid leave each year. There is no documentation, probably because the parties themselves did not anticipate that annual holidays would be a feature of their relationship. The purpose of the corporation was to provide a conduit for the distribution of earnings and to smooth receipt of those earnings. Furthermore, there is evidence that each of the band members continued to be paid the full amount drawn even though they were not necessarily working each day of every week. Even though, as a matter of law, the applicant might be entitled to paid annual holidays leave, to grant him payment of annual holiday entitlement would be inconsistent with the intention of the parties when the company was established and would be inconsistent with the manner in which all of them agreed that the earnings of the band would be distributed. It would give the applicant a windfall not enjoyed by the other band members. Accordingly, I am not prepared to find that there was any unfairness in the failure of Touring to pay the applicant any monies referrable to annual holidays entitlement, on the assumption that Touring properly distributed to each of the shareholders all of its net income after appropriate expenses and the discharge of appropriate obligations, either by way of salary or dividend. All of the available monies having been distributed in this way, it was not unfair, in the circumstances of these proceedings, for Touring to have failed to pay annual holidays entitlement.

Long service leave

71 I reject the applicant’s claim for the payment of long service leave entitlement against Touring for the reasons advanced above in relation to the claim for annual leave entitlement.

Claims against Murphy and Smith

72 The applicant seeks that any orders for monetary compensation to which he is entitled should be made also against Murphy and Smith. This is based on the well-known principles established by the High Court of Australia in Brown v Rezitis [1970] HCA 56; (1970) 127 CLR 157. Those proceedings concerned the provisions of s 88F of the Industrial Arbitration Act 1940, which was a predecessor to s 106. Barwick CJ observed that:

“...the parties to the proceedings are not necessarily limited to [the parties to the contract or arrangement]. It must be borne in mind that one of the purposes of the section is to deal with subterfuges, subterfuges which will take the worker out of the relationship of master and servant and therefore out of the operation of an industrial award designed, amongst other things, for the protection of workers in industry. There may be persons involved in the subterfuge who are not parties to the contract or arrangement but who are in reality the actors deriving benefit from the making or the execution of the contract or arrangement” (at [164]).

As his Honour later emphasised, the mere deriving of a benefit from the making or execution of a contract or arrangement which is found to be unfair and which is subsequently voided or varied is not of itself sufficient to justify the making of an order for payment of money. His Honour referred to “the actors” who derived benefit. That is a reference to persons who participated in or were involved in the creation of the unfairness. His Honour, at [168], referred to the receipt of payment of monies by a shareholder or other person who was in some way “culpably associated” with the making or operation of the contract.

73 The judgment of Menzies J in Brown v Rezitis is to similar effect. His Honour referred to:

“...a harsh and unconscionable arrangement between an insolvent company and two workers, [where] a swimming pool had been installed at the home of a director of the company, it would be within the power of the Court, in setting aside the arrangement and after giving him an opportunity to be heard, to order the director to make a payment which would put the workers in the same position as if, in doing the work, they had been his employees. I think it would be a like case if work were to have been done for a shareholder of a company which made such an arrangement. I would not think, however, that work done for the advantage of a director could be the basis of an order against a shareholder who had nothing to do with the matter, even if he held his shares beneficially. Unless something more were to appear - such as, for instance, that the company was a one-man company - a mere shareholder would be a stranger to any of the matters for which the section provides a remedy arising out of a contract or arrangement by a company” (at [170]).

74 The circumstances in which an order under s 106 for the payment of compensation may be made against a person not a party to the contract or arrangement found to be unfair were considered comprehensively by a Full Bench of this Court in Ace Business Brokers Pty Ltd v Phillips-Treby [2000] NSWIRComm 163. The factual circumstances being considered in those proceedings involved representations made by a business broker on behalf of a franchisor. It had been held at first instance that those representations were incorrect and had induced the applicants in the proceedings to enter in to the franchise agreement. The Full Bench confirmed the approach of the Judge at first instance to the effect that the actions of the business brokers as agent for its principal had been “blameworthy” in the sense of culpable as used by Barwick CJ in Brown v Rezitis. This was sufficient to justify the making of an order against the business broker because of the extent of its association with the unfair contract.

75 The Full Bench in Ace Business Brokers reviewed extensively prior decisions relevant to this issue. It is not necessary that I traverse those decisions. It is suffice to note that a person who is not a party to the contract or arrangement found to be unfair will only be amenable to an order for the payment of monies if that person was culpably involved in the creation, operation or termination of the contract or arrangement.

76 It is obvious from the narration of the factual material upon which these proceedings are based that Murphy and Smith were culpably associated with the circumstances leading up to the unfair conduct of Touring which I have found to have occurred and that they were culpably associated with the exclusion of the applicant from the band. I am unable to conclude that they derived any particular benefit from the unfairness that I have described because there is simply no evidence that their earnings from the performance of the band may have increased using a substitute drummer. Nevertheless, I am of the opinion that there is sufficient culpable association to found the making of an order against them for the payment of monetary compensation in accordance with the principles established in Brown v Rezitis. Furthermore, as they determined that Touring would no longer operate and accordingly it would be deprived of any further income consequent upon the exclusion of the applicant, it is appropriate that any monetary compensation ought to be paid by them personally.

Interest

77 The applicant claimed interest on the payment of any monies due to him. Prima facie, therefore, he would be entitled to interest from the date of exclusion from the band. However, as the respondents have made no submissions with respect to interest, I shall grant liberty to apply with respect to this matter in the event that the parties are unable to reach agreement.

Costs

78 The parties asked that costs be reserved and I shall do so accordingly.

Orders

79 1) Consequent upon the finding of unfairness which I have made, I vary the contract of employment between the applicant and Mental As Anything Touring Pty Limited from its inception to provide that the employer shall not purport to terminate the employment of the applicant without giving reasonable notice or paying moneys in lieu except where the employer has given notice to the applicant of any reasons why termination is being considered, has allowed the applicant an opportunity to respond and circumstances exist justifying termination without giving reasonable notice or making payment therefor.
2) The respondents are jointly and severally liable to pay the applicant the sum of $15,482.92
3) Costs and interest are reserved with liberty to apply.
AMENDMENTS:


17/04/2008 - Application of slip rule see Twohill v Mental As Anything Touring Pty Ltd (No 2) [2008] NSWIRComm 75, Order 1 - Paragraph(s) 79 (2)


LAST UPDATED:
17 April 2008