Brinckman & anor t/a The Brinckman Business Trust v B R Tiles Pty Ltd AND Boral Resources (Qld) Pty Ltd [2003] QIRC 186 (2003) 174 QGIG 745

31 October, 2003 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 745 ########################################################################################################################### QUEENSLAND INDUSTRIAL RELATIONS COMMISSION Industrial Relations Act 1999 – s. 276 – application to amend or void contract Peter Brinckman and Kerry Brinckman t/a The Brinckman Business Trust AND B R Tiles Pty Ltd AND Boral Resources (Qld) Pty Ltd (No. B641 of 2001) COMMISSIONER BLADES 16 October 2003 Unfair contract – Section 276 Industrial Relations Act 1999 – Goodwill - Independent contractors purchasing truck with work – Premium paid – Respondent aware that premium paid for truck “with work” – Company restructure – Fleet downsized – Contract terminated – Unfairness – Reasonable notice – Value of goodwill – Contract amended – Compensation awarded. DECISION This is an application under s. 276 of the Industrial Relations Act 1999 (the Act) for orders against B R Tiles Pty Ltd (the first respondent) and Boral Resources (Qld) Pty Ltd (the second respondent) declaring void ab initio or amending a contract or arrangement for services between the applicants and B R Tiles Pty Ltd. Pursuant to an amended application, orders were sought in the following terms: (a) An order declaring the contract or arrangement for services between Peter Brinckman and Kerry Brinckman (the applicants) and the first respondent void ab initio insofar as the said contract or arrangement failed to provide upon termination for payment to the applicants the value of the applicants’ truck together with the premium or goodwill obtainable if the truck was sold on the open market to a willing purchaser. -- 1 of 7 -- 746 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 31 October, 2003 (b) An order declaring the contract or arrangement between the applicants and the first respondent void ab initio insofar as the said contract or arrangement permitted the first respondent to terminate the contract or arrangement at such time as was determined only by the first respondent. (c) An order declaring that the contract or arrangement between the applicants and the first respondent be void ab initio insofar as the said contract or arrangement made no provision for termination by the first respondent upon notice to the applicants which was adequate and fair in the circumstances. (d) An order amending the contract or arrangement between the applicants and the first respondent to allow for payment of increases in the rate of remuneration payable to the applicants in accordance with six monthly CPI increases on and from the first quarter of 1996. (e) An order declaring the contract or arrangement between the applicants and the first respondent void ab initio insofar as the contract or arrangement made no provision for payment by the first respondent on its termination of adequate compensation to the applicants for the applicants’ expenditure in January 2001 in purchasing a crane for use in connection with the work to be performed under the contract or arrangement. The amended application sought that the respondents pay to the applicants: • $85,363.00 being the equivalent of 12 months net remuneration in lieu of proper notice of termination; • $80,000.00 as compensation for loss of opportunity to sell the applicants’ truck with premium or goodwill; • $20,000.00 as compensation for unpaid increases in the rate of remuneration since January 1996; and • $50,000.00 as compensation for monies expended on a crane in January 2001. It is alleged by the applicants that in December 1989, Mr Brinckman on behalf of the partnership Peter and Kerry Brinckman entered into a contract for services with the first respondent by purchasing from an existing contractor to the first respondent a truck with work for $115,000 of which some $75,000 represented goodwill or premium and following approval of the arrangement by the first respondent. It is alleged that the first respondent was aware that the applicants had paid the goodwill or premium at the commencement of that contract. The contract was subsequently performed between 1991 and 1998 by Mr Brinckman on behalf of PKC Enterprises Pty Ltd, a company of which Peter and Kerry Brinckman were the directors and shareholders. From 1998 until the termination of the contract, the work under the contract was performed by Mr Brinckman on behalf of Peter and Kerry Brinckman trading as The Brinckman Business Trust. It is further contended that in about August 2000, the first respondent advised Mr Brinckman that the carting operations of the first respondent would be restructured and that contractors would henceforth lose the opportunity to sell trucks with work or otherwise assign the benefit of their contracts. In early January 2001, the applicants purchased, with the consent and encouragement of the first respondent, a crane at a cost of $50,000 to be installed on the applicants’ truck for use in the work under the contract. About 12 and 23 January 2001 (sic), the first respondent advised that the contract for the cartage of roof tiles for the first respondent would, from about April 2001, be held by the second respondent, that existing contractors might express interest in becoming sub-contractors to the second respondent on terms and conditions set out in a proposal and that there would be a reduction in the current number of trucks carting roof tiles. It is alleged that the terms and conditions of the proposed subcontract arrangements with the second respondent were inferior to the terms and conditions of the applicants’ contract with the first respondent and that they did not express interest in undertaking sub-contract arrangements with the second respondent. On or about 9 March 2001, the first respondent gave the applicants notice of termination of their contract effective on and from 12 April 2001. It is alleged that the contract between the applicants and the first respondent became unfair through the conduct of the first respondent, at the direction or instigation of the second respondent, as follows: • the contract became unfair by the first respondent’s unilateral repudiation of the contract without compensation to the applicants; • the contract became unfair in the first respondent’s unilateral withdrawal of the right of the applicants to sell their truck with work or otherwise assign the benefit of their contract without adequate compensation being paid to the applicants; • the contract became unfair in the failure of the first respondent to pay CPI rate increases from March 1996 to the date of termination; • the contract became unfair in the first respondent’s failure to provide fair and appropriate notice of termination of the contract to the applicants; and • the contract became unfair in that the first respondent failed to properly inform the applicants of the full restructuring proposal at a time when it knew that the applicants were expending $50,000 on the purchase of a crane. It is finally alleged that the conduct referred to was harsh, unconscionable and unfair. B R Tiles Pty Ltd alleges that it has at all times made it clear to its contractors, including the applicant, that the work that was undertaken by contractors was work which was owned by the first respondent and was not for contractors, including the applicant, to sell. It is alleged that the first respondent engaged the applicant as a contractor, not as an employee and no employment relationship existed between the first respondent and the applicant. The first respondent did not, as a matter of normal business practice, grant security of employment to its various contractors. It made it clear at all times to its contractors, including the applicant, that the work that was undertaken by such contractors was work which was owned by the first respondent and was not for the contractors to sell. As a result, the applicant at no time had any right to assign or otherwise dispose of the benefit of the contract with the first respondent to an entity approved by the first respondent. The first respondent advised the applicant of its intention to restructure its fleet operations and that the applicant would have an opportunity to express interest in participating in the restructured operations. It is denied that it advised the applicant or other contractors that it would henceforth lose the opportunity to sell trucks with work or otherwise assign the benefit of their contracts. The first respondent also alleges that it sought to actively discourage the applicant from purchasing the crane and that if the applicant proceeded to purchase the crane it did so at its own risk. It was claimed that the terms and conditions offered in the proposed subcontract arrangements with the second respondent would have resulted in superior outcomes. It is alleged that the first respondent did not unilaterally repudiate the contract between it and the applicant who elected that it did not wish to enter into any further contractual arrangements with the respondents. The applicant rejected the respondent’s offer of compensation, an offer accepted by a number of other contractors. The first respondent indicated to the applicant notice of its intention to restructure its fleet operations as early as August 2000 and considerable discussions took place between various parties from that date up to the date commencement of the restructured operations on 17 April 2001 (sic). The applicant therefore had more than adequate notice and elected not to pursue a further contract with the respondents. The respondents seek that the application be dismissed with costs. At the commencement of the hearing, applicants’ Counsel withdrew the claim for $20,000 as compensation for unpaid increases in the rate of remuneration since January 1996 and the pleadings and orders being sought and referred to earlier have to be read in that light. On 11 October, 1989, the male applicant Peter Brinckman, entered into a written Business Contract for the purchase of: “A. Selling of truck and contract cartage of roof tiles B. 1979 8 - wheeler 26.280 MAN - Rego: 158-NLI... C. Sub-contracting to Boral Roof Tiles, delivery to building sites and hand unloading, weekly paid....”. -- 2 of 7 -- 31 October, 2003 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 747 The vendors were G.J. & D. Elliott and B.D. & H. Till and the price was $115,000. On 31 October, 1989, Mr Brinckman was provided with receipts indicating that $15,000 was for the truck and $50,000 was generally for “contract to Boral Goodwill” for each of the Elliotts on the one hand and the Tills on the other although on the Elliotts’ receipt, there is a confusing addition of the words “and truck”. Shortly after the purchase of the truck, Mr Brinckman had the truck valued at $40,000 and therefore, he himself attributed the sum of $75,000 to the value of the goodwill. The evidence reveals that the business arrangements of the applicants fluctuated between various entities. When the tax return for the year ended 30 June 1990 was submitted, it was in respect of a partnership between Peter John Brinckman and Kerry Francis Naismith who subsequently became Mr Brinckman’s wife. In 1991, the Brinckmans formed a company PKC Enterprises Pty Ltd which then carried on the work previously performed by the partners who were the sole directors and shareholders. From 1998 until termination of the contract on 12 April 2001, the business was conducted by the Brinckmans trading as the Brinckman Business Trust. My decision in this case has been based upon the whole of the evidence, the exhibits and the submissions, even though I might make no specific reference to some particular matter. Contract/arrangement with Boral It is alleged by the applicant that the first respondent had knowledge of and approved of the payment of a premium or goodwill for these contracts. It is not clear that some of Management really appreciated or portrayed to the Commission that they appreciated what was meant by “goodwill”. There were claims that the owner drivers had no authority to trade the company’s goodwill, that this was an asset that vested in the shareholders of the company. But this is not the “goodwill” that is referred to in this action. It is more appropriately termed a “premium for transferring a right to obtain work from Boral”. “Key money” was used in one of the reported cases. No owner driver ever attempted to trade the company’s goodwill and that was not alleged. What was being traded was “contract cartage of roof tiles” and “sub-contracting to Boral Roof Tiles etc”. Respondent’s Counsel referred to the Business Contract and submitted that goodwill was disavowed. Certainly there is no value apportioned to goodwill in that contract and a “best endeavours” clause relating to goodwill has been excised. But the written form of the contract (a legal document) probably uses the term goodwill in its true sense. Mr Brinckman gave evidence of a meeting held before his purchase between himself, Lance Lovell a Union Delegate for the TWU and Mr Gunton, then Manager of Boral Roof Tiles where it was alleged that Mr Gunton knew that a payment for goodwill was being made and that he knew the payment included both the truck and the contract with Boral. At the conclusion of the meeting, Mr Gunton is alleged to have consented to the deal. It is noted that Mr Lovell was not called as a witness to support Mr Brinckman’s allegation. That Boral knew of the payment of goodwill and accepted it, is supported also by Mr Quadvlieg whose contract with Boral was also terminated on 12 April 2001. He too has an action against the respondents relating to notice of termination and the payment of goodwill and obviously does not stand as a disinterested witness. He recalls that he took over the lease payments on a truck in August 1987 and paid $30,000 for goodwill. At the time of the transaction he met with the vendor of the business and Mr Tony Randerson the then General Manager of Boral Bricks. Mr Randerson expressed the view that the value of the goodwill was getting up a bit and that Boral didn’t like to recognise goodwill but that Mr Quadvlieg would have a job for life and he approved of the sale. Mr Quadvlieg’s evidence was that trucks could not be sold unless management approved first. Certainly Mr Quadvlieg did say in cross-examination that Boral approved the man, not the price but that evidence did not detract from his other evidence that Boral knew there was a premium being paid. Mr Roy Lomax gave evidence for the applicants. He is now unemployed but had worked for Boral Pty Ltd in the Roofing Division for approximately 18 years. He was never an owner driver. He was originally employed as a co-ordinator and prior to his resignation in October, 2001, was contracts manager. He also gave evidence that goodwill, i.e. the difference between the value of the truck and the amount paid “for the contract” was a feature of the arrangements entered into by owner drivers. He said that with the purchase of the goodwill came an expectation for the driver of a certain share of the available work based on the size of the truck. Sometimes he would become aware of the goodwill payment before the purchase, sometimes afterwards. He recalls being asked during the course of his employment by more senior management about what goodwill arrangements existed amongst the owner drivers. It was his role to approve of incoming contractors. Garry Pearce was also called by the applicants and he too testified to the long standing practice of the buying and selling of goodwill to the knowledge of the company. He spoke of sales in 1974; 1979; 1982; 1983; 1984 when 16 owner drivers each paid $937.50 to buy the goodwill from Peter Cain who retained his truck; 1985 when 15 owner drivers each paid $667.00 to Balke Trading Trust to take away a small truck from the fleet, Balke then purchased a large truck from another owner driver; December 1985 when 14 owner drivers paid $1072.00 to Lewis Transport for his goodwill – Lewis taking his truck with him; February 1987 when 13 owner drivers paid $1923.00 to buy out Balke’s goodwill with the truck being retained by Balke; mid 1980s; late 1980s when Boral bought out Eddy Ashton for $30,000 for an old truck worth $1800.00 and with Boral taking the truck which remained parked beside a fence and not used again; 1989 or 1990 when Wally Rhodes sold out for $120,000 with a 10 year old truck and crane being worth about $40,000. He also said that by 2001, 11 owner drivers had each paid $4,599.50 in addition to the original purchase price of the truck and job in reducing the fleet size. He said it was in the interests of all parties that the fleet size be reduced. Boral advanced loans on some occasions to some drivers for the purpose of the buyout, the loan being repaid from future earnings. Mr Randerson was a former General Manager of Boral Bricks (Queensland) Ltd. He had worked for a company when it was taken over by Boral Ltd in 1982 and continued with Boral until his retirement on 31 December 1999. His evidence was that goodwill was never recognised by the company as something a sub-contractor had a right to. Any goodwill was an asset of the company and was the property of the shareholders. Drivers had no entitlement to claim goodwill and no entitlement to transact the company’s goodwill and sell it. Mr Randerson denied he had any discussion with Mr Quadvlieg as to the price he paid for the vehicle and denied emphatically any suggestion that he endorsed or accepted Mr Quadvlieg paying any monies for goodwill. All he did was to agree to Mr Quadvlieg coming on board as fit and proper to drive for the company. Mr Randerson denied any suggestion that he endorsed the purchase of a truck for a price which included an element for goodwill. He did however recall the transaction involving Cain’s truck but had no knowledge of any element of goodwill. Boral had wanted to reduce the fleet and offered to advance monies to the drivers to assist in the buyout on the basis of the truck’s agreed value. He also recalled the Balke Trading Trust sale in August 1985 but claimed the sale involved only the truck and no goodwill. He acknowledged that the vehicle was taken by Balke and not left with the respondent. He acknowledged that in 3 or 4 cases in the 1980s, when the fleet was reduced, a price was paid by the remaining drivers to the outgoing driver and in each case, the truck did not stay with the company. He knew Cain took his truck with him. The point to this evidence is that if the buyout was made, then what was the purpose of paying the money if the owner driver left with his truck? He was aware of a myth of goodwill existing in the industry, a way that retiring drivers could “rip-off” incoming drivers. He was aware that the payment of goodwill was common in the industry and existed at Boral but denied knowing any facts. -- 3 of 7 -- 748 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 31 October, 2003 John Sarzano is employed as the Logistics Manager with Boral Clay and Concrete Products in Sydney and joined Boral in 1997. He managed the restructure of the Boral Clay and Concrete Division in Brisbane through the C & CP Synergy Program which was born about May/June 1999. He claimed that following his investigation as to a history of goodwill payments, he did not accept allegations made in this case regarding goodwill. He said that goodwill was not a feature of company operations in Queensland. It was not an asset that sub-contractors were entitled to appropriate for themselves and then on-sell. Indeed he said that in June 2000, a contractor named Herbert advertised his vehicle for sale and it appeared also to include “with work”. He immediately took steps to have the sale notice removed from the notice board and gave instructions that Herbert was to be informed that he was not entitled to sell his vehicle with work. David Farrell was the Concrete and Clay Implementation Manager from September 2000 to September 2001 when he became the Commercial Sales Manager, South Queensland. He was aware goodwill was something of an issue with Boral but it was outside the scope of his brief. Goodwill comprised of a premium being paid over and above the value of the truck. He claimed it was not his job as part of the restructure to educate Managers about how to deal with goodwill issues. There was a proposed transaction between a Mr Svendsen and a Mr Leclesio for the sale of a “shortages” truck “with goodwill”, evidenced by a file note dated 26 February 2001 of a conversation between Mr Farrell and Roy Lomax. The lengthy note shows that Mr Farrell was aware of the issue of goodwill and the sale of trucks with work and he went to some lengths to explain to Mr Lomax that there was no security of tenure or guarantee of ongoing work for Mr Svendsen. He acknowledged that the transaction was of the type that Boral was trying to eradicate from the organisation. It reveals that Boral had knowledge the practice occurred. William Dean, now retired, was a former Manager of various Boral companies during periods from 1971 to his retirement on 30 June 2001. He knew that outgoing owner drivers sold their trucks “with work” to incoming owner drivers. He refuted evidence of Mr Quadvlieg that Management had asked other drivers to buy out Wally Rhodes’ vehicle or that there was any element of goodwill. He refuted evidence of Mr Pearce that there had been payments for goodwill. He alleged that any monies paid either by owner drivers to other owner drivers or by the company reflected only the value of the vehicle. He alleged that it was clear policy that all trucks sold had their price determined by two independent valuations. That of course is not the evidence of Mr Randerson or Mr Gunton who both said that Boral had no hand in truck valuations. Had there been independent valuations, I would have expected there to have been some paper trail when these transactions were approved by Management. Mr Dean said that these independent valuations were in writing. He remembered one transaction where a loan was advanced to enable a buyout to occur. He agreed that the driver took his truck with him when he left. When questioned as to what then the payment was for, he recanted his earlier evidence. He also claimed that the goodwill policy was recorded in a variety of documents, contrary to the evidence of Mr Randerson, Mr Sarzano and Mr Gunton. Mr Gary Gunton worked for Boral from 1974 and was General Manager from 1981 to 1999. He was involved in the interviewing of many potential drivers but was not a party to or informed of the commercial arrangements between drivers. He interviewed them to assess their suitability to work for the company. He was aware the company had a policy against goodwill. He agrees that he met with Mr Brinckman prior to Brinckman’s completing his purchase but he denied the allegations of Brinckman that he had commented “the price has gone up a lot in the last few years” and “$115,000 is a lot more than the truck is worth”. He admitted though that his recollection of the meeting was reasonably hazy. He also denied using any phrase such as “job for life”. (There appears to be an error in paragraph 3 of his affidavit). Goodwill was never mentioned when he interviewed drivers. He claims he was not aware of any practice of selling trucks with work. He also said that he was virtually the only Manager who approved incoming contractors and that Mr Lomax had no such capacity. There was no written policy on goodwill and Boral played no part in obtaining valuations. Affidavit evidence was given by Donald Colley for the respondent, General Manager Operations for East Coast from February 1998 to August 2001. Mr Colley said that Mr Sarzano told owner drivers at the meetings called to explain the restructure that they could not sell their vehicles with goodwill because it was not theirs to sell. This evidence confirmed similar evidence of Mr Brinckman and in my view, further confirmed that Boral was well aware that the practice was engaged in. Mr Barry was General Manager for Boral Roof Tiles for 2 and a-half years before his transfer on 26 January 2001. He was not aware of any practice of contractors selling trucks with work. He also said that in his time, the size of the fleet had not changed. Finding On the whole of the evidence, I am satisfied on the balance of probabilities that the first respondent was aware that the applicants had paid an amount of premium for the right to contract with Boral, loosely termed “goodwill” – see e.g. TDG Logistics Pty Ltd v Reilly (2001) 167 QGIG 247 and numerous other reported cases. This practice was ongoing for many years and the evidence to that effect, particularly of Pearce, cannot be ignored. It was approved of and even encouraged by Management, particularly when it suited to reduce the fleet size. It was only in recent times (June 2000), that any effort at all was made to stamp out the practice. The evidence of Randerson and Dean revealed that something other than the truck was being bought out and in the light of all of the evidence, I accept Mr Brinckman’s claims over the evidence of Mr Gunton that Gunton knew the price of the vehicle purchased by Brinckman was inflated and contained an element for the purchase of the contract with Boral from the outgoing owner driver. Gunton may not have known the actual amount paid for goodwill and indeed, could not have known. That is unimportant. He knew that a substantial amount for goodwill was part of the deal. The termination of the contract Thus the contract to carry roof tiles for Boral was purchased at a premium, a fact which was known to Boral. It was terminated as from 12 April 2001. Mr Sarzano managed the introduction of the change process of restructure which led to this termination. This process affected three constituent companies of the Boral Clay and Concrete Division. They were Boral Bricks, Boral Masonry and Boral Roofing. In May/June 1999, he engaged Boral Transport in discussions and a business plan was eventually drawn up. David Farrell was appointed Clay & Concrete Implementation Manager in September 2000 to assist with the planning, consultation and implementation processes of the change. Boral Bricks, Boral Masonry and Boral Roofing each had their own dedicated fleet of vehicles for the purpose of effecting local deliveries with each fleet consisting of independent contractors. The three individual fleets were to be restructured into one Clay and Concrete fleet and the contract was to be between Boral Transport and Clay & Concrete Division. Boral Transport was to be the only contractor and work would be allocated to sub-contractors by Boral Transport. The fleet and its configuration would be reduced, resulting in a more effective and efficient fleet. The independent contractors would be required to purchase new larger vehicles capable of delivering larger pay loads. Contract rates were to be reduced. The process was termed the C & CP Synergy Programme. Meetings were held with drivers from August 2000 when various presentations were made. As part of the programme, Boral was prepared to offer $20,000 as an exit payment in the event that drivers chose to terminate the relationship with the company. Mr Sarzano claimed the payment was effectively a notice payment, set on the basis of earlier payments made to contractors exiting the company. I do not accept it was a payment in lieu of notice. I am satisfied it did not differ from the type of payment made where the remaining drivers and, on occasions, the company, paid out departing drivers who took their vehicles with them. Following upon meetings in August, September, October, December 2000 and January 2001, the drivers were advised that the implementation date would be about April 2001. If drivers did not wish to continue, subject to Boral’s agreement, they were to be provided with: • notice effective 15 April 2001; • $20,000 separation payment; and • Deed of Release. -- 4 of 7 -- 31 October, 2003 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 749 Mr Brinckman did not positively respond to a Notice of Intention to proceed to Stage 1 and on 9 March 2001, the applicants received a notice of termination from close of business on 12 April 2001. Mr Brinckman did not accept the $20,000 payment because he regarded it as insufficient to compensate him for the valuable asset of the contract, the inadequate notice of termination and lack of compensation for a crane he had purchased in early January 2001. The length of the notice The respondents claim that the applicants had notice from August 2000 that the respondent intended to restructure its fleet operations. Mr Sarzano said that Mr Brinckman was engaged in the consultation process of the restructure from about October 2000 and therefore effectively had six months notice of the restructure. The applicants claim that the notice was as per the letter of 9 March 2001. Mr Brinckman conceded that about August 2000, information was being circulated that there was to be a restructure, the fleet size would diminish, new trucks would have to be purchased, new rates would be struck and that contractors would not in future have the right to sell their contracts. Mr Brinckman attended a meeting on 25 September 2000 and again on 30 October 2000. There was a further meeting attended by Mr Brinckman and held on 12 December 2000 where a presentation was made to the Bricks and Masonry carriers where it was proposed that by 15 January 2001, carriers were to elect whether to stay or go, with the final date for separation being 15 April 2001. The first formal presentation to the Roofing carriers was on 23 January 2001 where it was proposed that of the 6 trucks in the fleet, only 4 would be needed, that the time frame was 26 February 2001 for the election to be made with 15 April being the separation date. The proposals for Bricks and Masonry on the one hand and Roofing on the other were separate as the dynamics of the Roofing fleet were different. All Roofing products were unloaded by hand and none of the contractors in the Roofing fleet had mechanical unloading facilities attached to their vehicles. The meeting of 12 December 2000 was presented only for Bricks and Masonry independent contractors. On 26 February 2001, the date due for the election whether to stay or go, Mr Brinckman met with the second respondent, advising he could not accept the proposal and requesting that he be allowed to continue providing services under the contract past the projected finalisation date of 12 April 2001. On 9 March, the applicants were provided with two letters, the first confirming the finalisation of the contract on 12 April and the second rejecting the request for the revised termination date. Mr Farrell confirmed that the plan for the Roofing contractors containing the revised rate was not finalised until the 23 January meeting and when put to him that it was a “take it or leave it” offer, he said that it would take a fundamental flaw in the offer to change it. He did however encourage discussions and confirmed that he had meetings with Brinckman about rates when Brinckman provided figures and calculations to support his argument. Mr Farrell also confirmed that Brinckman’s request for an extension was still under consideration on 28 February 2001. He forwarded a letter on that date to each owner driver who had not made the election and advised them that “I shall communicate with you soon to advise arrangements for the finalisation of your commercial relationship with Boral in April”. There was also written evidence in the form of the Presentation to Roofing Carriers on 23 January 2001 that at all times, Boral reserved the right not to accept a rejection of the offer by a contractor. The reason for this was that Boral did not wish to lose all its contractors. I consider that reservation to be important. Findings On the whole of the evidence, I am satisfied that the effective notice for termination of the contract was given on 9 March 2001. Up until then, an application for an extension beyond 12 April was still being considered and there was the possibility that the company might reject an election by an owner driver either to leave or to stay. Prior meetings had only raised the probability of a termination which, to the knowledge of the applicant, instilled by the respondent, could still have been changed. In view of the reservation by Boral of its rights, neither the meeting of 23 January nor the letter of 28 February nor any of the indications previously given could operate as a notice to determine the contract. They lacked certainty and a notice is required to be “reasonably explicit” – Falconer v Wilson (1973) 2 N.S.W.L.R. 131 at 145. Value of the goodwill Mr Brinckman unilaterally valued the goodwill at $75,000 after the contract had been entered into and after it had been approved by the respondent. There is evidence in his 1990 and 1991 tax returns that the goodwill was $75,000. While it disappeared from returns over a number of following years when PKC Enterprises Pty Ltd ran the business and while there has been an unexplained liquidation of a loan that does not cause the Balance Sheets to balance, the $75,000 goodwill reappeared in the 1997 tax return. Be that discrepancy as it may, the applicant paid a premium when he purchased the contract and I accept that the figure was $75,000. Applicants claim $80,000 as the value of the goodwill, based upon the fact that in mid 2000, Brinckman entered into negotiations with a Tony Kilpatrick for an agreement for $200,000, including a goodwill component of $80,000. The original written statement of Mr Brinckman contained the words “Towards the end of 2000", amended at the hearing to “Towards mid 2000". Obviously, if the negotiations were conducted towards the end of 2000, the goodwill, i.e. the right to sell the truck with work, as known to the applicant, was by that time, worthless. The applicant conceded that when he went into this relationship there was a risk, albeit a small one. He also accepted there was a potential for Boral to reorganise but in a fair and equitable manner. However, there is no evidence that he was ever told his goodwill payment was at risk until the time of the restructure. For 11 and a-half years, he had the benefit of a lucrative contract with Boral. Figures for full years show annual gross earnings ranging from $181,000 to $236,000. Respondent’s Counsel produced an Australian Accounting Standards Board “Accounting for Goodwill” which shows in clause 5.2 that purchased goodwill should “be amortised so that it is recognised as an expense in the profit and loss account on a straight-line basis, over the period from the date of acquisition to the end of the period of time during which the benefits are expected to arise”. The period should not extend beyond 20 years from the date of acquisition. Admittedly, the goodwill spoken of in this case is not the goodwill spoken of in that document but the applicants treated it as goodwill in their accounts and have made no attempt to amortise. In fact, the goodwill has appreciated. Factors such as enjoying the benefit of above-award wages for some 18 months and the taking of a calculated risk were considered by Macken J in Bradrib Pty Ltd v Jilly Bean Pty Ltd & Anor (No 1) (1987) 21 I.R. 90 to add up to reduce the liability of the company to some 50% of the loss. Had the decision to restructure not been made, I would assess the value of the goodwill at 12 April 2001, at $31,875.00. The amount is assessed after taking into consideration the length of time the applicants operated the business and earned a substantial income from the investment, that there must have been some risk that circumstances might one day change and that they could not expect their investment to forever remain static. I have used the Accounting for Goodwill publication as a guide but of course do not suggest it should be meticulously followed in all cases. To amortise appears to me to make good sense. -- 5 of 7 -- 750 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 31 October, 2003 The crane The applicant has made a claim for the value of a crane he attached to his vehicle in early January 2001. The original claim was for $50,000 but was reduced during final submissions. It was alleged by Mr Brinckman that as far back as October 1998, Mr Barry had indicated that hand unloading was a thing of the past so Brinckman purchased a new vehicle configured to accept a crane at some later time. It is alleged that Mr Barry had a change of heart and mechanical unloading was not introduced. It was not until December 2000 that Mr Brinckman began to suffer increased pain in the lower back. He alleges he approached Mr Barry in the first week of January 2001 informing him that he could no longer unload tiles by hand and asked for his suggestion. He alleges Mr Barry recommended to him to have the crane fitted as soon as possible. He alleges that on 12 January 2001, subsequent to the purchase of the crane, he received a letter from Mr Farrell advising that the decision to purchase a crane “involved a high degree of risk”. That letter referred to the recent meeting with Mr Barry. Mr Barry did not recall advising Brinckman that it was in his interests to install a crane. He remembered discussing with Farrell that Brinckman was looking to get a crane. I accept on the probabilities and in view of the written advice from Palfinger that the crane was delivered to Brinckman and fitted on 11 January 2001, prior to the receipt by Brinckman of the letter dated 12 January. I am satisfied that Barry had in fact allowed the crane to be fitted, a not unreasonable position in view of Brinckman’s back injury. But this decision by Brinckman was made in the full knowledge that there was a restructure planned for some time in the near future. He said in his reply to the letter of 12 January in a letter dated 15 January – “I am aware of the risks associated with this decision but I feel I had no alternative”. He claimed he had only two alternatives, to purchase and use the mechanical device or to park the truck and risk bankruptcy. He knew on 19 December 2000 that he was physically unable to hand unload tiles. At the time he installed the crane, the company was still resistant to the use of mechanical devices for unloading roofing tiles. I am satisfied that Mr Brinckman was well aware of the risk he was taking and that any loss in regards to the purchase of the crane should fall on his shoulders. The Law The application is brought pursuant to s. 276 of the Act which provides for the Commission to amend or declare void a contract for services if the contract is an unfair contract. In the circumstances of this case, an unfair contract is one which is harsh, unconscionable or unfair; ss (7)(a), and a contract can be considered unfair if it was an unfair contract when it was entered into or became an unfair contract after it was entered into because of the conduct of the parties or a variation to the contract or for any other reason considered sufficient; ss (4). In McNaught v Micador Australia Pty Limited (1996) 83 IR 111, Hungerford J, in dealing with similar legislation, said: “In considering ‘unfairness’, the determination is according to the common sense approach of a juryman by applying standards which appear to provide a proper balance or division of advantage and disadvantage between the parties who have made the contract or arrangement; in doing so, 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 will always have to be borne in mind: ...”. His Honour also said that unfairness may arise either from the terms of the contract itself, the surrounding circumstances and/or from the manner of performance or operation of the contract and regard may be had to the manner in which the contract or arrangement has ultimately worked out and operates as between the parties to it. Unfairness I am satisfied that the contract to carry roofing tiles with Boral became unfair because of the termination of the contract without adequate compensation for the loss of the right to sell the contract to an incoming owner driver and the failure to provide fair and appropriate notice of termination. That right to cart tiles for the first respondent passed into the hands of the second respondent on 15 April 2001. The applicants had paid a premium for the right to contract with Boral and Boral knew that at the time. Mr Farrell said that the transferring of work with goodwill was not something Boral favoured. But they needed to do more. Proper steps to stamp out the practice were never taken except that there is evidence that in June 2000, action was taken to prevent such a sale in the case of Herbert. But it was too late in Brinckmans’ case. Brinckman had paid goodwill many years before. It is not doubted that the respondent had the right to honestly restructure its business in any way it thought fit. But to terminate a contract in circumstances where it was aware “goodwill” had previously been paid without adequate compensation, rendered the contract unfair. In this case, the offer of $20,000 was, I find, inadequate. It was submitted that the termination was not unfair because there was evidence that if Brinckman had accepted the proposed arrangement, he would have been better off. Brinckman denied he would have been better off. Boral proposed a rate reduction from $15.20 to $12.60 per tonne for manual unloading and $10.50 per tonne for mechanical unloading and maintained that the increase in cartage volumes by the remaining contractors would have been sufficient to increase their income. However, that meant, I find, an increase in personal exertion to complete extra loads and there was also an increase in the cost factor. Whether the owner drivers would have been better off was very subjective and could also have depended upon the size of the truck. $12.70 was the tonnage rate in 1990. The applicants’ rejection of the proposal was reasonable. Boral was certainly better off by the restructure because the new contractor, Boral Transport, was to make a profit out of the rate reductions to the owner drivers. There was of course no allegation that the contract became unfair because of the reduction of the cartage rates. I have accepted that notice to terminate the contract was given on 9 March, providing for little over a month before termination. In my view, the length of the notice also renders the contract unfair. Brinckmans had worked for the company for 11 and a-half years and had a considerable investment in machinery. What they seek is 12 months’ notice but under cross-examination, an unreasonable attitude was bared in that had he been given 5 years’ notice, he would still be seeking the same payments for goodwill. I would suggest that lengthy notice of termination might well serve to reduce any goodwill payment to a negligible amount, if any. The question however, is what length of time is reasonable to terminate this contract. Reasonable notice Mr Brinckman claimed he was told he had a job for life. Mr Gunton denied that claim and said he would have told him that if people did the right thing by the company, then the company would treat them well in return. I am satisfied that the arrangement with Boral was a permanent arrangement, a secure tenure, an ongoing arrangement without reference to an end date, but not one “for life”. As his Honour the President said in TDG Logistics v Reilly (supra), the law notoriously permits termination of indefinite contracts for service by reasonable notice. In Gallagher v Pioneer Concrete (1993) 46 IR 304 at 333, Lockhart J, in rejecting a submission that there was no unilateral right on the part of the respondent to terminate its contracts with its Lorry Owner Drivers, said: -- 6 of 7 -- 31 October, 2003 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 751 “There must be imported into each contract a term entitling either the respondent or an LOD to terminate a contract of engagement provided reasonable notice is given by one to the other. What is reasonable must depend upon the facts and circumstances of each case. The terms must be implied as it is necessary to give the contracts business efficacy.”. The purpose of notice is to provide an employee with the opportunity to seek other employment. The purpose of notice in the Brinckmans’ case was to enable Brinckman to find similar work for the truck or to sell the truck (and for that matter the crane) for a reasonable market price and to obtain other employment. Brinckmans’ length of service demanded reasonable notice. Brinckman had been carting roof tiles for a considerable period of time. He would have had difficulty securing other cartage work or even other employment. He had developed a back injury. He sold his truck for less than its worth on the open market although it is conceded that he sold it for more than its depreciated value in his taxation returns. Truck repayments forced him to act quickly. In my view, a reasonable period of notice was 6 months. The amount sought, $85,363 is alleged to be the equivalent of 12 months net remuneration. The figure is not contested and I am satisfied it appears to be a reasonable estimate. In submissions, Counsel reduced the claim to 11/12ths of the sum to allow for the notice actually given. I assess that the applicants should be entitled to 5/6ths of one-half of $85,353 which I find to be $35,567.00. Amendment/ avoidance In considering whether to amend or declare void the contract, the provisions of s. 276(2) are relevant but not exclusive. I think it is important that there was a disparity of bargaining power. They were small independent contractors, dependent for their income on Boral, a large corporation. Boral held the strings. The applicants had little choice in the restructure and whether they elected to stay with the respondent or not, the “goodwill” component of the investment was to be lost. Conclusion An application under s. 276 of the Act involves a three stage process. Was the contract unfair or did it become unfair; if so should the contract be amended or avoided and thirdly, if the contract is amended or declared void, whether any payment should be ordered? It was submitted that no remedy should be provided because of the better arrangements being offered by the restructure. However, I do not accept that it was a better arrangement for the contractors although it was certainly a better arrangement for Boral. There is a broad concept of a restitution of the parties to a situation which existed before the making of the contractual arrangement as well as to make remedial provision for what has taken place or been done under the contract in the meantime: Port Macquarie Golf Club v Stead (1996) 64 IR 53 at 60. The guiding words though are those used in the Act, ss (5), “any order (the commission) considers appropriate about payment of an amount for a contract amended or declared void”. I am satisfied that the contract became unfair for the reasons previously mentioned. I am of the view that it should be amended to provide for payment of goodwill and reasonable notice upon termination and I so order. I consider an order should be made for the payment of the following sums: Goodwill.................................................................................................. 31,875.00 Notice ...................................................................................................... 35,567.00 Total ...................................................................................................... $67,442.00 I order that the respondents pay to the applicants the sum of $67,442.00 within 21 days of the date of release of this decision. B.J. BLADES, Commissioner. Hearing Dates: 2003 30 June 30 September 1, 2 and 3 October Appearances: Mr R. Reed, Counsel, instructed by Mr S. Ross, Carne Reidy Herd, for the applicants. Mr A. Horneman-Wren, Counsel, instructed by Mr H. Lepahe, Australian Industry Group, Industrial Organisation of Employers (Queensland), for the respondents. -- 7 of 7 --