BD & HA Steele Pty Ltd v Austcover Pty Ltd [2000] QIRC 119 (2000) 165 QGIG 256

256 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 17 November, 2000 ########################################################################################################################### QUEENSLAND INDUSTRIAL RELATIONS COMMISSION Industrial Relations Act 1999 – s. 276 – amend or void a contract BD & HA Steele Pty Ltd AND Austcover Pty Ltd (No. B1154 of 2000) COMMISSIONER THOMPSON 3 November 2000 DECISION An application was made by BD & HA Steele Pty Ltd pursuant to s. 276 of the Industrial Relations Act 1999 (the Act) to amend or void a contract of service between Austcover Pty Ltd and BD & HA Steele Pty Ltd. At an initial hearing before Commissioner Fisher on 30 August 2000, the parties, by consent, decided that a preliminary hearing, to determine an issue of jurisdiction as to whether specifically the Commission has the power under s. 276 of the Act to hear the application, should occur. Following the assignment of the case from Commissioner Fisher to myself, a preliminary hearing to determine the jurisdiction was held on 25 October 2000. RESPONDENT The respondent, represented by Mr John Merrell of Counsel, in opening submissions, indicated that he would question whether the Commission, under s. 276 of the Act, has the power to grant the order sought by the applicant for the reasons relied upon in the application. Mr Merrell submitted that s. 276 does not confer upon the Commission a power to make the order sought by the applicant for what is essentially a breach of contract argument. Background In 1999, the applicant, BD & HA Steele Pty Ltd, and the respondent, Austcover Pty Ltd, entered into a written contract for services whereby the applicant would act as a consultant company. The consultancy arrangements in accordance with clause 4.1 of the contract required the applicant to perform a number of services to assist the respondent in expanding business in the areas of general insurance, life insurance, financial planning and financial broking. It was submitted that the legal relationship between the applicant and the respondent was one of principal and contractor and not one of employer and employee. The applicant, for providing services, was paid a fee, and that fee in general terms was paid for introducing new business to the respondent company. The contract, at clause 13.1, allowed for either party to terminate the engagement by giving no less than three (3) months notice of termination in writing and this was relied upon by the respondent on 28 April 2000 when a written notice of termination was given to the applicant. Jurisdiction Mr Merrell submitted that the application to amend the contract of services between the applicant and the respondent was not because the contract was unfair, but because of an allegation that the respondent had breached an implied term within that contract. The Commission does not have the power or discretion to amend or void (wholly or partly) a contract because of the breach of a term (expressed or implied) of a contract. The wording of s. 276 is clear that the Commission’s discretion can only be enlivened when the contract is found to be unfair. Historically, from a legislative position, the power of the Commission to amend (vary) or void contracts through s. 123(A) of the Industrial Conciliation and Arbitration Act 1961 - 1983, s. 39 or s. 40 of the Industrial Relations Act 1990, and s. 290 of the Workplace Relations Act 1997 indicates that the power conferred upon the Commission to amend or void a contract cannot be enlivened because of a breach of contract. It was contended that in legislative historical terms, the Queensland Parliament never intended the Commission would have the power to vary or amend contracts in a way that the applicant seeks, and that is demonstrated from the first legislative reference to varying or voiding contracts in 1961 under the Industrial Conciliation and Arbitration Act of 1961 and to when the issue was next subject to legislative change in 1983 under the Industrial Conciliation and Arbitration Act 1961 – 1983. Mr Merrell quoted from a second reading speech in relation to the 1983 legislative changes in which the Hon. C.A. Wharton, Leader of the House, although acknowledged by Mr Merrell not the Minister responsible for Industrial Relations made the following comments:– “The Bill also provides some new beneficial legislation for employees. The Minister for Employment and Labour Relations has been concerned for some time that employees who enter into dubious contracts of employment have no redress in industrial tribunals if exploitation occurs. These contracts operate in areas of employment which are award free. -- 1 of 4 -- 17 November, 2000 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 257 Jurisdiction will now be conferred on a State Industrial Commission to review contracts that are unfair, harsh, unconscionable, or against public interest in circumstances where the work is not covered by an award. Contracts of employment designed to avoid the provisions of an award will also be open to ‘scrutiny’. The Industrial Commission will be given a power to declare void in whole or part any contract of this kind which offends against fairness.”. It was submitted that it was clear from the reasons given in the Minister’s comments that there was not the intention to provide power to review a contract because it had been breached, but in effect only to deal with the terms and conditions of the contract itself and whether it is unfair as defined in the legislation. In this next issue addressed by Mr Merrell was the Minter -v- Queensland Teachers’ Union of Employees (1994) 146 QGIG 189 at 196 per Bloomfield, C in which the Commissioner referred to the section in the Act in the following manner: “Section 39 does not empower the Commission to deal with a breach of a contractual term. The Commission is only empowered to deal with a contract, arrangement, collateral arrangement or any term or condition thereof which is unfair or harsh or unconscionable (etc) insofar as the claimed variation relates to the manner of performance of the work or the remuneration for the work. As earlier stated the application relates only to the second ground. On face value it appears that the application, and indeed the whole of the conduct of the case, has been directed towards a claimed breach of contract on the part of the respondent which the Commission is now being asked to rectify some years after it was completed. This is perhaps not surprising when one considers what the applicant was trying to do. Mr Commissioner Ashwood expressed it succinctly as follows:– ‘. . . the respondent (in that case) submitted that Mr Minter was not trying to enforce his contract but that he was endeavouring to change the terms of his contract to ensure it reflected the agreement that had been reached.’ (140 QGIG 313 at 315). Given that this is what is being sought I determine that I do have jurisdiction to hear, and decide, the application.”. Mr Merrell, in reference to the Workplace Relations Act 1997, drew attention to s. 290(1) and quoted the following reference to that Act:– “The Commission may amend or declare void, wholly or partly, a contract if it considers the contract (ii) is a contract for services that is designed to or does avoid the provisions of an industrial instrument and (b) the contracts conditions are harsh, unconscionable, or unfair.”. He submitted that the reference was to the contract conditions in s.290(1)(b), yet again, was another example where the Commission did not have the power to review a contract because of an alleged breach of the contract. In terms of the current Act, the 1998 Industrial Relations Taskforce Report that preceded the making of the Industrial Relations Act 1999 and upon that the subsequent enactment of s. 276 of the Act gives no intention that a breach of contract was in the minds of the Taskforce’s members as giving the Commission discretion to amend or void a contract because of a breach of the said contract. In relation to the application, Mr Merrell noted that whilst there was not specific mention of s. 276 (7), and that because the applicant in his view was not an employee but rather a contractor, then the relevant paragraphs for consideration in respect of unfair contract would be:– (a) is harsh, unconscionable or unfair; or (b) is against public interest. In the matter of Reich -v- Client Server Professionals of Australia Pty Ltd (Administrator appointed) (2000) NSW IRC 143 (15 August 2000), Mr Merrell indicated that matter had initially gone before a single Justice of the Commission in the first instance who rejected the application by holding that s. 106 of the New South Wales Act did not confer upon the Commission a power to amend a contract or employment where it is alleged the employer breached the contract, or breached a term of the contract. The question before the Justice in the first instance was could the conduct of an employer breaching a term of a contract mean that the contract was unfair within the meaning of s. 106 of the Act, and therefore allow for the power to amend the contract to remedy the breach? That question was answered in the negative by Justice Maidment in the first instance, however upon appeal to the Full Bench of the New South Wales Commission there was a decision where three (3) of the Justices of the New South Wales Commission (Wright J, Walton J and Hungerford J) held that the conduct of an employer in breaching the term of the employment contract could render the contract unfair, and therefore render the contract amendable to relief under s. 106 of the New South Wales Act. The other two (2) Justices (Glynn J and Schmidts J) of the five (5) person bench in a minority decision held the view that s. 106 did not confer a power on the New South Wales Commission to amend a contract on the basis of its unfair conduct. Summary In summation, Mr Merrell indicated that the clear wording of s. 276 of the Act did not provide for the Commission to exercise its power in review a breach of the contract. APPLICANT In representing the applicant, Mr Matthew Brady, stated that the thrust of the applicant’s submissions would be that the Commission should follow the majority decision of the Reich case in New South Wales, and that even if the Commission was to accept the minority view from that matter, then it was his view that the application could still proceed. Background In January 1998, Mr Blair Steele entered into a consultancy agreement with Austcover Pty Ltd and was engaged to introduce insurance business to the respondent and to assist with the development and the support of the respondent’s business. -- 2 of 4 -- 258 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 17 November, 2000 It was alleged that in September 1999, the applicant was compelled by the respondent to incorporate prior to a further contract being entered into by the parties. The applicant provided consultancy services to the respondent company and remuneration was by way of commission payments. On 28 April 2000, the Managing Director of the respondent wrote to Mr Steele in the following terms:– “Further to our discussions and the terms of our contract, we confirm we are giving written notice of termination 90 days in advance.”. Mr Brady indicated that after the notification was provided to the applicant, there was a request for the applicant to cease work immediately. The applicant then received payment, from the respondent, for commission for work performed prior to the contract being terminated, and the applicant had received no monies in payment for commissions lost through not being allowed to work out the period of notice. The applicant had brought the application on the basis that the contract was unfair in that it did not make express provisions for the payment of monies in lieu of notice. If the matter was to proceed after the jurisdiction argument, the applicant would be seeking orders pursuant to s. 276 of the Act that the written contract be varied to include an express term providing that the parties agree to payment of monies in lieu of notice and that an order pursuant to s. 276(5) for payment of the sum of $15,154 representing the commission income which the applicant would have earned had he been permitted to work out his period of notice. Jurisdiction In submissions, Mr Brady stated it was the applicant’s contention that the contract entered into by the parties was unfair within the meaning of the Act and it would be appropriate for the Commission to amend the contract in addition to granting relief under s. 276(5) of the Act for an order for payment of monies to the applicant. The respondent’s submissions that this Commission does not have jurisdiction, in the applicant’s view, is flawed, and in fact the Commission does clearly have jurisdiction under s. 276 of the Act on the basis that: (a) Bass -v- Truder & Ors (1990) 38 IR 172 has been expressly overruled by both the New South Wales Court of Appeal and a Full Bench of the New South Wales Industrial Relations Commission and is no longer good law; (b) the mere fact that the applicant may also have an action outside the Industrial Relations Commission (for example in breach of contract) does not itself deprive the Commission of jurisdiction to determine the matter under s. 276 and the existence of other remedies does limit the wide language of s. 276; (c) the fact that terms of a particular contract or arrangement may permit an unfair, harsh and/or unconscionable dealing by one party with the other party can lead to the conclusion that the contract or arrangement is unfair, harsh and/or unconscionable within the meaning of s. 276; (d) “unfairness” within the meaning of s. 276 may arise either from the terms of the contract itself, from the surrounding circumstances and/or from the manner of performance or operation of the contract and, in determining whether “unfairness” has been established, regard may be had not only to the terms of the contract or arrangement but also the manner in which the contract or arrangement had ultimately worked out and operates between the parties; and (e) the necessary jurisdictional requirements to hear and determine a matter under s. 276 exist once it has been established there is a contract or arrangement which falls within the definition of s. 276(1) and the applicant does not fall within the exclusionary powers of s. 276(6). The respondent has relied upon legislation in New South Wales, and it is contended by the applicant, that the Queensland and New South Wales provisions are very similar and, in the absence of case law in this issue in Queensland, then it is necessary for the Commission to give consideration to the New South Wales cases. In respect of the unfairness in the contract, Mr Brady made reference to Walker -v- Industrial Court of New South Wales (1999) 29 NSWLR 83 at 133, Kirby, P (as he was then) said:– “Whatever doubts may have existed earlier, it is now beyond argument that the ‘unfairness’ referred to in s. 88F(1)(b) IAA [the predecessor of s. 106 Industrial Relations Act 1996] can arise, not only from positive provisions of the contract or arrangement which offend fairness in the relevant sense, but also from the failure, on the part of the contract or arrangement, to provide in a way that such fairness requires.”. In determining whether “unfairness” had been established, his Honour commented at page 133 that “regard may be had not merely to the terms of the contract or arrangement as originally negotiated, but also to the manner in which the contract or arrangement has ultimately worked out and operates as between the parties to it.”. Mr Brady indicated that the three (3) majority Judges in the Reich decision agreed and said the following at paragraph 24: “. . . it seems to us, in finding a contract (contract or arrangement, or any related condition or collateral arrangement) to be unfair, that may be supported because it became an unfair contract due to the conduct of a party at the time of the termination of the contract which enabled a finding that a contact which could or did so operate was relevantly unfair. It would then be open to declare the contract void or to make an order varying its terms in an appropriate way . . .”. Finally in support of the jurisdictional argument, Mr Brady drew reference to a matter Beahan -v- Bush Boake Allen (1999) 47 NSWLR 648 at 685 that:– “What emerges from the . . . authorities, we think, is now settled view that s. 176 (as with the previous s. 88F of the 1941 Act and s. 275 of the 1991 Act) is directed to an impugned contract of employment, whether existing or terminated, as to the fairness of its express or implied terms. Such unfairness will depend upon the facts of each particular case by focusing attention on the contractual relationship between a particular employer and employee and where the unfairness may arise from the terms of the contract itself, the surrounding circumstances and/or the manner of performance or operation of the contract.”. -- 3 of 4 -- 17 November, 2000 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 259 Summary In the matter before the Commission, the applicant states unequivocally that the unfairness of the contract arose from the failure of the contract to specify a requirement that payment in lieu of notice be made and the failure of the written contract to specify how the payment in lieu of notice was to be calculated. There is nothing in the provisions of s. 276 of the Act which would suggest that the legislature has expressly, or by necessary implication, excluded the jurisdiction of this Commission in respect of the claims which could also be brought in another jurisdiction. It is therefore, in the view of the applicant, proper for the Commission to exercise its jurisdiction in this application. DECISION In the determination of this matter, there was a requirement to consider argument from the respondent that, under s. 276 of the Act, the Commission did not have the power to amend or void the contract between Austcover Pty Ltd and BD & HA Steele Pty Ltd for what was essentially an implied breach of contract rather than an unfair contract. Therefore, it was submitted that the Commission in effect lacked jurisdiction for the application to proceed further. In opposing argument from the applicant, it was put that the contract between the parties was unfair due to the failure of the contract to provide an adequate provision in respect of termination arrangements and, as such, clearly the Commission did have the jurisdiction to further progress this matter. From the inception of the Industrial Conciliation and Arbitration Act of 1961, and all subsequent industrial legislation enacted in Queensland since then, the Commission has had the power, in varying degrees, to determine the matters in relation to contract for services and in respect of s. 276 of the current it would appear to provide the broadest of powers available to the Commission to date. The absence of Queensland case law, in respect of the Commissions powers to amend or void contracts as set out in s. 276, has meant that reliance has been placed by the parties on jurisdictional findings in other places and in particular the New South Wales jurisdiction. Of the matters raised in these proceedings, the cases of Walker -v- Industrial Court of New South Wales, Beahan -v- Bush Boake Allen, and Reich -v- Client Server Professionals of Australia Pty Ltd, and the findings in respect of those matters, have encouraged my view that the applicant should have recourse to the Commission to further pursue the application. Therefore, I reject the position of the respondent that, in accordance with s. 276 of the Act, the Commission does not have the jurisdictional power to proceed with the application. As such, future hearing dates will be advised to the parties in due course. J.M. THOMPSON, Commissioner. Released: 3 November 2000 Appearances:– Mr M. Brady, of Counsel, instructed by Mr J. Dwyer of Reidy & Tonkin, for the Applicant. Mr J. Merrell, of Counsel, instructed by Mr T. McKenzie of Redchip Lawyers, for the Respondent. -- 4 of 4 --