Industrial Relations Commission of New South Wales in Court Session CITATION : Graeme Logan and anor v Mario J Fairlie and ors [2002] NSWIRComm 324 FIRST APPLICANT/RESPONDENT ON THE MOTION Graeme Logan SECOND APPLICANT/RESPONDENT ON THE MOTION Logan Partners CorporationPty Ltd PARTIES : FIRST RESPONDENT/ APPLICANT ON THE MOTION Mario Fairlie THIRD RESPONDENT/APPLICANT ON THE MOTION Maxjam Services Pty Ltd SECOND RESPONDENT Semaphore Telecommunications Pty Ltd FILE NUMBER: IRC524 of 2002 CORAM: Peterson J CATCHWORDS : Unfair contract - motion to strike out - whether motion premature - contract or arrangement partly written and partly oral - parol evidence rule - whether circumstances give rise to statutory bar to proceedings - significance of need for evidence to relevant findings of fact - motion dismissed. LEGISLATION CITED : Industrial Relations Act 1996 s106 Property Stock and Business Agents Act 1941 s3 s20(1)(c) s42(1)(c) s42AA(1) Saliba and anor v John Hearder Pty Limited (1986) 15 IR 36 CASES CITED : Fasold v Roberts (1997) 70 FCR 489 Colbron v St Bees Island Pty Ltd (1995) 56 FCR 303. HEARING DATES: 08/13/2002 DATE OF JUDGMENT: 11/29/2002 APPLICANTS/RESPONDENTS ON THE MOTION Mr C Stomo of counsel SOLICITOR Selby Levitt SYDNEY. LEGAL REPRESENTATIVES: FIRST AND THIRD RESPONDENTS/ APPLICANTS ON THE MOTION Mr J J de Meyrick of counsel SOLICITOR Castle & Castle ST IVES. JUDGMENT: - 9 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: PETERSON J DATE: 29 NOVEMBER 2002 Matter No IRC524 of 2002 GRAEME LOGAN AND ANOR v MARIO J FAIRLIE AND ORS. Application under s106 of the Industrial Relations Act 1996. INTERLOCUTORY JUDGMENT 1 The respondents, Mario J Fairlie and Maxjam Services Pty Ltd ('Maxjam') but not the second respondent, Semaphore Communications Pty Limited ('Semaphore'), have initiated a notice of motion seeking to strike out a summons for relief filed pursuant to s106 of the Industrial Relations Act 1996 ('the Act'). The applicants are Graeme Logan and Logan Partners Corporation Pty Limited ('Logan Partners'). 2 During the course of hearing of the motion the respondents sought to give further consideration to a line of authority advanced for the applicants. Leave to file further written submissions was granted, which were filed subsequently both by the respondents and the applicants. This judgment deals with the motion. 3 The summons for relief seeks a declaration that a commission agreement dated 1 March 1999 between Mr Logan and Logan Partners, on the one hand, and the three respondents on the other, in respect of the sale of shares in or assets of Semaphore is in force; an order that an agreement dated 21 January 2000 between Logan Partners, Semaphore and Maxjam be set aside and an order that the commission agreement be specifically performed by the respondents. 4 An alternative form of order sought is that the unfair contract be amended to make it fair by substituting the payment terms in the unfair contract with the payment terms in the commission agreement. A further order sought is that the respondents pay the applicants the sum of $2 million. Other incidental orders are sought. 5 The summons for relief relates to circumstances in which the applicants in the substantive proceedings acted to arrange the sale of a company controlled by Mr Fairlie, who is a telecommunications engineer. Mr Fairlie had obtained particular radio licences and had developed, he alleges, at a cost of some $750,000, intellectual property in relation to the licences which were for utilisation as a substitute for land line communications between computers and the internet. The licences and the intellectual property in relation thereto were held by Semaphore. Mr Fairlie wished to sell those assets and contracted with the applicants for that purpose. 6 The grounds in the summons for relief assert that the parties other than Maxjam were engaged in the telecommunications and radio communications industries. Messrs Logan and Fairlie were known to each other and became friends. The applicants were engaged in the industry of providing broking, divestment, mergers and acquisition services to non-retail clients in the corporate advisory industry, which were usually consummated by the sale of shares in or assets of companies between purchasers and vendors, the applicants acting as a broker or middle man for the purposes of the transaction. It is alleged that Mr Fairlie, for approximately 12 months, offered for sale without success the issued shares in Semaphore and alternatively, or in addition, the assets of Semaphore. 7 It is asserted that Mr Fairlie acting as director of Semaphore and controller and agent of Maxjam requested the applicants to sell the issued capital of or assets of Semaphore at a price exceeding $2m, the commission being payable only if the applicants were successful and on the basis they paid all costs incurred in achieving a sale. The commission to be paid would be the moneys paid by the purchaser on sale in excess of $2m. 8 The basis upon which a strike out application may proceed is now well established. It is necessary that the evidence in the applicants' case be taken at its highest, that is to say, that it is accepted as establishing the facts which the evidence asserts. This, not surprisingly, sets a fairly high bar over which the case for the striking out of an application at a preliminary stage in the proceedings must leap. The approach is predicated upon the presumption that an applicant is entitled to have its case heard and determined subject only to some intervening matter which is fatal to its progress. An interlocutory application of this kind is not a vehicle for the determination of the merits of the matter or for a consideration of countervailing evidence or views that might be held by the respondents. 9 Mr Logan alleges, by affidavit filed in support of the summons, that, having become acquainted with Mr Fairlie, he learned from him that he wished to sell his interest in the radio licences and the intellectual property with a return to Mr Fairlie of $2m. They agreed that the applicants would attempt to sell the interests in Semaphore for a fee equal to any excess that they could obtain over $2m. 10 These arrangements were put in place pursuant to a written exclusive agency agreement. Subsequently, Mr Logan contends that Mr Fairlie expressed concern that any purchaser "would flip" if it became aware of the size of the fee and, accordingly, suggested that a new written agreement be entered into providing for a fee of 3 percent of the sale price but with an oral agreement standing alongside that the excess over $2m would still be paid to the applicants. 11 Ultimately a sale was effected at a price of $3m but the respondents sought to adhere to the written agreement, denying that there was any extraneous oral agreement by which they were bound. The applicants initiated these proceedings. 12 I make no reference to the disputed version of the facts which will be advanced by the respondents on this evidentiary material, if the matter goes forward, because of the nature of the question for interlocutory decision. However, the applicants' position in this respect is strongly denied by the respondents and the respondents assert that Logan Partners obtained the benefit of a secret commission from Maxjam by way of a free grant of shares in it, a matter which was not known to the other respondents. The Submissions 13 The contentions advanced by Mr J de Meyrick of counsel for the applicants on the motion, are fourfold: (i) The summons for relief constitutes an abuse of process in that the written contract between the parties expressly excludes any and all earlier arrangements that may have existed between them. The parol evidence rule would prevent the admission of extrinsic evidence, there being no suggestion that the case comes within the limited exceptions to that rule, for example, void for mistake, fraud, innocent misrepresentation, ambiguity. If the applicants could establish the existence of the alleged oral agreement, its purpose was to deceive the buyer and, if not illegal, is at least unenforceable on the grounds of public policy. The applicants under s106 should "come with clean hands" per Macken J in Saliba and anor v John Hearder Pty Limited (1986) 15 IR 36. (ii) The applicants were business agents within the definition contained in the Property, Stock and Business Agents Act 1941 (NSW) yet they were not licensed as is required by s20(1)(c) of that Act. Section 42(1)(c) expressly prohibits a person (including a corporation) from bringing any proceedings in any court to recover any commission, fee, gain or reward for any services performed as a business agent, unless that person was a holder of a business agent's licence. (iii) Section 42AA(1) of that Act also expressly provides that a licensee is not entitled to be paid any commission, fee, gain or reward for services performed unless the agreement relating to those services was in writing, executed by the parties, and contained certain provisions set out in the Regulations. (iv) The applicants' claim cannot be truly characterised as a contract within the concept of s106. If it had any merits it would be only in terms of breach of any ordinary commercial contract. The claim is really one for alleged unpaid commission in relation to an unsustainable commercial agency agreement. Any unfairness would abide only in the alleged debt which, in a proper case, would find its remedy in the ordinary law. 14 Mr Stomo of counsel for the applicants disputed each of these submissions. It was submitted that on any view of the facts the applicant has been required to perform work in an industry thus satisfying the need for a nexus between the work performed in an industry and the contractual arrangements between the parties. 15 He submitted the applicants were not carrying on the business of a business agent. The agreement between the parties involved a commission to sell licences owned by Semaphore. Semaphore did not carry on a business. In this regard he referred particularly to the judgment of Sackville J in Fasold v Roberts (1997) 70 FCR 489 and also Colbron v St Bees Island Pty Ltd (1995) 56 FCR 303. 16 He submitted that on this question the statute must be interpreted in the light of the facts as they apply. In the present matter, when one examines the deed of agreement for the sale/purchase the following is clear: A The company was a $2 company B The shareholder of the company was also the owner of the licences held by the company C The company had not traded and was not trading. D The company had no value other than the value of the licences which were not operative. E $2.25 million was paid for a $2 company. F $750,000 was paid for intellectual property. G Nothing was paid for any goodwill. H The company describes itself as a licence holder of the various licences. 17 On a proper classification of the arrangement, the sale of a business or the activities of a business agent within the meaning of the Act have not been disclosed. 18 It was further submitted that the application is premature, all the evidence ought be in to enable findings of fact against which the relevant determinations, including that under the Property, Stock and Business Agents Act 1941 could be made. The motion should be dismissed and the matter proceed to final hearing. Conclusions 19 On the face of the applicants' evidence as filed, there is disclosed a situation which is capable of giving rise to jurisdiction under s106 of the Act. The written agreement for the payment of a commission, if coupled with an oral agreement that an additional fee would be payable, is a situation which would seem capable of being caught by the concept of an arrangement as it occurs in the definition of 'contract' in s105 of the Act. It may be that an attempt to review the written contract alone would face the difficulties raised by the respondents concerning the parol evidence rule. That rule is concerned relevantly to prevent a party or parties who have agreed to embody their contract in writing from seeking to add to, vary or contradict it through oral evidence; the contract is taken to be as it was written. However, oral evidence will be admissible to establish a collateral contract or a contract partly in writing and partly oral. See the discussion in Contract Law in Australia, Carter and Harland, Fourth Edition 2002, Butterworths at 236-240. It is to be noted that the parol evidence rule is not a rule of evidence but one of contract law. It is this latter position which I would understand the applicants to have adopted. The wider jurisdiction as to an arrangement as defined may well be capable of dealing with the alleged scheme for the sale involved in this case. The written contract itself, if it purports to exclude extra-contractual terms expressly agreed despite the terms of the written contract, may be arguably unfair and justify variation in the circumstances as they may be found. I would reject the argument at this stage that the relief sought has been demonstrated to be an abuse of process. 20 As to the Property, Stock and Business Agents Act 1941, I consider it is premature to decide this point. The relevant provision is the definition of 'business agent' in s3 as follows: Business agent means any person (whether or not such person carries on any other business) who for reward (whether monetary or otherwise) exercises or carries on business as an agent for performing any of the following functions, namely: (a) selling, buying or exchanging or otherwise dealing with or disposing of, or (b) negotiating for the sale, purchase or exchange or any other dealing with or disposition of, or (c) compiling for publication or compiling and publishing a document that contains a list relating solely or substantially to the acquisition or disposal by any person of, businesses or professional practices or any share or interest in or concerning or the goodwill of or any stocks connected with businesses or professional practices. 21 Two questions appear to arise presently under this argument. The first is whether the applicants, either together or separately, were business agents within the meaning of that Act. The second, in conjunction with the first question, is whether the sale of the shares in Semaphore for the purpose of acquiring the rights to the relevant licences was also work of a kind within that definition. It would seem to me necessary that both those questions would need to be answered positively for that Act to have any application in the context of the parties' relationship. If the Act does not apply then the strictures imposed by s20, which requires a business agent to be licensed and prohibits any other person from carrying on the business of a business agent and s42, which prohibits the bringing of proceedings to recover any commission unless the person was the holder of a business agent's licence, could have no operation. 22 In Fasold v Roberts (ibid at 524) Sackville J said: I agree with Rolfe J that, generally speaking, the word "business" as used in the Fair Trading Acts, bears the dictionary meaning of "trade, commercial transactions or engagement". However, that will not always carry matters very far. I think that in addition, ordinarily at least, the concept of "business" imports, as Barwick CJ suggested in Hungier v Grace , a notion of system, repetition and continuity. 23 See also Colbron v St Bees Island Pty Ltd (ibid at p313-314) in which Lindgren J discussed the need to determine (there in the context of an alleged principal and agent relationship) questions of this kind not by reference to the way a party or parties may describe themselves but by reference to the relevant factual circumstances. Here, I accept that the concept of business and business agent as used in the statutory definition must be treated similarly. 24 Those views illustrate the way in which it is premature to make any final conclusion about that question. The evidence is in a state which could not satisfy consideration of the question. 25 I mention some peripheral points raised by the respondents in support of their motion. Firstly, it was suggested in the respondents' submissions that Logan Partners had received a "secret commission" from the purchaser, Maxjam, of Semaphore's interests. This point was made in the context of a suggestion that the applicants should come with clean hands (see Saliba v John Hearder Pty Ltd). Again, this is a question which is not identified at all in the evidence, let alone sufficiently to enable some determination of the question. It, too, reinforces the view that the point here has been taken prematurely. 26 The second incidental point was the proposition that this arrangement as asserted is a mere commercial contract which gives rise to any remedy used as a debt which is recoverable under the ordinary law. It seems to me the illustration that the contract is one which may exist both in writing and orally points to the need for any redress, if appropriate, to arise under the special provisions of the Act concerning unfair contracts. 27 In all of the circumstances I would dismiss the motion. The matter will proceed to conciliation. I would reserve costs. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.