Industrial Relations Commission of New South Wales in Court Session CITATION : Noakes & Anor v Adams & Anor [2002] NSWIRComm 272 FIRST APPLICANT Paul Anthony Noakes SECOND APPLICANT Fiona Gai Noakes PARTIES : FIRST RESPONDENT Tony Adams SECOND RESPONDENT Ellen May Adams FILE NUMBER: IRC 1603 of 2001 CORAM: Marks J CATCHWORDS : Unfair contract - Occupation of premies used as cafe/restaurant - Strike out application on basis of lack of jurisdiction refused because firstly there was evidence available capable of founding jurisdiction and secondly, in any event, this was not an appropriate time in the proceedidngs to seek such an order. LEGISLATION CITED : Industrial Relations Act 1996 s 106 Jennings v Auto Plaza Ltd (1990) 46 IR 413 Booth v Kritikos Developments Pty Ltd (1995) 59 IR 298 Kostakas v New World Oil & Developments Pty Ltd (1997) NSWIRComm 84 CASES CITED : Starkey v Mitchforce Pty Ltd (2000) NSWIRComm 216 The Australian Institute of Music Ltd v L M Investment Management Pty Ltd (2000) NSWIRComm 201 Euphoric Pty Ltd v Ryledar Pty Ltd (2002) NSWIRComm 136 Nagle v Tilberg (1993) 51 IR 8 HEARING DATES: 09/02/2002; 09/03/2002 DATE OF JUDGMENT: 10/23/2002 APPLICANT Mr R Alkadamani of counsel SOLICITORS Haywards LEGAL REPRESENTATIVES: RESPONDENT Mr M S Jacobs SC and Mr P J Bambagiotti of counsel SOLICITORS JDK Legal JUDGMENT: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: MARKS J Wednesday 23 October 2002 Matter Number IRC 1603 of 2001 PAUL ANTHONY NOAKES AND ANOR v TONY ADAMS AND ANOR Application under section 106 of the Industrial Relations Act 1996 INTERLOCUTORY JUDGMENT 1 The applicants, Paul Anthony Noakes and Fiona Gaye Noakes, have commenced proceedings in this Court under s106 of the Industrial Relations Act 1996 ("the Act"), against the respondents Tony Adams and Ellen May Adams. The summons seeks orders declaring void or varying a "contract or arrangement or collateral arrangement between the applicants and the respondents under which the applicants performed work in an industry …." The respondents filed a notice of motion seeking inter alia a declaration that this Court does not have jurisdiction with respect to these proceedings or, in the alternative, ought to decline to exercise any such jurisdiction. The applicants filed a later notice of motion seeking an order that the respondents' notice of motion be stood over to the first day of the hearing. By arrangement, both notices of motion were heard concurrently. 2 Both parties relied on affidavit material, certain documentation and Mr Noakes gave oral evidence for the purpose of the interlocutory proceedings. The applicants alleged that on 5 December 1998 they entered into a written agreement with Troy Baggett to purchase from him a café/restaurant business known as "Troy's on Market" conducted by Mr Baggett in Market Street, Mudgee. They agreed to pay $15,000 for the goodwill of the business. The agreement was said to be conditional upon the applicants signing a 12 month lease with Mr Tony Adams who was said to have been the owner of the premises from which the business was conducted. 3 The applicants met with Mr Adams and had a conversation with him in which they asked for the grant of a lease. They also wanted to make arrangements for the sale of alcohol at the restaurant premises. A form of lease was prepared by Mr Terry McMahon, solicitor who was acting for Mr Adams which was sent to solicitors acting for the applicants. The applicants queried two of the terms of the lease. Eventually, the solicitors advised Mr Adams' solicitor that the amendments were no longer required. By letter dated 5 January 1999 the applicants' solicitors forwarded the lease document duly executed by them and stamp duty to Mr Adams' solicitor. By letter dated 18 February 1999, Mr McMahon noted that one clause in the lease had been amended and he was obtaining instructions concerning his clients' position. He also said that he believed the lease may require the consent of the Liquor Administration Board prior to submission to the mortgagee for consent. By letter dated 14 April 1999, Mr McMahon said that the lease "is not to proceed at this stage. We understand that our clients have discussed this with your clients that they are content to leave the matter on the current basis." The amount paid for stamp duty was refunded. 4 The applicants worked in the café/restaurant with Mr Baggett from 4 to 11 January 1999. Thereafter they worked in the restaurant alone. There had been provision in the lease document that the applicants would purchase alcohol to be served in the restaurant from the respondents at cost plus a 10% mark-up. 5 The applicants allege that when they first met with Mr Adams there was also a discussion in which Mr Adams said that he was keen to build a bistro area in the beer garden which would be serviced by the café/restaurant. The applicants allege that the addition of the bistro would ensure that the business would have "a viable future" and that they were induced to proceed with the purchase transaction and the lease based in part of this representation. 6 Sometime in about March 1999 the parties became aware that the basis upon which alcohol was purchased by the applicants and sold by them in the restaurant was unlawful under the relevant legislation governing the sale of alcohol in licensed premises. This necessitated a change in those arrangements and, in effect, the applicants provided alcohol to patrons of the café/restaurant without any profit to them. This was the reason why the original lease arrangement did not proceed. Based on advice from a new solicitor, the respondents offered the applicants a catering agreement by which they could utilise the café/restaurant premises. This was rejected by them, in part, because of conflicting advice they had received concerning the type of arrangement which would be regarded as lawful for the sale of alcohol in the premises. 7 Ultimately, the respondents did not proceed to install a bistro in connection with the hotel which they operated from the premises. 8 In addition to operating the café/restaurant the applicants alleged that there were other responsibilities imposed by them as part of an arrangement entered into with Mr Adams. They were required to provide counter meals for sale to bar patrons at the hotel operated by the respondents to specifications set by the respondents. They were also required to provide snacks to the hotel each Tuesday night to be consumed in conjunction with a dart competition and to provide hot finger food to the hotel every Friday afternoon. This was said to be a continuation of an arrangement which Mr Baggett had with the respondents. The respondents paid for the cost of ingredients but not for the cost of the preparation of these snacks. 9 The lease document contained certain provisions requiring the applicants to run a café/restaurant at the premises, to open at times usual for a business of a café/restaurant, to keep the property clean and dispose of waste properly and to maintain the property in its condition at the time of the lease, promptly undertaking any necessary repairs. The applicants were also required to maintain and decorate the shop front. 10 It is not necessary for the purpose of these interlocutory proceedings to refer to the circumstances under which any relationship between the applicants and the respondents ceased. 11 The stage has been reached in the proceedings that the applicants have filed all of the affidavit evidence on which they wish to rely for the purpose of the proceedings. Mr M Jacobs QC of counsel for the respondents in support of the notice of motion submitted that the matter could be determined by taking the applicants' case at its highest based on the affidavit material filed. He submitted that "there is no evidence of any contract or arrangement or collateral arrangement between the applicants on the one hand and respondents 'under which the applicants performed work in an industry (which) was unfair, harsh and unconscionable and contrary to public interest.' Any loss sustained by the applicants arose primarily, on the basis of evidence filed, "from the alleged failure on the part of the respondents to provide a lease, and build the bistro, and not from the provisions of an unfair, harsh and unconscionable contract or arrangement or collateral contract contrary to public policy." 12 Mr Jacobs submitted that "the understanding (on the facts not put in issue) that the applicants would supply counter meals, did not constitute any such obligations to perform work. They were not told what to cook or how to prepare food. But they chose to supply counter lunches as part of the restaurant business, and for which they were paid. The supply of counter meals was not a lease condition." In connection with the sale of liquor, Mr Jacobs submitted that this "was something the applicants wanted to do as part of the restaurant business, and not as a lease condition." As there was no "contractual obligation" on the part of the applicants to do any work at all, the matter fell outside of s106. Alternatively, the claim was in reality one for alleged breach of contract in that the respondents failed to grant a lease as represented and failed to build a bistro. Therefore, it was submitted, this Court lacked jurisdiction because s106 was not directed to a claim for breach of contract simpliciter. 13 Mr R Alkadamani of counsel who appeared for the applicants to resist the motion submitted that in essence there was an arrangement, or collateral arrangement or collateral conditions existing between the parties that led directly to the performance of work. It was not necessary for the purpose of s106 that there be a contractual obligation to perform work. Mr Alkadamani relied upon the obligations imposed on the applicants as set out in the lease document which he submitted were carried out as part of an arrangement between the parties notwithstanding the fact that the lease was not ultimately entered into, as well as the arrangement for the sale of alcohol, and the arrangement to provide counter meals and snacks. 14 There are a number of decided cases in this Court which have held in the particular circumstances of those proceedings that obligations created by a contract for the lease of premises can fall within s106. These include the following: 1. Jennings v Auto Plaza Limited (1990) 46 IR 413. Cahill Dep CJ had regard to positive covenants in the lease imposing obligations on the lessee to keep the leased premises open for business during normal trading hours for the restaurant business authorised for the lease to be carried on and a covenant requiring the lessee to carry out a full fit-out of the premises as a restaurant. 2. Booth v Kritikos Developments Pty Limited (1995) 59 IR 298. Schmidt J referred to express terms requiring the performance of work. Those proceedings involved a sale of a hotel business and a concurrent contract or lease between related parties. Her Honour said: "Properly analysed, one of the purposes of the arrangement between the parties, namely what was sought to be achieved, was to ensure the performance of certain work in the business during the continuation of the parties' relationship under the lease. Another purpose was to ensure that the specified renovation work was carried out to the premises the subject of the lease. … The arrangement between the parties contained express written terms requiring the applicant to conduct a hotel business at the premises and to ensure that particular work was performed." (at 304) 3. Kostakas v New World Oil and Developments Pty Limited (1997) NSWIRComm 84. Schmidt J considered the terms of a commercial lease of a shop within a shopping complex. Her Honour said, in part: "This was not a lease where all that was involved was the lease of premises, it being thereafter a matter of no concern to the lessor whether the lessees put the property to the use specified in the lease. Here the terms of the lease not only specified the use to which the property would be put, it also contained detailed requirements as to how the lessees would conduct the business. Particularly the hours during which the business would be kept open. It also required that necessary staff, contractors and sub-contractors would be provided to adequately carry on the business. Specific obligations were imposed which required work to be performed in redecorating, repairing and cleaning the premises over the period of the lease. The lease also imposed a positive obligation upon the lessor to operate a promotional fund to promote and advertise the retail section of (the complex) and the business conducted there, including the coffee lounge in question." Her Honour held that the Court had jurisdiction to entertain the application and declined to dismiss the proceedings on an interlocutory basis. 4. Starkey v Mitchforce Pty Ltd (2000) NSWIRComm 216. Hungerford J held that the lease of a hotel constituted a contract whereby work was performed in the hotel industry having regard to the terms and provisions of the lease. 5. The Australian Institute of Music Ltd v L M Investment Management Pty Ltd (2000) NSWIRComm 201. Peterson J considered the lease of premises used for the purpose of conducting a music education facility. After considering the terms of the lease his Honour concluded that: "The conduct of that business could not be said to be 'an accidental incident or consequence' …. of the lease. The conduct of that business was a particular and fundamental term thereof. The requirement to conduct the business, which necessarily implies work, as do the words in the lease 'proper staffing', make clear that it was an express purpose of the lease. The extent of obligations imposed by the lease is not as found in Kostakas v New World Oil ; however in the critical respect the leases are similar in effect and I find it impossible to take any different view on the present case. The obligation to maintain a particular identified business in a 'proper, orderly and business-like manner including the proper staffing and, where appropriate, stocking of the premises', as here, achieves in my view satisfaction of the essential jurisdictional fact." His Honour declined to strikeout the proceedings on an interlocutory basis. 15 There are two bases upon which I conclude that the respondents' notice of motion must fail and that the applicant's notice of motion must succeed. The first relates to the jurisdictional issue. It is only necessary, as Mr Jacobs submitted that the evidence be considered taking the applicant's case at its highest. There is, in my opinion, evidence that, if accepted, is capable of founding jurisdiction. This would arguably apply to any arrangement that the applicants would supply counter meals and would sell alcohol. In addition there were arguably requirements for the applicants to conduct a café/restaurant at the premises during such times as are usual for such a business, to keep the property clean and dispose of waste properly, to maintain and repair and to maintain and decorate the shop front. 16 Also of significance is the approach to be adopted in determining questions of jurisdiction at a preliminary stage. The relevant principles have been set out in a recent judgment of a Full Bench of this Court in Euphoric Pty Ltd v Ryledar Pty Ltd (2002) NSWIRComm 136. I refer in particular to the judgment of the President and Vice President of this Court at paras 8 to 14. I am not satisfied that this is an appropriate time at which to determine this issue having regard to the observations of the Full Court decision in Nagle v Tilberg (1993) 51 IR 8 at 10 to 12 referred to in their Honours' judgment. That is I am not satisfied that the respondents are in a position at this stage of the proceedings to clearly demonstrate that this Court lacks jurisdiction to deal with the matter. 17 Accordingly, the respondents' notice of motion is dismissed and that filed by the applicants is upheld. 18 Costs would normally follow the event. I shall reserve costs if the parties are unable to reach agreement. ____________________________ DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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