Industrial Relations Commission of New South Wales CITATION : Awad v World Best Holdings Limited (No 3) [2004] NSWIRComm 188 APPLICANT Mr Riad Awad PARTIES : RESPONDENT World Best Holdings Limited FILE NUMBER: 1865 of 2001 CORAM: Marks J CATCHWORDS : Interlocutory judgment on strike out application - whether retail lease unfair contract - question of jurisdiction - whether lease a contract whereby a person performs work in an industry - applicant failed to prosecute proceedings diligently - applicant failed to comply with order for payment of outstanding costs - proceedings dismissed - costs ordered. LEGISLATION CITED : Industrial Relations Act 1996 ss 105 106 Edwards v Kingsmede Pty Ltd and anor [2004] NSWIRComm 82 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 128-129 CASES CITED : Mitchforce v Industrial Relations Commission [2003] NSWCA 151 Mitchforce Pty Ltd v Starkey (No 2) [2003] NSWIRComm 458 Nagle v Tilburg (1995) 51 IR 8 HEARING DATES: 06/28/2004 DATE OF JUDGMENT: 07/30/2004 APPLICANT Mr R Awad RESPONDENT LEGAL REPRESENTATIVES: Mr R N Gye of counsel Solicitor: Mr P A Biber Phillip Anthony Biber JUDGMENT: - 9 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: MARKS J Friday 30 July 2004 Matter No IRC 1865 of 2001 RIAD AWAD v WORLD BEST HOLDINGS LIMITED (No. 3) Application under s 106 of the Industrial Relations Act 1996 INTERLOCUTORY JUDGMENT ON STRIKE OUT APPLICATION 1 The applicant, Riad Awad, commenced proceedings against the respondent, World Best Holdings Limited, claiming relief under s 106 of the Industrial Relations Act 1996 ("the Act") by summons filed in this court on 9 March 2001. The summons is inelegantly drafted but seemingly alleges that a lease dated 1 August 1998 between the applicant as lessee and the respondent as lessor of certain retail premises in Minto was unfair. In the alternative there appears to be an allegation that an agreement consisting of a warranty, representation and an implied term (which might, presumably, be described as an "arrangement"), said to be collateral to the lease, is also said to be unfair. There are consequential orders sought declaring the lease void or varying it. 2 The particulars contained within the summons are to the effect that certain representations were made to the applicant by or on behalf of the respondent with respect to the leased premises and the shopping complex of which they formed a part. 3 Certain provisions of the lease in particular were said to be unfair, but as I understand the summons, these are more likely to be alleged to be indicative that the lease was a contract as defined in s 105 of the Act, that is, for the purpose of s 106(1), a contract "whereby a person performs work in any industry…". 4 In order to understand the statutory context against which these proceedings are being litigated I set out hereunder s 105 and 106 of the Act: 105 Definitions In this Part: contract means any contract or arrangement, or any related condition or collateral arrangement, but does not include an industrial instrument . unfair contract means a contract: (a) that is unfair, harsh or unconscionable, or (b) that is against the public interest, or (c) that provides a total remuneration that is less than a person performing the work would receive as an employee performing the work, or (d) that is designed to, or does, avoid the provisions of an industrial instrument . 106 Power of the Commission to declare contracts void or varied (1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract. (2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason. (3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time. (4) In considering whether a contract is unfair because it is against the public interest, the matters to which the Commission is to have regard must include the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force. (5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case. (6) In making an order under this section, the Commission must take into account whether or not the applicant (or person on behalf of whom the application is made) took any action to mitigate loss. 5 This judgment deals with a motion filed by the respondent on 21 June 2004 seeking that the applicant's summons be dismissed for want of jurisdiction and seeking a further order that the proceedings be dismissed because the applicant has failed to pay costs previously ordered to be paid by him in judgment delivered on 4 September 2003 and which were assessed on 12 May 2004. The respondent also seeks orders for costs, including costs on an indemnity basis since 21 June 2004. 6 These proceedings have been the subject of two earlier interlocutory judgments delivered on 25 November 2003 and 24 March 2004 respectively. The latter is published at [2004] NSWIRComm 56. 7 It is not necessary that I revisit in any detail my interlocutory judgment of 24 March 2004, save to point out the following: 1. The respondent has been denied the opportunity of pursuing a claim for arrears in rent before the Administrative Decisions Tribunal because they have been stayed whilst these proceedings are pending. 2. The applicant has persistently and consistently failed to comply with orders of this court in and in connection with the preparation of the proceedings for hearing and the case management process. 3. The applicant has been given a great deal of latitude in connection with the case management process as is evidenced by my refusal to strike the proceedings out for want of prosecution for reasons that are given in my judgment of 24 March 2004. 8 In my judgment of 25 November 2003 I ordered inter alia that certain costs previously ordered to be paid by the applicant became payable forthwith on 31 January 2004 or on such later date as a certificate of assessment issued under the Legal Profession Act. That certificate issued on 12 May 2004 in the sum of $10,263.05. I should add for completeness that the application for assessment was made on 18 December 2003, that it was referred to the costs assessor on 9 January 2004 and, accordingly, some four months elapsed before the certificate of assessment issued. A copy of the certificate of assessment was forwarded by the respondent's solicitor to the applicant's then solicitors, Messrs Levitt Robinson, by letter dated 18 May 2004. By letter dated 7 June 2004 those solicitors stated that they had referred the matter to their client "and we have not received instructions as to payment". By letter dated 10 June 2004 the respondent's solicitor said that his client expected a cheque "by return mail". 9 When these interlocutory proceedings came on for hearing on 28 June 2004 the applicant appeared personally. His previous solicitors had filed a notice of ceasing to act on 22 June 2004. The applicant said that he would pay the outstanding costs within 28 days of 28 June 2004 and that aspect of the interlocutory application was stood over on that basis. 10 The respondent also submitted that this court had no jurisdiction to deal with the matter because the lease was not a contract whereby a person performs work in an industry. In making this submission the respondent relied on recent decisions of the New South Wales Court of Appeal and a Full Bench of this Court in what has become known as the "Mitchforce" litigation. Before dealing with these decisions I should refer briefly to the lease document which was in evidence before me for the purpose of these interlocutory proceedings. The applicant's summons referred to particular covenants within the lease, presumably, as I have said, to rely upon them as establishing a contract whereby work was performed as required by s 106(1). They are clauses referring to a covenant to repair, to erect alterations which may be required or be reasonably necessary by reason of the lessee's approved layout, the ability to erect certain signs and advertisements, a covenant to paint and restore the premises if they become damaged and to paint them once during the term of the lease and once during any renewal term, the right of the lessor to effect repairs, the right of the lessee to remove fixtures and fittings upon the determination of the lease, the obligation of the lessor to maintain and keep the air conditioning, elevators and escalators in working order, the obligation of the lessee to effect insurance and to provide a bank guarantee or bond, the obligation of the lessee to comply with certain building rules, the obligation of the lessee to conduct a business on the premises during certain times, the payment of a promotional levy and the right of the lessor to require relocation under certain circumstances. There is also reference to "special conditions" which, presumably, is a reference to certain conditions in the lease which includes the obligation of the lessor to supply and fit light fittings and the like. 11 As I have previously stated, there is also reference in the summons to certain representations made to the applicant which were alleged to be false and misleading. These were confined to representations of matters such as turnover, the number of people using the complex, the amount of advertising undertaken, marketing campaigns and the like. However, all of these representations are not ones which, in my opinion, can be said to involve the performance of work. 12 I should add for completeness that all of the material upon which the applicant seeks to rely in the proceedings has been filed. 13 I have recently summarised the effect of the Mitchforce litigation and its application to commercial lease arrangements in Edwards v Kingsmede Pty Ltd and anor [2004] NSWIRComm 82. I also summarised in those proceedings the basis upon which this court should consider interlocutory applications of this kind which are directed to the dismissal of the proceedings on an interlocutory basis. 14 In Kingsmede I stated, relevantly: "9 It is first necessary to ensure that this is the appropriate time at which to deal with this interlocutory application. There is a long line of authority established at Full Bench level in this court and its predecessors to the effect that the respondents are required to establish that the claims made in the summons are so obviously untenable that they could not succeed, or are so manifestly faulty as not to admit of argument. This line of authority, which is exemplified by cases such as Nagle v Tilburg (1995) 51 IR 8, relies in turn on observations by Barwick CJ made in the High Court of Australia in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 128-129. This line of authority and the principles established are now so well-known in this court that it is not necessary that I deal with them any further. 10 Consistent with this line of authority I take the view that it will only be in exceptional cases that a court should consider a strike-out application going to jurisdiction before all of the relevant factual material has not only been filed but has also been subjected to forensic examination during the litigation process. It is the determination of this particular issue which in the context of these proceedings has given me the greater concern. 11. During the course of the hearing of the motion the applicant indicated through counsel that he did not intend filing any further affidavit material in chief, in addition to that which had already been filed in the proceedings. This affidavit material is directed solely to the lease arrangement including an ancillary arrangement dealing with car-parking space. … 13. Whilst I have some doubt as to whether it is appropriate to deal with this matter at this interlocutory stage, on balance I am prepared to do so having regard to the manner in which the summons has been framed, the fact that all of the evidence in chief in support of the applicant's claim has been filed, and because of the view I take as to the substantive argument raised by the respondents. For these reasons I shall proceed to deal with the motion on its merits. 14. The application of s 106 of the Act to a commercial lease of premises has recently been the subject of consideration in the New South Wales Court of Appeal and by a Full Bench of this court. 15. In Mitchforce v Industrial Relations Commission [2003] NSWCA 151 Spigelman CJ considered a lease agreement of premises which were to be used for the specific purpose of a hotel. That agreement contained a number of provisions similar to the obligations imposed on the lessor and lessee in these proceedings, including provisions which his Honour described as contemplating the conduct of physical activity on the premises. These included on the part of the lessee: a covenant to repair and maintain the premises; to make good any breakages, defects or damage caused by lack of care; to repair and replace broken glass and damaged or broken services; to maintain the premises with particular reference to gutters, drains and pipes and the like; to paint the premises; and to make certain alteration and repairs other than structural repairs required by statute. 16. After considering relevant authorities Spigelman CJ concluded that although that lease agreement contemplated that work would be undertaken, in order to come within the definition of a contract for the purposes of s 106 of the Act it was necessary to find that the performance of work was a "purpose" of the lease agreement and that the agreement led "directly" to the performance of work in an industry. His Honour stated that the purpose of the agreement was to provide premises for the purpose of conducting a business, but the business was to be conducted by the lessee on the lessee's own account. His Honour emphasised that there was no express term which obliged the lessee to conduct the business. Mason P agreed generally with this reasoning of the Chief Justice. (I add for completeness that Handley JA dissented.) 17. The same lease document was also considered by a Full Bench of this court in Mitchforce Pty Ltd v Starkey (No 2) [2003] NSWIRComm 458. In a joint judgment, Wright J, President and Walton J, Vice President agreed with the reasoning of the Chief Justice which I have summarised above. 18. In my opinion the factual matrix which formed the basis of the Mitchforce litigation is relevantly indistinguishable from the factual circumstances which surround and apply to the lease agreement in these proceedings. A commercial lease of this kind, absent any positive requirement that work be actually undertaken so that the carrying out of work in an industry can be characterised as a purpose of the agreement, will not fall within the definition of a contract for the purpose of the s 105 definition so as to attract the jurisdiction of this court under s 106. 19. There are a number of decisions of this court, both at first instance and on appeal, which deal with commercial leases of premises, but which are distinguishable in a factual sense from the circumstances of these particular proceedings. Those decisions are dealt with in the judgment of the Chief Justice and in the joint judgment of the President and Vice President of this court in the Mitchforce litigation. It is not necessary that I traverse these judgments in any detail. They have been considered at appellate level in Mitchforce and relevantly distinguished. I merely observe that the factual circumstances in those decisions may also be relevantly distinguished from the factual circumstances which apply in the context of these proceedings." 15 In my opinion the observations which I made in Kinsgmede are equally applicable to the circumstances of these proceedings. In the course of submissions made on behalf of the respondent, Mr R N Gye of counsel, who appeared for the respondent, made particular submissions with respect to clause 45 of the lease which required the lessee, inter alia, to "conduct his business in the Premises and keep the same open during such hours as are regular for such type of business in trade areas in the Sydney metropolitan district". In supporting a submission that these particular provisions were not determinative of the "purpose of the agreement" Mr Gye relied upon observations of Handley JA in the New South Wales Court of Appeal in the Mitchforce litigation at para [54] as follows: "Such provision is often inserted to protect a Lessor's legitimate interests as the owner of the property, whether of the demised premises or of an associated property. Such provisions do no more than restrain the lessee departing from the common assumption upon which the lease was based. They do not necessarily mean that work is 'performed' under the agreement itself. In particular, it cannot be said that a contract containing such provisions leads 'directly' to the performance of work. The work 'directly', in the case law, is to be regarded as an essential part of the process of determining that the contract can be said to have the requisite 'industrial colour or flavour'." I agree with these submissions. 16 At the proceedings on 28 June 2004 Mr Awad indicated that he would be able to retain new solicitors within 10 days. He was given a copy of the respondent's tender bundle and a copy of the respondent's written submissions and had already been served with a copy of the notice of motion and affidavit material in support. On this basis there was arguably no need for any new solicitors to have access to the file held by his previous solicitors in order to furnish him with advice about this interlocutory application and to respond. In view of the dilatoriness on the part of the applicant in prosecuting these proceedings and in view of the grave concerns expressed by the respondent about the prejudice suffered by it through the delay of the applicant to prosecute the proceedings diligently, I ordered that any written submissions which the applicant wished to make either personally or through new solicitors should be filed in the court within one month of 28 June 2004. No such submissions were received by 28 July 2004. On that day solicitors who had been approached by the applicant to act for him but who were not at that stage retained by him sought by letter to my Associate, presumably without reference to the respondent, to extend the time for filing submissions and that the motion be re-listed in a further two to three weeks to allow the applicant to raise funds to secure the file from his previous solicitor. I declined to extend the period on an ex parte basis. 17 For the reasons which I previously advanced I am satisfied that the applicant has not prosecuted these proceedings diligently and specifically has not complied with the order for payment of outstanding costs. For these reasons the proceedings should be dismissed. 18 For the reasons given I am also satisfied that the respondent has made out its case that the subject matter of the proceedings is not a contract whereby a person performs work in an industry as required by s 106(1) and the proceedings should be dismissed accordingly. 19 There is no reason why the respondent should not have its costs of the proceedings. I am not, however, prepared to make any order that any part of those costs should be paid on an indemnity basis. 20 ORDERS 1. The proceedings are dismissed. 2. The applicant is to pay the respondent's costs of and in connection with the proceedings in an amount assessed under the Legal Profession Act in default of agreement. This costs order is to subsume within it any order for the payment of costs previously made in the proceedings which have not yet been the subject of payment. 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.