Industrial Relations Commission of New South Wales in Court Session CITATION : Best v Barlings Beach Community Pty Limited and Ors [2003] NSWIRComm 435 APPLICANT: Peter Best FIRST RESPONDENT: Barlings Beach Community Pty Ltd ACN 097 766 722 SECOND RESPONDENT: Lee Dunn PARTIES : THIRD RESPONDENT: Michael Adams FOURTH RESPONDENT: John Lynch FIFTH RESPONDENT: Coomes Consulting Group Pty Ltd ACN 050 029 535 FILE NUMBER: IRC 5373 of 2002 CORAM: Schmidt J CATCHWORDS : Unfair contract - orders pursuant to s174 of the Industrial Relations Act 1996 sought - settlement reached at conciliation - no certificate of successful conciliation issued - terms of settlement signed - no reference to GST or requirement to provide tax invoice - no evidence called in relation to settlement discussions - operation of s174 - orders made - no requirement for tax invoice to be provided - questions of GST liability not determined - respondents to bear the applicant's costs of the motion as agreed or assessed LEGISLATION CITED : Industrial Relations Act 1996 CASES CITED : Timothy Fox v GIO Australia Limited [2002] NSWIRComm 318 HEARING DATES: 11/26/2003 DATE OF JUDGMENT: 12/08/2003 APPLICANT: Mr R Moore of counsel SOLICITORS: BHM Lawyers LEGAL REPRESENTATIVES: RESPONDENTS: Mr JV Murphy of counsel SOLICITORS FOR FIRST, SECOND, THIRD AND FOURTH RESPONDENTS: Mallesons Stephen Jaques SOLICITORS FOR THE FIFTH RESPONDENT: Maddocks Lawyers JUDGMENT: - 10 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: Schmidt J DATE: 8 December 2003 Matter Number IRC 5373 of 2002 PETER BEST v BARLINGS BEACH COMMUNITY PTY LIMITED AND OTHERS Application under section 106 of the Industrial Relations Act 1996 JUDGMENT 1 This judgment concerns a motion filed by the applicant on 26 September, seeking that the Court make orders in the matter, pursuant to s174 of the Industrial Relations Act 1996 ('the Act'). The proceedings were brought under s106 of the Act. The conciliation required by s109 of the Act was conducted by Kavanagh J on 25 July 2003. 2 While no certificate of successful conciliation was issued by her Honour, it was common ground that a settlement was reached by the parties at the conciliation. The parties' legal representatives signed terms of settlement which were placed on the file and which provided: 1. RESPONDENTS PAY APPLICANT $27,500 AS CONSULTANCY FEE PLUS $15,000 FOR LEGAL COSTS WITHIN 30 DAYS OF TODAY 2. PARTIES EXCHANGE DEEDS OF RELEASE IN USUAL TERMS, INCLUDING CONFIDENTIALITY UNDERTAKING, AT TIME OF PAYMENT 3. APPLICANT TO DISCONTINUE PROCEEDINGS 3 There was no evidence called as to what had been discussed or otherwise agreed that day. On 19 August, the solicitors for the first to fourth respondents wrote to the applicant advising that a deed had been drafted and sent to the fifth respondent for consideration. The question of GST was also raised. The letter went on to say: 'We confirm that payment of the settlement sum is to be made by Barlings Beach Community Pty Limited. The settlement sum of $42,500 is constituted by $27,500 for consulting services and $15,000 for legal costs. We confirm that our client requires tax invoices to be provided for each of these amounts. To avoid confusion, the tax invoices should be as follows: 1 Tax invoice from Peter Best to Barlings Beach Community Pty Limited for $25,000, plus GST of $2,500. The tax invoice should include a reference to Mr Best's ABN; and 2 Tax invoice from BHM Lawyers addressed to Barlings Beach Community Pty Limited c/- Mallesons Stephen Jaques for $13,636.36, plus GST of $1,363.64 4 The applicant provided a tax invoice for legal fees of a total of $15,000, being the reimbursement of legal fees of $13,636.36 and tax of $1,363.64. A second tax invoice for 'consultancy fees' was also provided, for a total $30,250 being $27,500 consultancy fees and tax of $2,750. The applicant also executed the deed provided by the respondents, having amended the consultancy fee to reflect the tax invoice - a total of $30,250. There was no issue between the parties as to the legal fees. 5 The respondents declined to make a payment of $30,250 and eventually, the applicant filed the motion. The respondent complained that it had understood for the first time at the hearing that the money order sought by the applicant was for $27,500. While this was discussed by the parties during an adjournment, no agreement emerged. The respondents' position was that the proceedings needed to be brought to a proper conclusion. They too asked the Court to make orders under s174 of the Act, but to different effect. 6 The orders sought by the applicant were: (i) An Order that the Respondents pay the Applicant the sum of $27,500.00 as a consultancy fee. (ii) An Order that the Respondents pay to the Applicant the sum of $15,000.00 for legal costs. (iii) An Order that the Respondents pay the Applicant's costs of this Motion. (iv) Such further or other Orders as this Commission deems appropriate. 7 The orders sought for the respondents at the hearing were: 'You should, pursuant to s174, make an order that my client pay the total amount which is now sought today $27,500, to the applicant upon production by the Applicant to my client a tax invoice showing $27,500 plus $2,500 GST.' 8 I observe that while this is the submission which the transcript records, I understood the respondents' case to be that the $27,500 should be inclusive of GST. 9 Section 174 of the Act provides: 174 Powers when application settled by conciliation If a matter that is the subject of an application to the Commission under this Act is settled by conciliation, the Commission may: (a) dismiss the application, or (b) make an order on the agreed terms for settlement. 10 The case advanced for the applicant by Mr Moore of counsel was that the orders sought by the applicant reflected the agreement which the parties had reached. The payment to be made to the applicant should be for a total of $27,500. The settlement terms did not deal with the question of GST and the payment agreed was in relation to the settlement of the claim, not as the result of the provision of any tax invoice. The idea of a tax invoice had been raised by the respondents' solicitors, after the settlement. If the respondents wished to derive a tax credit from any payment made to the applicant under the settlement, that could only flow from a sum in addition to what the respondents had agreed to pay the applicant to settle the claim. The applicant was entitled to receive what the parties had agreed would be paid to him on settlement. 11 It was further argued that having regard to the claim made in the summons, the case of the respondents in reply and the terms of the settlement, it was clear that the payment of the settlement sum did not attract GST in any event. Submissions as to the operation of the Goods and Service Tax Ruling 2001/4 and a number of authorities referred to therein were advanced. 12 It was also argued that the Court would make a consequential order for interest, on a similar basis to that made in Timothy Fox v GIO Australia Limited [2002] NSWIRComm 318. It was conceded however, that there was no obvious statutory basis for such an order. It was submitted to flow from the Court's inherent powers. 13 The case advanced for the respondents by Mr Murphy of counsel was that the orders sought by the applicant should be refused. Orders as sought by the respondents should rather be made because they reflected the parties' agreement. While the terms of settlement did not refer to tax invoices or GST, it was inherent in the parties' agreement that the sum be paid 'as consultancy fee', that the parties had envisaged that the respondents would, in the usual way, be provided with a tax invoice and would have the benefit of the credit for the GST payable. 14 It was complained that the idea that the payment did not attract GST had been raised for the first time at the hearing. Before that, there had been no objection to the provision of a tax invoice. The problem had been the pursuit of a higher sum, to which the applicant was not entitled. That was no longer pressed. 15 No adjournment was sought, however, and it was argued to be clear under the Ruling that GST was payable by the applicant, particularly given that the payment which had been agreed was a 'consultancy fee' and related to the performance of work. It was submitted to be relevant that the Court's jurisdiction arose from the performance of work. The settlement was for the performance of work. It could be for nothing else. The requirement to a pay a consultancy fee under the settlement carried with it an entitlement to the tax invoice, in the normal way. There was no question that if the applicant had continued to perform work as a consultant, that he would have provided tax invoices and would have been paid in accordance with them. The real problem was that the applicant did not wish to be liable for the payment of the GST due. 16 It was also submitted that the Court had no power to order the interest claimed by the applicant and an order for costs was sought against the applicant. Consideration 17 The provisions of s174 of the Act are to my mind unambiguous. They permit the making of orders in terms agreed by the parties in settlement of the matter and no more. Here, there was no evidence from which it could be inferred that the question of GST and tax invoices was a topic expressly discussed by the parties at the conciliation proceedings. The terms of settlement make no reference to the matter. They do not require the applicant to provide the respondents with a tax invoice. I cannot read into the words used by the parties as the respondents urged. They seem to me entirely devoid of any reference to the topic of GST, or the provision of any tax invoices. 18 The reason why the question arose from the respondents' point of view, was obviously because, as the respondents explained it, if the applicant was obliged to pay GST in respect of the payment received under the settlement, the respondents believed that they were entitled to receive a credit in respect of that payment. The Court was not taken to the relevant legislation which gave rise to any GST liabilities, or which entitled the respondents to any credit in respect of such liabilities. 19 The parties were agreed that if a consultant was claiming payment for work which had been quoted, whether it was for a total amount or an amount plus GST, the consultant would be required to provide a tax invoice under the applicable legislation. The parties were not agreed, however, as to whether there was an obligation to provide a tax invoice in respect of the sum due under the settlement terms. 20 On the case advanced for the respondents, consultancy contracts which they have entered with unrelated persons, attract such liabilities and rates are usually quoted on a basis which is either inclusive, or exclusive of GST. Tax invoices are provided to the respondents by such consultants and the sums which appear therein, have regard to the contractual terms which the parties have agreed. 21 In this case, the claim advanced in the summons was that the first respondent had offered to engage the applicant as a consultant; on the basis of that offer the applicant left his employment; a contract was proposed and became the subject of negotiations, but was never entered by the parties; the applicant, nevertheless, performed some work for some of the respondents, for which he was never paid and the first respondent later advised the applicant that it did not propose to engage him. The applicant sought the variation of the contract which he alleged had come into existence and the payment of certain money sums, including six months' remuneration which he would have earned in his employment with his former employer; payment for work performed and a sum in respect of termination of the contract. 22 The first to fourth respondents denied that any contract had come into existence or that the applicant had performed work for them. While it was agreed that there had been discussions about the applicant performing work for the fifth respondent, it was their case that there had been no misrepresentations made by them which would entitle the applicant to any relief. The fifth respondent also denied that any contract had come into existence or that the applicant had performed any work. It was the position of this respondent that the applicant had been counselled not to terminate his former employment with a Local Council, because its approval to his engagement would be required. No offer was finally made to the applicant, because of the attitude taken by the Council to the proposed consultancy. 23 It follows that the existence of the jurisdictional fact - a contract or arrangement under which work was performed - was in issue in the proceedings. The parties, nevertheless, agreed to settle the claim and to call the payment a 'consultancy fee'. It does not necessarily follow that thereby it was agreed by the parties that work was performed. The answer to that question might be found in the terms of the deed which the parties agreed. That was, however, not in evidence. 24 Nor was the contract which the parties had been negotiating, but had not entered. All that was apparent from what was before the Court, was that while the parties characterised the payment to be made on settlement as a 'consultancy fee', it was a payment which flowed from the settlement of a claim, where even the existence of any contract between any of the parties was in issue, as was the question of whether any work was, in fact, performed by the applicant for any of the respondents. 25 Contrary to the respondents' submission, it was not obvious that the settlement was reached because the respondents accepted that work had been performed. It was certainly not clear which of the respondents such work had been performed for, or even whether it was one or more of the respondents who was actually to pay the agreed sums. It follows that the payment agreed was not one which simply flowed from the application of agreed contractual terms for consultancy work performed under a contract, which some or all of the parties had entered. 26 Those circumstances do not readily lead to the conclusion that the payment which will be required to be made to the applicant as the result of the Court's orders in these proceedings, will attract GST, having in mind the terms of the Tax Ruling to which reference was made by the parties. One thing which is clear, is the fact that the parties have called the payment a 'consultancy fee' in the terms of settlement, will not be determinative of that question. It follows that the question of whether a GST liability arises from the settlement depends upon the nature of the proceedings, what in fact transpired between the parties; the claim made and the settlement arrived at. 27 There are questions as to whether there was in fact ever any supply of services by the applicant to any of the respondents; whether the Court's order will require payment to be made by the respondents to the applicant in respect of such supply, or rather whether it is in reality, a settlement of a claim. The Tax Ruling makes particular reference to the settlement of damages claims. Given the nature of proceedings brought under s106, which is concerned with the variation or avoidance of unfair contracts; the creation of new rights between the parties and the awarding of money orders, 'just in the circumstances of the case', it may be that the settlement of this claim has a similar character to the settlement of such proceedings. The fact that the claim encompassed payment of money which would have been earned in the former employment, further underscores this possibility. 28 I am satisfied, however, that these are matters which do not require this Court's determination. Whether or not the payment required to be made under the Court's orders by the respondents to the applicant will attract a GST liability, need not be determined, in order for this matter to be properly disposed of, in accordance with the provisions of s174, in the circumstances of this case. Undoubtedly, if the payment made attracts a GST liability, it will have to be paid by the applicant. The respondents, or one or more of them, may then have an entitlement under the relevant legislation to receive a credit in respect of such a tax payment. There was, however, nothing put before the Court by the respondents which could lead to the conclusion that the applicant has a responsibility to provide the respondent with a tax invoice in respect of the Court's orders. 29 The legislation which might have this consequence was not referred to in these proceedings. The terms of the settlement do not expressly require it. I cannot read the terms as impliedly containing such a term. The question of GST appears to have been raised as an afterthought. Section 174 does not now permit any departure from the terms of the settlement which the parties in fact reached. It follows that the orders pressed by the respondents cannot be made. 30 For similar reasons, the claim for interest must be refused. While such an order was made in Fox, I can see no basis in the legislation upon which the exercise of such a discretion could now rest. Section 174 confines the orders to the terms of settlement. Orders under s106 are not available to be made, given the settlement of the matter. It may well be that the judgment itself may attract interest, but that is a different question. 31 There does appear to be one practical difficulty with the orders to be made. The settlement contemplated payment within 30 days of the date agreement was reached. That time has passed. It is accordingly appropriate to require that the outstanding payments be made forthwith. 32 The appropriate order as to costs in these circumstances is that the respondents' bear the applicant's costs of the motion, as agreed or assessed. 33 I finally note that the complaint that it was only at the hearing that it was revealed that an order for $27,500 was sought, not $30,500, must be rejected. That, after all, was the order sought in the motion. Orders 34 For all of these reasons I order that: 1. The respondents forthwith pay the applicant the sum of $27,500 consultancy fee plus $15,000 for legal costs. 2. The parties exchange the deed of release, the terms of which have been agreed, at time of payment. 3. The proceedings are discontinued. 4. The respondents are to bear the applicant's costs of the motion, as agreed or assessed. ------------------------ 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.