Industrial Relations Commission of New South Wales in Court Session CITATION : Edwards v Kingsmede Pty Ltd and anor [2004] NSWIRComm 82 revised - 02/06/2004 Kingsmede Pty Ltd PARTIES : SECOND RESPONDENT Pamiers Pty Ltd FILE NUMBER: 5621 of 2002 CORAM: Marks J CATCHWORDS : Unfair contract - Lease agreement - Interlocutory strike-out application - Whether lease a contract whereby work was performed in an industry - Only in exceptional cases should court consider strike-out application going to jurisdiction at interlocutory stage - Factual circumstances similar to Mitchforce litigation - Lease did not fall within statutory definition of a contract so as to attract jurisdiction - Summons dismissed - Costs reserved. LEGISLATION CITED : Industrial Relations Act 1996 s105 s106 Nagle v Tilburg (1995) 51 IR 8 CASES CITED : General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Mitchforce v Industrial Relations Commission [2003] NSWCA 151 Mitchforce Pty Ltd v Starkey (No 2) [2003] NSWIRComm 458 HEARING DATES: 03/18/2004 DATE OF JUDGMENT: 04/22/2004 APPLICANT Mr R N Gye of counsel SOLICITORS Phillip A Biber, Lawyer LEGAL REPRESENTATIVES: RESPONDENT Mr A B Gotting of counsel SOLICITORS Gordon & Johnstone Lawyers JUDGMENT: - 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: MARKS J Thursday 22 April 2004 Matter No IRC 5621 of 2002 PETER JOHN EDWARDS v KINGSMEDE PTY LTD & ANOR Application under s 106 of the Industrial Relations Act 1996 INTERLOCUTORY JUDGMENT ON STRIKE-OUT APPLICATION JUDGMENT [2004] NSWIRComm 82 1 This interlocutory judgment deals with an application brought by the respondents Kingsmede Pty Ltd and Pamiers Pty Ltd to strike-out a summons initiated by the applicant Peter John Edwards against them seeking certain relief under s 106 of the Industrial Relations Act 1996 ("the Act"). 2 The summons seeks orders declaring void or varying "the contract or arrangement under which the applicant performed work and all related conditions and collateral agreements and, in particular, the lease and arrangements thereto" pursuant to which the applicant occupied certain premises and from which he carried on a practice as an accountant. The summons also seeks consequential orders including orders for the payment of monetary compensation. 3 The summary of matters of fact and law set out in the summons refers to various provisions of the lease agreement and in particular provisions enabling the rental to be varied from time to time. The summons also refers to communications between the applicant as lessee and the respective lessors of the premises either directly or through an agent dealing substantially with the rental review and variation process. The complaint of unfairness made about the lease was directed firstly to the amount of increase in rent which was visited upon the applicant as lessee and secondly the fact that the respondents permitted the leased premises to be occupied by a third party and in doing so created a surrender of the lease. 4 Despite the reference in the summons to a contract or arrangement under which the applicant performed work and all related conditions and collateral agreements, the summons, in terms of the factual matters and allegations as to unfairness, was confined to the lease agreement and the manner in which the lease agreement operated. 5 The notice of motion filed by the respondents attacked the summons on the basis that it was directed solely to the lease and that the lease did not constitute a contract which was one whereby work was performed in an industry as contemplated by s 106(1). 6 I should add for completeness that the respondents' motion also sought to strike-out the summons as constituting an abuse of process. The respondents did not pursue this ground at the hearing of the notice of motion but reserved the right to prosecute that application at a later date. 7 In order to deal with the arguments advanced on behalf of the respondents it is necessary first to set out the provisions of 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. 8 In support of the contention that the lease was a contract whereby work was performed in an industry the applicant relied in the summons on a number of provisions of the lease. These are provisions which are commonly found in commercial lease agreements and include obligations on the lessor of the following kind, namely: to use its best endeavours to provide a satisfactory cleaning service; to ensure that services are operational and functional; to keep and maintain all common areas in good order and repair and in a clean and tidy condition; and to replace the standard carpet. The applicant also relied on obligations imposed on the lessee, such as: to cause all exterior doors and windows of the premises to be securely locked and fastened at all times when the premises were not occupied; to redecorate the premises at various times and upon the happening of various events; to keep such of the plant and equipment located within and exclusively servicing the premises maintained and in good repair; and to ensure that the premises were kept free of rodents and pests. It was said that these provisions imposed obligations on each of the parties to the lease to either perform work or arrange for work to be performed as described. In this way it was submitted that there was fulfilment of the requirement for the contract to be one whereby work was performed in an industry. 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. 12 The summons, as I have indicated, is concerned only with the lease agreement. I invited counsel appearing for the applicant to consider whether the applicant intended seeking to amend the summons in any way so as to attempt to rely on any contract as defined in s 105 other than the lease agreement. Since the hearing, the applicant's solicitor has advised my associate in writing that the applicant does not intend making any further submissions and, inferentially, does not intend taking any further step in connection with the interlocutory application. 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. 20 For all of these reasons I uphold the submissions made on behalf of the respondent. The summons should be dismissed accordingly. I have not heard argument as to costs and I grant liberty to apply with respect to costs. ORDERS 21 I make the following orders: 1. The summons is dismissed. 2. Costs are reserved. 3. Liberty to apply with respect to 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.