Industrial Court of New South Wales CITATION: Secure Parking Management Pty Ltd v Yamamoto Realty Co Ltd and anor [2006] NSWIRComm 377 APPLICANT: Secure Parking Management Pty Ltd PARTIES: RESPONDENTS: Yamamoto Realty Co Ltd and Cape Bouvard Properties Pty Ltd FILE NUMBER(S): IRC 1560 of 2005 CORAM: Haylen J CATCHWORDS: Industrial Relations Act 1996 - s 106 - unfair contract - claim that lease agreement operated unfairly in making it impossible for applicant to make a profit in the management and operation of a car park - respondents owners of building with obligation to also provide parking facilities - applicant claims that substance of contract was to manage and operate car parking facility for benefit of respondents - contract alleged to be one whereby work performed in an industry - respondents file Notice of Motion challenging jurisdiction - respondents claim relationship mere lease agreement and contract not one whereby persons perform work in an industry - any work performed not directly the result of lease obligations but indirect and not purpose of lease agreement - respondents allege "Mitchforce" type lease and application fatally flawed - Notices of Motion pursued when only evidence provided by formal affidavit supporting summons for relief - challenge to jurisdiction taken prematurely - notices of motion adjourned until sufficient evidence filed to permit Court to establish nature and content of relationship Agar v Hyde & anor (2000) 201 CLR 52. Awad v World Best Holdings Pty Ltd (2005) 146 IR 9 Bell and anor v Macquarie Bank Ltd and anor (No 2) (1999) 87 IR 126 Edwards v Kingsmede Pty Ltd and anor [2004] NSWIRComm 82 Euphoric Pty Ltd v Ryledar PtyLtd and anor (2002) 117 IR 1 Fish v Solution 6 Holdings Ltd (2006) 227 ALR 241 McDonald's Australia Holdings Ltd v Industrial Relations Commission of New South Wales (2005) 223 ALR 78 CASES CITED: Majik Markets Pty Ltd v Brake and Service Centre Drummoyne Pty Ltd (1991) 28 NSWLR 443 Mitchforce Pty Ltd v Starkey (No 2) (2003) 130 IR 378 Mitchforce Pty Ltd v Industrial Relations Commission of New South Wales (2003) 57 NSWLR 212 Nagle v Tilburg (1993) 51 IR 8 Production Spray Painting & Panel Beating Pty Ltd v Newnham (1991) NSWLR 644 Stevenson v Barham [1977] 136 CLR 190 Virtue v New South Wales Department of Education and Training (1999) 92 IR 428 Wirraway (NSW) Pty Ltd and anor v Ultra Tune Australia Pty Ltd [2006] NSWIRComm 300 HEARING DATES: 30/10/2006 DATE OF JUDGMENT: 11/29/2006 APPLICANT on Notice of Motion (Yamamoto Realty Co Pty Ltd) Mr J Fernon SC SOLICITORS: Freehills APPLICANT on Notice of Motion (Cape Bouvard Properties Pty Ltd) Mr A Moses of counsel LEGAL REPRESENTATIVES: SOLICITORS: Mallesons Stephen Jaques RESPONDENT on Notice of Motion (Secure Parking Management Pty Ltd) Mr B Rayment QC with Mr B Cross of counsel SOLICITORS: Woods & Day JUDGMENT: INDUSTRIAL COURT OF NEW SOUTH WALES CORAM: Haylen J 29 November 2006 Matter No IRC 1560 of 2005 SECURE PARKING MANAGEMENT PTY LTD v YAMAMOTO REALTY CO PTY LTD AND ANOR Application under s 106 of the Industrial Relations Act 1996 JUDGMENT [2006] NSWIRComm 377 1 In March 2005, Secure Parking Management Pty Ltd ("Secure Parking") commenced proceedings under s 106 of the Industrial Relations Act 1996 seeking relief and certain orders arising from its operation and management of a car park in the basement level of a property situated at 99 Walker Street, North Sydney, such property comprising an office tower and retail outlets. The lease commenced on 1 January 1998 and terminated on 31 December 2005. In 1998, the applicant entered a lease with Yamamoto Realty Co Pty Ltd ("Yamamoto") to operate and manage the car park. 2 An Amended Summons for Relief stated that the Development Approval for the building required the basement car park to be operated and managed by the owner of the building for tenants and their visitors. Secure Parking was fully aware of the terms of the Development Approval and agreed to enter the lease. The Development Approval provided for a car park for a maximum of 182 car spaces. Under the terms of the lease, the base annual rental for the premises in 1998 was $1.1 million but that was to be reviewed yearly throughout the term of the lease and was to increase by a figure of between 4 per cent and 8 per cent annually pursuant to a formula set out in the lease document. 3 Secure Parking claimed in the Amended Summons that, under the terms of the lease, Yamamoto placed specific prohibitions on the applicant in carrying out the operation of the car park at the premises and also imposed onerous specific obligations upon the applicant which were alleged to limit the applicant's right to use the premises to maximise turnover and profit. It was alleged that from 2002 the gross revenue in the operation and management of the car park was reduced substantially due to a number of factors: (a) the departure from the building of some major tenants and users of permanent parking spaces; (b) a reduction by existing tenants of a number of permanent parking spaces used by them; and (c) market forces operating to reduce the fees which could be charged by the applicant for monthly parking, daily parking and early bird parking. 4 Despite the reductions in gross revenue, Yamamoto continued to increase the base rent charged to Secure Parking. As a result, Secure Parking began to incur losses in the operation and management of the car park in the lease years 2003 and 2004 and asserted those losses would continue in 2005. Although Yamamoto was said to be aware of these losses and the inability of Secure Parking to make a profit, it nevertheless refused to re-negotiate the terms of the lease. Secure Parking also alleged that Yamamoto failed to respond to or participate in any marketing initiatives proposed by Secure Parking in an attempt to increase the revenue of the car park so that Secure Parking could attempt to meet the rental obligations imposed on it under the lease. 5 In late October 2004, Cape Bouvard Properties Pty Ltd ("Cape Bouvard") purchased the building and the contract of lease was assigned from Yamamoto to Cape Bouvard. Secure Parking then made representations to Cape Bouvard seeking to reduce the rent payable under the lease. These representations were rejected. 6 The Amended Summons sought that the terms of the lease be varied in its operation at particular times so as to effectively reduce the rent payable periodically by Secure Parking. Ancillary orders were also sought requiring fair consultation and negotiation processes due to the changed business circumstances and requiring good faith dealings in assisting Secure Parking to obtain the best return possible in relation to the business. The core of the claims made in the Amended Summons is attached as an Annexure to this judgment. 7 In March 2005, Yamamoto filed a Notice of Motion seeking a declaration that Division 2, Part 9, Chapter 2 of the Act did not apply to the contract or arrangement the subject of the proceedings, and accordingly, the Court had no jurisdiction in relation to Yamamoto in respect of the proceedings. The essence of the Grounds and Reasons pleaded was that the lease relied upon by Secure Parking and any other related condition or collateral arrangement was not a contract whereby a person performs work in an industry. That Motion was stood over by consent while the parties awaited the decision of the High Court in a number of matters dealing with the operation of s 106 of the Act. On 1 September 2006, Cape Bouvard (a company added to the proceedings in place of the previous second respondent that had been incorrectly identified) also filed a Notice of Motion in similar terms challenging the jurisdiction of the Court to deal with Secure Parking's application for relief, claiming that the lease relied on by Secure Parking and any other related condition or collateral arrangement was not a contract whereby any person performed work in an industry. Without objection, an extension of time was granted to allow this Motion to be brought in accordance with the Rules of the Court. 8 The first respondent pointed to the joint judgment of Gleeson CJ, Gummow, Hayne, Callinan and Crennan JJ in Fish v Solution 6 Holdings Ltd (2006) 227 ALR 241, namely: Performance of work in an industry is the hinge about which s 106 turns. It is the arrangements (contractual and non-contractual) whereby a person performs work in an industry that the Court may avoid or vary. The joint judgment in Fish had referred with implicit approval to the decision of the High Court in Stevenson v Barham [1977] 136 CLR 190 where the majority had stated: The relevant jurisdictional factor to be established in the Commission was that 'if the contract is one which leads directly to a person working in an industry it has the requisite industrial character - it is a contract 'whereby a person performs work in any industry' ... . (at [27]). 9 In Mitchforce Pty Ltd v Industrial Relations Commission of New South Wales (2003) 57 NSWLR 212, reference was made to the judgment of Mahoney JA in Production Spray Painting & Panel Beating Pty Ltd v Newnham (1991) NSWLR 644, namely, that it would not be sufficient for the application of what is now s 106 that the performance of relevant work would be merely contemplated or envisaged as a possible consequence of the transaction. The section looked at the purpose of the transaction itself and whether the purpose of the transaction was that relevant work be performed. It was not sufficient if work was merely an accidental incident or consequence of the transaction. Further, in Production Spray Painting, Priestley JA and Handley JA drew the distinction between a contract which led directly to the performance of work in an industry on the one hand and, on the other, a contract that did so only indirectly or in a remote or consequential manner. 10 It was submitted that the purpose of a lease was to give a tenant the right to exclusive possession of land for specified periods. In Mitchforce, Spigelman CJ had referred to the obligations of the lessee under the lease in question in that case and to various provisions that contemplated that the lessee would be physically active on the premises. The mere contemplation that some type of work would be performed was not enough to satisfy the test of jurisdiction. In Mitchforce, the lease contained no express term obliging the lessee to conduct the business but it was observed that, even if such a term did exist, it would not be determinative of the issue of jurisdiction. Thus, the obligation for the repair and maintenance of the premises in Mitchforce was insufficient to attract jurisdiction - the obligation did not lead directly to the performance of work. 11 In Awad v World Best Holdings Pty Ltd (2005) 146 IR 9, a Full Bench of the Commission referred to the provisions of a lease requiring physical activity, namely, the lessee being obliged to conduct his business on the premises and to keeping the premises open during such days and hours as were regular for that type of business in the trade areas of the Sydney Metropolitan district. The Full Bench observed that this provision on its own did not lead directly to the performance of work. The obligation on the lessee to conduct his business on the premises was, in effect, a negative covenant preventing the lessee from operating the business beyond the boundaries of the premises. Also, an obligation to keep the business open during such days and hours as were regular could not be said to lead directly to the performance of work. 12 The applicant's Amended Summons in the present matter alleged that, pursuant to the lease, the applicant was required to perform work in the car parking industry. Clause 8.1 of the lease, however, was a negative stipulation requiring that the lessee must not use the premises other than as a car park - it did not require the performance of work but merely contemplated that work would be done which was insufficient to invoke the Court's jurisdiction. This was a similar clause, it was submitted, to the lease in Awad where the lessee was not permitted to use the premises other than for the sale of takeaway foods pursuant to a menu that was to be approved by the lessor. 13 Item 6 of the Appendix to the lease laid down the permitted use of the premises as a car park. This provision was no different from Clause 8.1. 14 Clause 8.6 of the lease dealt with signage at the premises and, while it may contemplate work, by itself that was insufficient. That requirement as to signage did not lead directly to performance of work under the contract. 15 Clause 8.7 of the lease dealt with the weight of vehicles allowed on the premises and, again, did not directly lead to the performance of work. Clauses 8.5 and 13.1 of the lease firstly placed prohibitions on the lessee's use of the premises, hours of access and signs and, secondly, contained lessee's covenants (including a requirement that the lessee must ensure that, at all times during the operating hours, the business conducted in the premises was conducted in an efficient, proper and businesslike manner; that the lessee was to use its best endeavours to procure that the best return obtainable was derived from the business conducted in the premises; and, was to ensure that all employees, agents or contractors engaged by the lessee in connection with the operation of the business carried out their duties to the highest standards and complied with any directions from time to time given by the lessor). The premises were not to be used for any other purpose than car parking. The car park was to be conducted to a standard reasonably required by the lessor and the lessee could not alter or amend the operating hours without written approval of the lessor. It was submitted that none of these clauses (consistent with the judgments in Mitchforce and Awad) required the performance of work or led directly to the performance of work. Similarly, Clauses 6.3(g) and (h) regarding compliance by the lessee with applicable regulations, did not lead directly to the performance of work. 16 The complaint of the applicant was that the rent payable under the lease was so high that it could not make a profit. The applicant submitted that, in effect, it was therefore required to remunerate the first respondent by doing work and providing services for the first respondent for which the applicant was unpaid. This characterisation of the operation of a lease was rejected by the majority in Mitchforce, where Spigelman CJ stated: [52] A contract or arrangement which was not at the outset a contract 'whereby a person performs work in any industry' cannot subsequently be transformed into one by reason of a change in economic or commercial circumstances. 17 The thrust of that submission was supported by the second respondent Cape Bouvard. The second respondent was the current owner of the premises at North Sydney. The first respondent Yamamoto was the owner of the premises prior to the second respondent. Ownership of the premises was transferred to the second respondent in late October 2004. The lease that was the subject of the applicant's Amended Summons was entered into between the first respondent (the owner of the premises at the time) and the applicant in relation to the premises in late February 1998. By operation of ss 117 and 118 of the Conveyancing Act 1919 (NSW) the second respondent became the lessor in place of the first respondent under the lease when it became the owner of the premises in late October 2004. This was not in dispute. 18 The second respondent submitted that it was plainly desirable to determine the question of jurisdiction at a preliminary stage because the absence of jurisdiction was clear. This was the approach taken in Euphoric Pty Ltd v Ryledar Pty Ltd (2002) 117 IR 1. It was submitted that the provisions of the lease were sufficient to resolve the issues at this early stage. The applicant had clearly invoked the jurisdiction of the Court on the basis of the terms of the lease as the relevant contract for the purposes of s 105 of the Act. Unlike Mitchforce Pty Ltd v Starkey (No 2) (2003) 130 IR 378, no other basis for jurisdiction other than the lease was alleged by the applicant. 19 The applicant had relied on four particular clauses of the lease in asserting that it was required to perform work in the car parking industry. It was submitted that the present case was factually indistinguishable from the factual matrix involved in Mitchforce (No 2). 20 The second respondent drew heavily on the facts found in Mitchforce (No 2) noting that in that case there were factors that more strongly pointed to work being performed as a direct consequence of entering the lease. The common purpose was that the applicant would conduct the business of a hotel from the tavern the subject of the lease; part of the consideration for the lease was tied to the continued operation of the lease and one clause provided that the quantum of rent would be proportional to the turnover of the tavern. There was some evidence that the lessor had a real interest in the ongoing performance of work at the tavern. Despite these factors, the majority of the Full Bench went on to draw a distinction in the situation where the applicant would operate a business from the premises and thus perform work, a transaction which directly led to the performance of work. The majority held that this distinction was important - it ultimately served to support the finding made by the majority that the transaction represented by the lease was a transaction the applicant had entered into for the purpose of receiving a return on a capital asset: the respondent entered the lease in order to obtain use of the capital asset from which it could conduct a business. In the Court of Appeal, Spigelman CJ found that Hungerford J was correct in saying that the lease contemplated the performance of work by or on behalf of the lessee and that the tavern was a purpose built structure the value of which depended on the maintenance of the licence attached to the premises. Notwithstanding these findings, Spigelman CJ went on to find that the purpose of the agreement was to provide one part of the means for conducting a business by the lessee. 21 The lease in the present case simply transferred the right to occupy a business space on particular terms and conditions from the lessor to the lessee. It provided only one of the necessary components required by the applicant to operate its business. In this respect, it was indistinguishable from the lease in Mitchforce. It was submitted that it was difficult to conceive a commercial lease leading more directly to the performance of work than the lease considered by the Court of Appeal and the Full Bench of this Court in the Mitchforce litigation. 22 The applicant did not provide any evidence to show how the standardised commercial lease in the present case was the type of contract which would, unlike the Mitchforce lease, lead directly to the performance of work. The applicant did not plead any collateral arrangement or overall arrangement in the present case and the only contract pleaded within the meaning of s 105 of the Act was the lease. As it stood, the lease in the present case was not a contract whereby work was performed in an industry. 23 It was further submitted that, even if the lease was within jurisdiction, the orders sought by the applicant had nothing to do with the performance of work - the orders sought operated only to reduce the rent payable under the lease. It was submitted that the payment of rent was within the "heartland" of the traditional usage of land purpose of a lease and could not have any bearing on the performance of work. 24 The applicant argued that the attack on jurisdiction by the respondents was premature and that, in accordance with the views strongly expressed by the Full Bench in Nagle v Tilburg (1993) 51 IR 8, the motions should be dismissed. In the present case, the essential facts were not settled and the respondent's arguments rested solely on the terms of the lease and ignored the fact that the lease was a contract to manage and operate a parking station for the respondent. 25 In Majik Markets Pty Ltd v Brake and Service Centre Drummoyne Pty Ltd & ors (1992) 28 NSWLR 443, Kirby P at 446 noted that, when a challenge to jurisdiction was made when the evidence had not yet been adduced in the substantive proceedings, while it was often convenient to do so to avoid the inconvenience of a protracted hearing, threshold relief of the kind sought was to be conserved to a clear case where it was plain that the invocation of the jurisdiction impugned was wholly misconceived or, upon analysis, lacked an arguable legal foundation. The claim for such relief had to demonstrate that no order could be made which would be within jurisdiction and that burden was a heavy one. 26 In relation to the reliance on the judgments in the Mitchforce litigation, it was submitted that there the lessor owned the licence and the lessee operated the hotel. One of the interests of the landlord was that, when he got the hotel back at the end of the lease, the licence would still be valuable to him and would still be in force. Mitchforce was to be understood in that context and the provisions of the lease were not provisions where one person did work for another - they were designed to ensure the property rights (being the hotel licence) were maintained. In the present case, the applicant's landlord was not merely its landlord: the respondents were the landlord of a building and one of the services they offered to its tenants was parking. That was something the respondents could have done themselves - they could have operated the parking station, complied with the various lease requirements and kept it open for tenants' parking. Instead, the respondents engaged in a contractual relationship with the applicant as a result of which they obtained the benefits of the management of the car park in the respondent's building. It was submitted that this was, in every sense, work done by one person for another. In all the debates in the authorities about the operation of this section of the Act, it has never been doubted that at the heart of the section is the provision of work by one person for another. 27 The early cases under s 88F of the Industrial Arbitration Act dealt with owner drivers, where a truck driver would be enticed to buy a truck and operate it under the contract carrying the goods of another party - as the contract operated, the base rates became uneconomical. The contract or arrangement was varied under the section so as to give an owner driver reasonable remuneration. 28 In deciding where this lease lay in terms of the debate about jurisdiction it was appropriate to consider the provisions of Clause 13. Under this clause, the lessor played a prominent part in the conduct by the lessee of its activities, reflected in the fact that the applicant was running the parking station, managing it effectively under this document for the respondent. Clause 13 required the lessee to conduct its business in good faith and in accordance with the best method of conducting a car park and to a standard reasonably required by the lessor. The lessee was required to keep the premises open, the hours could not be altered without the written approval of the lessor - that is, the lessor told the applicant when it could open and close. The lessee could not amend or alter the terms, conditions or provisions of any contract of parking without the written approval of the lessor. The fees were to be determined in consultation with the lessor and those fees were to be determined for distinct car parking spaces: there would be different fees for reserved and non-reserved parking spaces to a level that met the satisfaction of the lessor. It was submitted that these provisions were indicative of a classic contract whereby one person performed work for another. 29 The present case was to be distinguished from Awad, which related to a shopping centre and where the provision required the fruit shop proprietor to keep his premises open as a fruit shop. In running a shopping centre it was critical to the landlord to have a fruit shop on the premises so that shoppers who wanted fruit and vegetables when they came to the centre would be able to have their requirements fulfilled. The landlord was not selling fruit and vegetables and they were not sold for his particular purposes. Properly approached, the present lease arrangement did not operate in that way. The applicant was working for the respondents as the manager of the respondents' car parking station. This was a radically different situation to that dealt with in the Mitchforce litigation. Under this lease, there were a number of employees, the work was to be performed to the satisfaction of the lessor, the applicant was providing the service of a car park manager even though he was working under a lease. Notwithstanding the formalities that this was work under a lease, one aspect of this relationship was a contract of service between the landlord and tenant and the provision of car parking management services for the landlord. All of those relationships needed to be explored at trial to put the full details before the Court. 30 In the present case, the landlord had the benefit of work provided by the applicant so that it could comply with its contractual obligations to its tenants in that it had a service provided to its tenants, including the car park: the applicant stepped in to enable the landlord to perform that service. The applicant's employees who worked in the car park industry did so for the applicant's profit and also so that the landlord could comply with its own commercial legal obligations. In essence, this was a contract of management and the fact that the arrangement was contained within a lease in no way removed it from the jurisdiction of the Court. 31 When the evidence was adduced, the Court would then be seised of the detail of the relationship between the employees of the applicant, the nature of the employees who were working there and the relationship between the work performed as the manager of the car park and the income that the applicant received. After the lease was entered into, the conduct of the respondent made it unfair because that contract effectively painted the applicant into a corner where it had to comply with the provisions of the lease and had to do so without appropriate remuneration. That situation was like that of the owner driver but on a different scale. DELIBERATION 32 There is considerable force in the submissions for the respondents in drawing attention to the terms of the Amended Summons and its concentration on numerous provisions of the lease agreement, (eg. see the extract from the Amended Summons annexed to the judgment). The original Summons filed in March 2005 was supported by a formal affidavit of a director of the applicant stating that the Summons had been read and attesting to the truth of the matters of fact contained within the Summons. The applicant had filed no further evidence and the respondents had each accepted that the matters set out in the Amended Summons were to be accepted for the purposes of dealing with the Motions, which effectively sought to strike out the proceedings for want of jurisdiction. 33 In the course of argument, the Court was taken to a number of reported decisions dealing with lease agreements and "commercial" contracts and pointing to the similarity between provisions that have been held to be outside the jurisdiction of the Court and the provisions particularly relied upon and set out in the Amended Summons by the applicant. Those cases included the various decisions in the Mitchforce litigation, Euphoric and Awad. The respondents' submissions, as they were developed, had an initial attractiveness and it appeared possible to determine the issue of jurisdiction by reference to the matters contained in the Amended Summons and by reference to the entire lease agreement put into evidence by the respondents. However, during the course of submissions for the applicant, it became clear that the issue of jurisdiction involved a somewhat more complex consideration of characterisation, with the applicant arguing that this was not simply a case of a challenge to the terms of a lease but that the essential issue was whether the arrangement between the parties could be properly characterised as an agreement whereby the applicant was to undertake the operation and management of the car park in the basement levels of the building on behalf of the respondents and that the agreement at least contemplated, if not required, the performance of work in an industry. 34 The applicant's characterisation point is easily lost or capable of being overlooked because of the extensive concentration of the Amended Summons upon particular provisions of the lease agreement. Notwithstanding this concentration, there are several paragraphs in the Amended Summons that refer to the applicant entering a lease with the respondents to operate and manage the basement level car park and to do so in furtherance of the respondents' obligations to conduct such a car park. Those allegations are to be found in paragraphs 11, 12, 19, arguably in 21, in 24, 25, and in particular in sub-paragraphs of (c) and (j) of the paragraph dealing with "Matters of Law". The Amended Summons also asserted in paragraph 20 that, pursuant to the lease, the applicant was required to perform work in the car parking industry and further alleged that, in substance, the applicant was required to remunerate the first respondent for doing work and providing services for the first respondent for which the applicant was unpaid. Consideration of those paragraphs of the Amended Summons indicates that the applicant was placing characterisation of the lease agreement and the substance of the arrangement at the heart of its case, although the force of those allegations was somewhat overwhelmed by the extensive references to particular clauses of the lease agreement. The form and content of the Amended Summons is therefore to be taken to squarely raise the issue of characterisation of the arrangement and as denying that the contract, in its widest definition, was simply limited to the terms of the lease agreement or some similar commercial agreement. It may properly be stated that the characterisation argument is one of substance, identifiable within the Amended Summons and not merely a forensic flourish made by counsel in a forlorn bid to give life to proceedings that were clearly fatally flawed. 35 The applicant submits that, in order to make good its characterisation case, the Court will need to be in possession of all of the evidence and that it is premature to determine the question of jurisdiction at a stage when nothing more has happened than the filing of an Amended Summons supported by a formal affidavit. The respondents, however, have raised an issue of substance having regard to the terms of the Amended Summons. The applicant's case considered at this early stage could not be regarded as being as strong as the circumstances dealt with by the Full Court in Wirraway (NSW) Pty Ltd and anor v Ultra Tune Australia Pty Ltd [2006] NSWIRComm 300. The applicant's case may be regarded as somewhat more borderline, but, as Handley JA noted in relation to franchise agreements in McDonald's Australia Holdings Ltd v Industrial Relations Commission of New South Wales (2005) 223 ALR 78: [ 102] Characterisation of a contract to determine whether it is within the jurisdiction of the Commission under s 106 will raise questions of fact and degree in franchise cases near the borderline and the decision may not be an easy one . 36 The applicant's characterisation of the arrangement may prove to be unsustainable, but, at this stage, it requires considerable evidence in order for the point to be fully fleshed out: that is a risk the applicant takes for, if it fails to make out that case at the full hearing of the matter, or when all its evidence is filed, it will be liable for considerable costs. It is accepted, without hesitation, that the respondents have a legitimate interest in avoiding a protracted hearing by having a jurisdictional point determined at an early stage, but it has long been understood that when that stage is "appropriate" needs to be determined in each case. For instance, it is to be noted that in Edwards v Kingsmede Pty Ltd and anor [2004] NSWIRComm 82, Marks J was able to determine an interlocutory strikeout application in s 106 proceedings because of the manner in which the Summons had been framed and the fact that all of the evidence in-chief in support of the applicant's claim had been filed. Similarly, in Taouk v Fairline Corporation Pty Ltd (2005) 147 IR 365, Boland J determined that he had sufficient material at the interlocutory stage of a challenge to jurisdiction in a s 106 application to determine that issue. The Mitchforce cases, indeed, were decided after a full hearing and the making of final orders. 37 In Majik Markets Pty Ltd v Brake and Service Centre Drummoyne Pty Ltd (1991) 28 NSWLR 443, the Court of Appeal dealt with the principles to apply when the Court entertained a challenge to jurisdiction in a preliminary or threshold application. While noting that such a course was often sensible, it was stated that any threshold relief of that kind was to be conserved to a clear case where it was plain that, "... the invocation of the jurisdiction impugned is wholly misconceived or, upon analysis, lacks an arguable legal foundation" (per Kirby P at 446). 38 In dealing with the task of the Court of Appeal where prerogative relief was sought, Mahoney JA dealt with a general principle of relevance to the current proceedings when he stated: Insofar as prerogative relief is sought on the ground that the arrangement which has been made does not fall within s 88F, it is in principle necessary that this court know what the arrangement in question is so that it can determine whether that arrangement is one which falls within s 88F. Ordinarily, what the arrangement is can be determined only after the whole of the evidence has been given before the Commission and the Commission has made the findings of fact necessary to determine what the arrangement is. (at 455). The Full Court of the Industrial Court in Nagle v Tilburg & anor (1993) 51 IR 8 at 11 cited the above passages from Majik Markets and drew from them the proposition that, whilst it was desirable for a case to be determined at an early stage it was only able to do so at the appropriate stage of the proceedings where the facts, either established by evidence or plainly agreed in terms, enabled the Court to determine what the contract or arrangement was or at least the parameters of the contract or arrangement. Unless the facts were sufficiently established to enable the Court to be satisfied it has the necessary material to reach a clear and final decision on the question, then the appropriate stage had not been reached for such a determination to be made. 39 In Nagle v Tilburg, the parties tendered an agreed statement of facts, but the nature of that document was found by the Court to be unhelpful. The issue of characterisation of the arrangement was at the heart of the argument, with the respondents to the application for relief arguing that the contract was no more than a sale of a commercial business without an ongoing relationship under which work was to be performed or, alternatively, if there were mutual obligations arising on a continuing basis they were nevertheless to be viewed as part of a commercial transaction and outside the scope of the Act. The applicant in those proceedings argued that, however the relationship might be labelled, properly viewed, it was one between parties under which persons were anticipated to perform work in an industry. Of these submissions, the Full Court of the Industrial Court said: We have given earnest consideration to the mutual desire of the parties for the question of jurisdiction arising to be resolved on a preliminary basis and we recognise that Marks J felt able to so resolve the matter. We have given consideration also to the agreed facts in light of the submissions put both at first instance and on appeal. However, we have to say that we find the procedure so adopted by the parties in the determination of this important jurisdictional point by way of a preliminary procedure wholly unsatisfactory. Indeed, applying the principles in which the summary disposal of claims may be allowed to the facts of the present case, we are of the view that the state of those facts were such that the separate determination of the jurisdiction question was premature. It is simply not possible, in our view of the circumstances as they are known, to be confident that the claim made in the summons could not succeed or was so manifestly faulty it did not admit of argument; on the other hand, we find ourselves unable to conclude in any clear way that jurisdiction has been established at this stage. ( at 13). 40 In Bell and anor v Macquarie Bank Ltd and anor (No 2) (1999) 87 IR 126, a Full Bench of the Commission in Court Session rejected the view that Nagle v Tilburg was authority for the proposition that the usual course was that a question of jurisdiction should be argued as a threshold matter in applications brought under s 106 of the Act. The effect of a motion to dismiss for want of jurisdiction was not to give the respondent an opportunity to put the applicant to proof of jurisdiction. In Euphoric Pty Ltd v Ryledar Pty Ltd and anor (2002) 117 IR 1, another Full Bench of the Commission in Court Session reviewed the authorities dealing with an interlocutory challenge to jurisdiction in relation to applications brought under s 106 of the Act and, in particular, referred to the judgment in Virtue v New South Wales Department of Education and Training (1999) 92 IR 428, noting the principles set out at 447-448 as follows: (1) The discretion of a court to determine a case at an early stage, when appropriate, has been repeatedly accepted. (2) As a general rule it is desirable that an objection to jurisdiction be determined as early as circumstances will conveniently admit so that the tribunal does not embark on a hearing which it lacks authority to conduct. The course of a court entertaining a challenge to jurisdiction in a preliminary or threshold way is often a sensible one where a party has a substantial threshold argument which, if it succeeds, will knock out the claim and save the costs and inconvenience that attend a protracted hearing of proceedings on the merits. (3) However, a further general proposition is that all issues arising should be dealt with in the substantive proceedings unless the basis for a challenge, either on jurisdictional grounds, or for lack of a reasonable cause of action, be clearly demonstrated. (4) Threshold relief of the kind sought here must be conserved to a clear case where it is plain that the invocation of the jurisdiction impugned is wholly misconceived or, upon analysis, lacks an arguable legal foundation. (5) Necessarily, refusal of relief at the threshold will not finally determine that jurisdiction exists for any order which the Court might make between the parties. This is because, to secure relief, the claimants must demonstrate that no order could be made which would be within jurisdiction. The resulting burden is a heavy one. (6) Accordingly, whilst it is desirable for a case to be determined at an early stage it is only open to do so at the appropriate stage of the proceedings. That is, where the facts, either established by evidence or plainly agreed in terms, enable the Court to determine what the contract or arrangement is or, at least, the parameters of the contract or arrangement. In other words, unless the facts are sufficiently established to enable the Court to be satisfied it has the necessary material to reach a clear and final decision on the question then the appropriate stage has not been reached for such a determination to be made. (7) Similarly, the jurisdiction to terminate an action summarily for want of a cause of action is to be sparingly employed and ought not to be used save where the lack of the cause of action was clearly demonstrated. 41 More recently, in a different context, these principles have been briefly revisted by the High Court in Agar v Hyde & anor (2000) 201 CLR 52. In the joint judgment of Gaudron, McHugh, Gummow and Hayne JJ it was stated: [57] It is, of course, well accepted that a court whose jurisdiction is regularly invoked in respect of a local defendant (most often by service of process on that defendant within the geographic limitations of the court's jurisdiction) should not decide the issues raised in those proceedings in a summary way except in the clearest of cases. Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways (Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91, per Dixon J; General Steel Industries Inc v Commissioner for Railways (NSW) 112 CLR 125 at 30, per Barwick CJ) but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way. 42 Having regard to the wealth of authorities to which the Court was directed, although there was an initial attraction to the respondents' propositions, ultimately this is a case which, on balance, should proceed to the filing of evidence to enable the Court to be in a position to determine the issue of jurisdiction. As propounded by the applicant, the issue of characterisation is one that should be explored but only when all the relevant evidence has been brought forward by the parties. In view of that conclusion, it is not appropriate at this stage to consider making the orders sought by the respondents. In this case, the preferable course is to adjourn the Notices of Motion so that they might be heard and determined at an appropriate time. Those circumstances also suggest that the appropriate order as to costs should be that costs be costs in the cause and the Court will proceed on that basis unless the parties indicate to the Court within seven days that they wish to be heard on that matter. Finally, it is appropriate for the Court to proceed to conciliation pursuant to the provisions of s 109 of the Act. The parties are to advise the Court of their availability for the purposes of conducting conciliation. ANNEXURE Extract from Amended Summons for Relief 12. The Development Approval for the Building required a basement car park to be operated and managed by the owner of the Building for the tenants of the Building and their visitors. The Applicant was fully aware of the terms of the Development Approval for the Building and the Premises and agreed to enter The Lease. Particulars The Development Approval provided for a car park with a maximum of 282 car spaces and allocated in the following proportions: Commercial offices spaces: 86 Spaces Retail: 16 Spaces Food Hall: 58 Spaces Minor Restaurants: 27 Spaces Major Restaurants: 95 Spaces 13. The base annual rental for the Premises in 1998 was $1.1 million, which was to be reviewed yearly throughout the term f the Lease, and was to increase by a figure of between 4% and 8% annually pursuant to a formula in the Lease document. Particulars Clause 4.3 of the Lease 14. The Lease further provided for the payment of a percentage rental as follows: Particulars Clause 4.1(c)(3) of the Lease: "Percentage Rent" means: (A) If the Receipts exceed the Threshold Amount by not more than $60,000.00, then fifty percent (50%) of the excess over the Threshold Amount: (B) If the Receipts exceed the Threshold Amount by more than $60,000.00 but not more than $135,000.00 then the aggregate of $30,000.00 and sixty percent (60%) of the excess over $60,000.00; and (C) If the Receipts exceed the Threshold Amount by more than $135,000, the aggregate of $75,000.00 and eighty percent (80%) of the excess over $135,000.00 15. The Threshold Amount means:- 4.1.(c)(2) 'Threshold Amount' means, subject to adjustment pursuant to this clause 4.1.(c)(2), $1,350,000.00. The Threshold Amount shall be adjusted on each of the Review Dates by multiplying the Threshold Amount applicable for the Lease Year immediately prior to the relevant Review Date by a fraction the numerator of which shall be the Price Index (as defined in clause 4.3(b)) applicable for the quarter ending immediately prior to that relevant Review Date and the denominator of which shall be the Price Index applicable for the quarter ending immediately prior to the date twelve (12) months before the relevant Review Date provided that if the faction is:- (A) greater than 108/100, then the fraction shall be deemed to be 108/100; or (B) less than 104/100, then the fraction shall be deemed to be 104/100. 16. "Receipts" under the Lease means:- 4.1(c)(i) " Receipts" means the annual gross receipts of the Lessee. 17. The Lease document provided for rent review dates during the term of the Lease. Such review dates are:- 1 January 1999, 1 January 20001, January 2001, 1 January 2002, 1 January 2003, 1 January 2004, 1 January 2005. 18. The annual rent payable under the Lease is to be reviewed annually in accordance with the formula provided in Clause 4.3(a) of the Lease document:- Particulars Clause 4.3(a) "... the rent payable under this Lease will be reviewed on each of the Review Dates by multiplying the rent payable for the year immediately prior to the relevant Review Date by a fraction the numunerator of which shall be the Price Index (as defined in Clause 4.3(b)) applicable for the quarter ending immediately prior to that relevant Review Date and the denominator of which shall be the Price Index applicable for the quarter ending immediately prior to the date twelve (12) months before the relevant Review Date provided that if the fraction is:- a. greater than 108/100, then the fraction shall be deemed to be 108/100; or b. less than 104/100, the fraction shall be deemed to be 104/100 Clause 4.3(b) For the purposes of clauses 4.1.(c)(2) and 4.3(a), the expression "Price Index" means the Consumer Price Index (All Groups) for Sydney as published by the Australian Bureau of Statistics provided that if such index is suspended or discontinued or modified so that it does not reflect on a consistent basis changes which have occurred in the cost of living in Sydney the expression will mean such index which in the opinion of the Australian Statistician whether published or advised at the request of either party does reflect on a consistent basis changes which have occurred in the cost of living in Sydney and provided further that if the Australian Statistician has not published and will not advise an appropriate index the expression will mean such index that may be agreed upon in writing by the praties and in default of agreement for a period of fourteen (14) days such index as may be determined at the request of either party by the President of the New South Wales Division of the Australian Institute of Valuers and Land Administrators (Inc) or his nominee" 19. Pursuant to the Lease the First Respondent required the Applicant to use the Premises for the management and operation of a "Car Park" and provided that the Applicant must not use the Premises otherwise than for the purpose of a Car Park. 20. Pursuant to the Lease, the Applicant was required to perform work in the car parking industry Particulars (i) Clause 8.1 of the Lease: The Lessee must not use the Premises otherwise than for the Purpose stated in Item 6 of the Appendix (ii) Item 6 of the appendix provided "Permitted Use: Car Park". (iii) Clause 8.6 of the Lease provides: (a) The Lessee must install and maintain at its cost such signs relating to, and setting out terms and conditions of the use of the Premises by motor vehicles in such location in and near the Premises or the Building as the Lessor reasonably requires from time to time. (b) The Lessee may with the Lessor's prior written consent (which shall not be unreasonably withheld) install and maintain at its cost any other signs relating to the proper and efficient operation of the car park in the Premises" . (iv) Clause 8.7 of the Lease provides: ... The Lessee must ensure that any motor vehicles which enter the Premises do not exceed any maximum tare weight notified by the Lessor ... (v) Clause 13.1 of the Lease provides: In addition to the Lessee's covenants as to the use the Premises contained elsewhere in the Lease; (a) The Lessee must 1. ensure that at all times during the operating hours the business conducted in the Premises is conducted in an efficient proper and business-like manner; 2. use its best endeavours to procure that the best return obtained is derived from the business conducted in the Premises; and 3. ensure that all employees, agents or contractors engaged by the Lessee in connection with the operation of the business conducted in the Premises carry out their duties to the highest standard and comply with an directions from time to time given by the Lessor. (b) The Lessee must not use or permit to be used the Premises or any part therefore for any purposes other than car parking. (c) The Lessee must conduct its business in the Premises at all times in good faith in accordance with the best methods of conducting a car park and to a standard reasonably required by the Lessor. The Lessee must not commit and must use its best endeavours not to suffer or permit any disorderly, offensive, improper, illegal or unlawful act to be committed or performed on the Premises. (d) The Lessee must keep the Premises open as a commercial car parking station during the operating hours. The Lessee must not alter or amend the operating hours without the written approval of the Lessor. (e) The Lessee must provide all necessary and sufficiently qualified and trained staff for the operation of its business conducted in the Premises and must provide such staff with the Lessee's standard issue uniforms acceptable to the Lessor (such acceptance not to be unreasonably withheld). The number of staff provided must be sufficient in the Lessor's opinion to manage adequately the business conducted in the Premises and must not be altered without the written approval of the Lessor ..." (f) The Lessor has approved the terms, conditions and provisions of the Contract for parking in the Premises. The Lessee must not amend or alter the terms, provisions or conditions of any contract for parking without the written approval of the Lessor. (g) (1) In consultation with the Lessor the Lessee will determine carparking fees for persons who park motor vehicles in the Premises. The Lessee must determine distinct carparking spaces for reserved and non-reserved car parking spaces to the satisfaction of the Lessor. The carparking fees approved by the Lessor from time to time must not be varied without the prior written approval of the Lessor. The Lessee must submit written details of all fees and increases in fees to the Lessor at least one (1) month prior to the proposed implementation of such fees or increases in fees. Subject to subparagraph (3), the Lessor will not unreasonably withhold its consent to an increase in car parking fees if the increased fee does not exceed by more than five per centum (5%) the highest car parking fee charged by comparable car parks in North Sydney (such car parks being selected by agreement between the Lessor and Lessee and failing agreement within seven (7) days, selected by the Lessor). (2) The Lessee acknowledges and agrees that the Lessor has the right to determine the priorities of car parking space availability in the Premises and that subject to payment of the car parking fees approved by the Lessor priority will be given to tenants of the Building and their invitees and customers. The Lessee acknowledges and agrees that eight-six (86) car parking spaces (or such other number as notified by the Lessor in writing from time to time) will be made available to tenants of the Building and their invitees and customers. The Lessee must enter car parking licence agreements with such tenants of the Building and on such terms and conditions as required by the Lessor. (3) Notwithstanding the provisions of subparagraph (1), the Lessee must not increase the car parking fees payable by tenants of the Building more frequently than twice in every twelve (12) months. (h) The Lessee must use its best endeavours to ensure that the area shown hatched on the plan of the level known as "Basement Level B1" and identified as the "Loading Dock" in the plan annexed hereto and marked "'B" is not used for any purpose other than for the loading and unloading of items to or from bona fide delivery vehicles whilst they are making deliveries to or from the Building. The Lessee must keep a record of all users of the loading dock and must endeavour to ensure that all vehicles using the loading dock only for such period as is reasonable having regard to the items being loaded or unloaded. (vi) Clause 6.3(g) The Lessee must at the Lessee's expense, together with its contractors servants and agents comply with all statutes Ordinances Proclamations Orders and Regulations By-Laws Orders and Directions affecting the Premises or any fixtures or fittings installed by the Lessee therein; (vii) Clause 6.3(h) The Lessee must at the Lessee's expense comply with any notices or orders which may be given by any competent authority in respect of the Premises or their use by the Lessee and will keep the Lessor indemnified in respect of all such matters PROVIDED THAT the Lessee is under no liability in respect of any structural alterations required in terms of this sub-clause (h) and the preceding sub-clause (g) unless that liability arises out of the Lessee's use or occupation of the Premises. (viii) The Development Approval required the owner to operate and manage the basement car park in the Building for tenants of the Building and their visitors in that the Development Approval provided for a car park with a minimum of 282 car spaces allocated in the following proportions: Commercial offices: 86 Spaces Retail: 16 Spaces Food Hall: 58 Spaces Minor Restaurants: 27 Spaces Major Restaurants: 95 Spaces 21. Pursuant to the Lease, the First Respondent imposed specific prohibitions on the Applicant in carrying out the operation of the Car Park in the Premises, in particular those provided in Clause 8.5 of the Lease. Particulars Clause 8.5 The Lessee must not:- (a) Use or permit to be used for other than their designed purposes any of the fixtures or fittings in the Premises or the Building; (b) Store or use inflammable or dangerous substances upon the Premises; (c) Do or permit to be done on the Premises or in the Building anything which in the opinion of the Lessor may become a nuisance or a disturbance, obstruction or cause of damage whether to the Lessor or to other tenants or users of the Building nor use the Premises in any noisy noxious or offensive manner. (d) Obstruct or interfere with any of the entrances or common areas of the Building; (e) Subject o Clause 8.6, permit any sign advertisement name or notice to be placed on any part of the Premises or Building; (f) Cover or obstruct or permit to b covered or obstructed in any manner or by any article or thing, the ventilating shafts or air inlets or outlets which enable air to flow in or out of the Premises or any part of the Building; or (g) Use any heating or cooling devices or any other device or machine which in the opinion of the Lessor may interfere with the efficient running of the air-conditioning plant for the Building or increase the running costs thereof. 22. The First Respondent imposed onerous specific obligations upon the Applicant under the Lease and the Second Respondent continues to impose those onerous specific obligations upon the Applicant under the Lease limiting the Applicant's right to use the Premises to maximise turnover and profit. Particulars Clause 8.6 (a) The Lessee must install and maintain at its cost such signs relating to, and setting out terms and conditions of, the use of the Premises by motor vehicles in such locations in and near the Premises or the Building as the Lessor reasonably requires from time to time. (b) The Lessee may with the Lessor's prior written consent (which shall not be unreasonably withheld) install and maintain at its cost any other signs relating to the proper and efficient operation of the car park in the Premises. Clause 8.7 ... The Lessee must ensure that any motor vehicles which enter the Premises do not exceed any maximum tare weight notified by the Lessor ... Clause 13.1 In addition to the Lessee's covenants as to the use of the Premises contained elsewhere in the Lease; (a) The Lessee must (1) ensure that at all times during the operating hours the business conducted in the Premises is conducted in an efficient, proper and business-like manner; (2) use its best endeavours to procure that the best return obtainable is derived from the business conducted in the Premises; and (3) ensure that all employees, agents or contractors engaged by the Lessee in connection with the operation of the business conducted in the Premises carry out their duties to the highest standard and comply with any directions from time to time given by the Lessor. (b) The Lessee must not use or permit to be used the Premises any part thereof for any purpose other than car parking. (c) The Lessee must conduct its business in the Premises at all times in good faith in accordance with the best methods of conducting a car park and to a standard reasonably required by the Lessor. The Lessee must not commit and must use its best endeavours not to suffer or permit any disorderly, offensive, improper, illegal or unlawful act to be committed or performed on the Premises. (d) The Lessee must keep the Premises open as a commercial car parking station during the operating hours. The Lessee must not alter or amend the operating hours without the written approval of the Lessor. (e) The Lessee must provide all necessary and sufficiently qualified and trained staff for the operation of its business conducted in the Premises and must provide such staff with the Lessee's standard issue uniforms acceptable to the Lessor (such acceptance not to be unreasonably withheld). The number of staff provided must be sufficient in the Lessor's opinion to manage adequately the business conducted in the Premises and must not be altered without the written approval of the Lessor ... (f) The Lessor has approved the terms, conditions and provisions of the Contract for parking in the Premises. The Lessee must not amend or alter the terms, provisions or conditions of any contract for parking without the written approval of the Lessor. (g) (1) In consultation with the Lessor the Lessee will determine carparking fees for persons who park motor vehicles in the Premises. The Lessee must determine distinct carparking fees for reserved and non-reserved car parking spaces to the satisfaction of the Lessor. The carparking fees approved by the Lessor from time to time must not be varied without the prior written approval of the Lessor. The Lessee must submit written details of all fees and increases in fees to the Lessor at least one (1) month prior to the proposed implementation of such fees or increases in fees. Subject to subparagraph (3), the Lessor will not unreasonably withhold its consent to an increase in car parking fees if the increased fees does not exceed by more than five per centum (5%) the highest car parking fee charged by comparable car parks in North Sydney (such car parks being selected by agreement between the Lessor and the Lessee and failing agreement within seven (7) days, selected by the Lessor). (2) The Lessee acknowledges and agrees that the Lessor has the right to determine the priorities of car parking space available in the Premises and that subject to payment of the car parking fees approved by the Lessor priority will be given to tenants of the Building and their invitees and customers. The Lessee acknowledges and agrees that eight-six (86) car parking spaces (or such other number as notified by the Lessor in writing from time to time) will be made available to tenants of the Building and their invitees and customers. The Lessee must enter car parking licence agreements with such tenants of the Building and on such terms and conditions as required by the Lessor. (3) Notwithstanding the provisions of subparagraph (1), the Lessee must not increase the car parking fees payable by tenants of the Building more frequently than twice in every twelve (12) months. (h) The Lessee must use its best endeavours to ensure that the area shown hatched on the plan of the level known as 'Basement Level B1' and identified as the 'Loading Dock' in the plan annexed hereto and marked 'B' is not used for any purpose other than for the loading and unloading of items to or from bona fide delivery vehicles whilst they are making deliveries to or from the building. The Lessee must keep a record of all users of the loading dock and must endeavour to ensure that all vehicles using the loading dock are parked in the loading dock only for such period as is reasonable having regard to the items being loaded or unloaded. oo00oo 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.