Caterpillar of Australia Pty Ltd v Industrial Court of New South Wales

[2009] NSWCA 83

Reported Decision:	78 NSWLR 43
Appeal Outcome:	Special leave dismissed with costs by the High Court, 4 September 2009 s103/2009

New South Wales

Court of Appeal

CITATION:	Caterpillar of Australia Pty Ltd v Industrial Court of New South Wales [2009] NSWCA 83
HEARING DATE(S):	28 November 2008
JUDGMENT DATE:	17 April 2009
JUDGMENT OF:	Spigelman CJ at 1; Allsop P at 165; Tobias JA at 166
DECISION:	(1) Order that the record of the Full Court of the Industrial Court of New South Wales in matter No. IRC 227 of 2007 be brought up to this Court; (2) Order that the orders of the Full Court of the Industrial Court of New South Wales of 21 February 2008 and 13 March 2008 in the said proceedings be quashed; (3) Order that the record of the Industrial Court of New South Wales in matter No. IRC 5227 of 2000 be brought up to this Court; (4) Order that any findings of jurisdiction, unfairness or declarations or orders made in or consequent upon the judgments of the Industrial Court of New South Wales (Boland J) in matter No. IRC 5227 of 2000 delivered on: (a) 23 October 2001 – Judgment No. 9; (b) 19 December 2002 – Judgment No. 11; (c) 27 February 2003 – Judgment No. 14; (d) 4 June 2003 – Judgment No. 15; (e) 2 February 2007 – Judgment No. 17. be quashed. (5) Declare that the Industrial Court of New South Wales does not have jurisdiction to make any declarations or orders sought by the second to fourth respondents in matter No. IRC 5227 of 2000 other than dismissing the proceedings and ordering costs against the second to fourth respondent; (6) Subject to the Order in par 8, Order that the second to fourth respondents, or any of them are prohibited, from further proceeding in matter No. IRC 5227 of 2000 in the Industrial Court of New South Wales or upon the Judgments of the Trial Judge and the Judgment of the Full Court of the Industrial Court of New South Wales on 21 February 2008; (7) Subject to the Order in par 8, an Order prohibiting the first respondent from taking any step to further exercise, or purport to exercise, its power pursuant to any provision of the Industrial Relations Act 1996 in matters No. IRC 5227 of 2000 and No. IRC 227 of 2007; (8) An Order that the proceedings be remitted to the first respondent to determine the issue of costs in the proceedings before it and to conduct an enquiry into damages sustained by the applicants pursuant to an undertaking given by the second to third respondents as a result of interlocutory orders granted by the first respondent on 24 October 2001 and continued by orders made on 13 February 2003 until the interlocutory orders were dissolved on 14 July 2003; (9) An Order that the second to fourth respondents pay the first to fourth applicants’ costs of the proceedings in this Court.
CATCHWORDS:	ADMINISTRATIVE LAW – judicial review – generally – supervisory jurisdiction of the New South Wales Court of Appeal – superior court of limited jurisdiction – Industrial Court of New South Wales - INDUSTRIAL LAW – New South Wales – unfair contracts – jurisdiction – whereby a person performs work in any industry – s106 Industrial Relations Act 1996 - STATUTORY INTERPRETATION – acts of parliament – interpretation – rules of construction – contextual interpretation – industrial context – s106 Industrial Relations Act 1996
LEGISLATION CITED:	Industrial Arbitration Act 1940 Industrial Relations Act 1996 Industrial Relations Amendment Act 2005 Supreme Court Act 1970 Workplace Relations Amendment (Work Choices) Act 2005 (Cth)
CASES CITED:	Attorney General (Qld) v Wilkinson (1958) 100 CLR 422 Batterham v QSR Ltd [2006] HCA 23; (2006) 225 CLR 237 Berowra Holdings Pty Ltd v Gordon [2006] HCA 32; (2006) 225 CLR 364 Bros Bins Systems Pty Ltd v Industrial Relations Commission of New South Wales [2008] NSWCA 292; (2008) 178 IR 28 Cameron v Cole (1943) 68 CLR 571 Caterpillar of Australia Ltd v Gough & Gilmour Holdings Pty Ltd [2008] NSWIRComm 3; (2008) 170 IR 185 CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 Craig v South Australia (1995) 184 CLR 163 Fish v Solution 6 Holdings Ltd [2006] HCA 22; (2006) 225 CLR 180 Gedeon v Commissioner of New South Wales Crime Commission [2008] HCA 43; (2008) 82 ALJR 1465 Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd [2007] NSWIRComm 3 Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 15) [2003] NSWIRComm 173 Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 11) [2002] NSWIRComm 354 Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 9) [2001] NSWIRComm 260 Helvering v Gregory (1934) 69 F 2d. 809 Kennet v Mayrama Pty Ltd (No. 4) [2006] NSWIRComm 357 Kirk Group Holdings Pty Ltd v WorkCover Authority (NSW) [2006] NSWCA 172; (2006) 66 NSWLR 151 Kuru v State of New South Wales [2008] HCA 26; (2008) 82 ALJR 1021 McDonald’s Australia Holdings Ltd v Industrial Relations Commission of New South Wales [2005] NSWCA 286; (2005) 223 ALR 78 Network Ten Pty Ltd v TCN Channel Nine Pty Ltd [2004] HCA 14; (2004) 218 CLR 273 New South Wales v The Commonwealth [2006] HCA 52; (2006) 229 CLR 1 ("Work Choices Case") Old UGC Inc v Industrial Relations Commission of New South Wales [2006] HCA 24; (2006) 225 CLR 274 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 R v Federal Court of Australia; Ex parte Pilkington ACI (Operations) Pty Ltd (1978) 142 CLR 113 R v Gray; Ex parte Marsh (1985) 157 CLR 351 Ready Mixed Concrete (Victoria) Pty Ltd v Federal Commissioner of Taxation (1969) 118 CLR 177 Re LSH; Ex parte RTF (1987) 164 CLR 91 Re Macks; Ex parte Saint [2000] HCA 62; (2000) 204 CLR 158 Re McJannet; Ex parte Minister for Employment, Training and Industrial Relations (Qld) (1995) 184 CLR 620 Re Refugee Tribunal; Ex parte Aala [2000] HCA 57; (2000) 204 CLR 82 Rockdale Beef Pty Ltd v Industrial Relations Commission of New South Wales [2007] NSWCA 128; (2007) 165 IR 7 Solution 6 Holdings Ltd v Industrial Relations Commission of New South Wales [2004] NSWCA 200; (2004) 60 NSWLR 558 Stevenson v Barham (1977) 136 CLR 190 Suttor v Gundowda (1950) 81 CLR 418 Westfield Holdings v Adams [2001] NSWIRComm 293; (2001) 114 IR 241 Yim v The Industrial Relations Commission of New South Wales [2007] NSWCA 77; (2007) 162 IR 62
PARTIES:	Caterpillar of Australia Pty Ltd (First Applicant) Caterpillar Inc (Second Applicant) Caterpillar SARL, Singapore Branch (Third Applicant) Caterpillar Overseas Credit (Fourth Applicant) Industrial Court of New South Wales (First Respondent) Gough and Gilmour Holdings Pty Ltd (Second Respondent) Harcourt David Gough (Third Respondent) Anthony Lansley Gilmour (Fourth Respondent)
FILE NUMBER(S):	CA 40121 / 08
COUNSEL:	A C Archibald QC, A R Moses SC, Y Sharrif (Applicants) B Walker SC, M J Kimber SC, A B Gotting (Second, Third and Fourth Respondents)
SOLICITORS:	Mallesons Stephen Jaques (Applicants) Harmers Workplace Lawyers (Second, Third and Fourth Respondents)
LOWER COURT JURISDICTION:	Industrial Court of New South Wales
LOWER COURT FILE NUMBER(S):	IRC 227 / 07; IRC 5227 / 00
LOWER COURT JUDICIAL OFFICER:	IRC 227 / 07 Wright J, Walton J, Staff J; IRC 5227 / 00 Boland J
LOWER COURT DATE OF DECISION:	IRC 227 / 07 21 February 2008 IRC 5227 / 00 (No 17) 2 February 2007 (No 15) 4 June 2003 (No 14) 27 February 2003 (No 11) 19 December 2002 (No 9) 23 October 2001
LOWER COURT MEDIUM NEUTRAL CITATION:	IRC 227 / 07 Caterpillar of Australia Pty Ltd v Gough & Gilmour Holdings Ltd [2008] NSWIRComm 3 IRC 5227 / 00 Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 17) [2007] NSWIRComm 3 Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 15) [2003] NSWIRComm 173 Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 14) [2003] NSWIRComm 44 Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 11) [2002] NSWIRComm 354 Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 9) [2001] NSWIRComm 260

- 23 -

CA 40121 of 2008

SPIGELMAN CJ
ALLSOP P
TOBIAS JA

Friday 17 April 2009

Caterpillar of Australia Pty Ltd v Industrial Court of New South Wales

FACTS
The third respondent (“Mr Gough”) and the fourth respondent (“Mr Gilmour”) were the owners of, and worked full time as the senior executives of, the second respondent (“Holdings”). The applicants (“Caterpillar”) entered into three Dealership Agreements with Holdings in 1991 for the sale and servicing of the applicants’ construction and mining equipment. The Dealership Agreements, along with the Last Resort Policy and the Fourth Assurance, formed an Overall Arrangement.

There was a breakdown in the relationship between the Caterpillar and the second to fourth respondents (“Gough and Gilmour”). Ultimately, Caterpillar gave a notice of termination of the dealership on 25 October 2000.

Gough and Gilmour instituted proceedings under s 106 of the Industrial Relations Act 1996 in the Industrial Court of New South Wales. Justice Boland determined that the contractual arrangement was unfair and made orders varying the contractual arrangement.

The applicants challenged the jurisdiction of the Industrial Court before Justice Boland, who dismissed the challenge. The Full Bench heard an appeal from that decision and dismissed it.

Caterpillar invokes the supervisory jurisdiction of this Court pursuant to s 58(2) and s 69 of the Supreme Court Act 1970. Caterpillar challenges the jurisdiction of the Industrial Court to order the variation of the contractual arrangements pursuant to s 106(1). Caterpillar also challenges the orders made by Justice Boland.

HELD
(Per Spigelman CJ, Allsop P and Tobias JA agreeing)
Supervisory jurisdiction

1 There is a distinction of significance between a superior court of general jurisdiction and a superior court of limited jurisdiction. [77] [165] [166]

Cameron v Cole (1943) 63 CLR 571; Re Macks; Ex parte Saint [2000] HCA 62; (2000) 204 CLR 158; Berowra Holdings Pty Ltd v Gordon [2006] HCA 32; (2006) 225 CLR 364 referred to.

2 Decisions with respect to jurisdictional error by courts created under Ch III of the Constitution are instructive but must be treated with care. [78] [165] [166]

Solution 6 Holdings Ltd v Industrial Relations Commission of New South Wales [2004] NSWCA 200; (2004) 60 NSWLR 558; Fish v Solution 6 Holdings Ltd [2006] HCA 22; (2006) 225 CLR 180 referred to.


Interpretation of s 106(1)

3 The contemporary approach to statutory interpretation requires a court to have regard to the context in which words appear, without the need to first identify an ambiguity. [86] [165] [166]

CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 335; Network Ten Pty Ltd v TCN Channel Nine Pty Ltd [2004] HCA 14; (2004) 218 CLR 278 referred to.

4 The phrase “whereby a person performs work in any industry” must be interpreted in the overall industrial context of the Industrial Relations Act 1996. [90] [99] [100] [103]-[105] [165] [166]

Fish v Solution 6 Holdings Ltd [2006] HCA 22; (2006) 225 CLR 180 applied.


5 The introduction of s 106(2A) confirms that the words “whereby a person performs work in any industry” s 106(1) must be read and understood in an industrial context. This is reinforced by the second reading speeches. [106]-[113] [165] [166]

Application of s 106(1)

6 The first inquiry is whether a person performs work in any industry and the second step is to identify the set of arrangements whereby that work is performed. [118]-[119] [165] [166]

Fish v Solution 6 Holdings Ltd [2006] HCA 22; (2006) 225 CLR 180; Batterham v QSR Ltd [2006] HCA 23; (2006) 225 CLR 237; Old UGC Inc v Industrial Relations Commission of New South Wales [2006] HCA 24; (2006) 225 CLR 274 applied.

7 The Full Bench did not apply the approach of the joint judgments in the High Court trilogy of cases. Instead of asking what was the contract or arrangement pursuant to which Messrs Gough and Gilmour performed work, the Full Bench asked whether the work was performed pursuant to the Dealership Agreements. Neither Boland J nor the Full Bench directed attention to the contractual arrangement between Holdings and Messrs Gough and Gilmour. [122] [123] [165] [166]

Fish v Solution 6 Holdings Ltd [2006] HCA 22; (2006) 225 CLR 180; Batterham v QSR Ltd [2006] HCA 23; (2006) 225 CLR 237; Old UGC Inc v Industrial Relations Commission of New South Wales [2006] HCA 24; (2006) 225 CLR 274 referred to.


8 When determining which contract or arrangement satisfies the statutory formulation, the industrial context of the legislative scheme remains significant. The further away the relevant contract or arrangement is from something resembling an employer/employee relationship, the less likely it is that it satisfies the statutory ‘hinge’. [124] [137] [165] [166]

9 The Full Bench failed to give express regard in its reasons for judgment on the jurisdictional question to the industrial context of the legislative scheme. [138] [165] [166]

10 Messrs Gough and Gilmour perform work in an industry “in accordance with”, “in fulfilment of” or “in consequence of” their contract or arrangement with Holdings. [134] [165] [166]

Fish v Solution 6 Holdings Ltd [2006] HCA 22; (2006) 225 CLR 180 considered.

11 The Full Bench erred in concluding that Messrs Gough and Gilmour were performing work in an industry pursuant to the Dealership Agreements. There was no “industrial” element of the work they performed in that regard. They were entrepreneurs who conducted an enterprise of significant scale. Insofar as they performed work, they did not perform it “in accordance with” or “in consequence of” the Dealership Agreements or the Overall Arrangement. [135] [136] [141]-[142] [165] [166]

Ready Mixed Concrete (Victoria) Pty Ltd v Federal Commissioner of Taxation (1969) 118 CLR 171; McDonald’s Australia Holdings Ltd v Industrial Relations Commission [2005] NSWCA 286; (2005) 223 ALR 78 applied.


Legislative Amendment s 106(2A)

12 Section 106(2A) expressly applies only if the contract or arrangement to which the condition is related or the arrangement is collateral “is a contract whereby the person performs work in an industry.” Section 106(2A) reaffirms that performance of work in an industry is the hinge about which s 106 turns. [147] [165] [166]

Fish v Solution 6 Holdings Ltd [2006] HCA 22; (2006) 225 CLR 180; Old UGC Inc v Industrial Relations Commission of New South Wales [2006] HCA 24; (2006) 225 CLR 274 applied.


13 Section 106(2A) is not satisfied and cannot be used as a basis to vary the Last Resort Policy or the Fourth Assurance. [149] [165] [166]

Challenge to the orders

14 The power to vary a contract is not limited to a contract whereby work is performed. [158] [165] [166]

15 The applicants have not shown any jurisdictional error in the orders made. [160] [165] [166]

16 This Court should not intervene before the Industrial Court has made a monetary compensation order. [161] [165] [166]

Orders

(1) Order that the record of the Full Court of the Industrial Court of New South Wales in matter No. IRC 227 of 2007 be brought up to this Court;

(2) Order that the orders of the Full Court of the Industrial Court of New South Wales of 21 February 2008 and 13 March 2008 in the said proceedings be quashed;

(3) Order that the record of the Industrial Court of New South Wales in matter No. IRC 5227 of 2000 be brought up to this Court;

(4) Order that any findings of jurisdiction, unfairness or declarations or orders made in or consequent upon the judgments of the Industrial Court of New South Wales (Boland J) in matter No. IRC 5227 of 2000 delivered on:

(a) 23 October 2001 – Judgment No. 9;
(b) 19 December 2002 – Judgment No. 11;
(c) 27 February 2003 – Judgment No. 14;
(d) 4 June 2003 – Judgment No. 15;
(e) 2 February 2007 – Judgment No. 17.
be quashed.


(5) Declare that the Industrial Court of New South Wales does not have jurisdiction to make any declarations or orders sought by the second to fourth respondents in matter No. IRC 5227 of 2000 other than dismissing the proceedings and ordering costs against the second to fourth respondent;

(6) Subject to the Order in par 8, Order that the second to fourth respondents, or any of them are prohibited, from further proceeding in matter No. IRC 5227 of 2000 in the Industrial Court of New South Wales or upon the Judgments of the Trial Judge and the Judgment of the Full Court of the Industrial Court of New South Wales on 21 February 2008;

(7) Subject to the Order in par 8, an Order prohibiting the first respondent from taking any step to further exercise, or purport to exercise, its power pursuant to any provision of the Industrial Relations Act 1996 in matters No. IRC 5227 of 2000 and No. IRC 227 of 2007;

(8) An Order that the proceedings be remitted to the first respondent to determine the issue of costs in the proceedings before it and to conduct an enquiry into damages sustained by the applicants pursuant to an undertaking given by the second to third respondents as a result of interlocutory orders granted by the first respondent on 24 October 2001 and continued by orders made on 13 February 2003 until the interlocutory orders were dissolved on 14 July 2003;

(9) An Order that the second to fourth respondents pay the first to fourth applicants’ costs of the proceedings in this Court.

[164] [165] [166]

CA 40121 of 2008

SPIGELMAN CJ
ALLSOP P
TOBIAS JA

Friday 17 April 2009

Caterpillar of Australia Pty Ltd v Industrial Court of New South Wales

Judgment

1 SPIGELMAN CJ: The applicants invoke the supervisory jurisdiction of the Court pursuant to s 48(2) and s 69 of the Supreme Court Act 1970 with respect to proceedings instituted against them by the second to fourth respondents (“Gough and Gilmour”) invoking the jurisdiction of the Industrial Court of New South Wales under s 106 of the Industrial Relations Act 1996 (the “IR Act”). The proceedings were instituted in 2000 and have involved, at the time of the appeal to this Court, 17 judgments by his Honour Justice Boland.

2 The applicants challenge the jurisdiction of the Industrial Court. His Honour Justice Boland heard and dismissed that challenge. (Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd [2007] NSWIRComm 3.) An appeal from his Honour’s judgment was heard by the Full Bench and dismissed. (Caterpillar of Australia Ltd v Gough & Gilmour Holdings Pty Ltd [2008] NSWIRComm 3; (2008) 170 IR 185.)

3 As the Full Bench has made a decision on an issue of jurisdiction, the privative clause in s 179 of the IR Act, by force of s 179(4), does not extend to prevent this Court exercising its supervisory jurisdiction.

4 Prior to the judgment on jurisdiction from which an appeal was brought to the Full Bench, Boland J delivered a series of judgments in the course of which he found certain aspects of the relevant “contract” to be unfair and made variation orders.

5 The orders which the applicants seek in this Court are:

(1) An order that the record of the Full Court of the Industrial Court of New South Wales in matter No. IRC 227 of 2007 be brought up to this Court;

(2) An order in the nature of certiorari that the orders of the Full Court of the Industrial Court of New South Wales of 21 February 2008 and 13 March 2008 in the said proceedings be quashed;

(3) An order that the record of the Industrial Court of New South Wales in matter No. IRC 5227 of 2000 be brought up to this Court;

(4) An order in the nature of certiorari quashing any findings of jurisdiction, unfairness, declarations or orders made in or consequent upon the judgments of the Industrial Court of New South Wales (Boland J) in matter No. IRC 5227 of 2000 delivered on:

(a) 23 October 2001 – Judgment No. 9;
(b) 19 December 2002 – Judgment No. 11;
(c) 27 February 2003 – Judgment No. 14;
(d) 4 June 2003 – Judgment No. 15;
(e) 2 February 2007 – Judgment No. 17.
(collectively referred to herein as “the Judgments of the Trial Judge”).


(5) A declaration that the Industrial Court of New South Wales does not have jurisdiction to make any declarations or orders sought by the second to fourth respondents in matter No. IRC 5227 of 2000 other than dismissing the proceedings and ordering costs against the second to fourth respondent;

(6) Subject to the Order in par 8, an Order in the nature of prohibition prohibiting the second to fourth respondents, or any of them, from further proceeding in matter No. IRC 5227 of 2000 in the Industrial Court of New South Wales or upon the Judgments of the Trial Judge and the Judgment of the Full Court of the Industrial Court of New South Wales on 21 February 2008;

(7) Subject to the Order in par 8, an Order in the nature of prohibition prohibiting the first respondent from taking any step to further exercise, or purport to exercise, its power pursuant to any provision of the Industrial Relations Act 1996 in matters No. IRC 5227 of 2000 and No. IRC 227 of 2007;

(8) An Order that the proceedings be remitted to the first respondent to conduct an inquiry into damages sustained by the applicants pursuant to an undertaking given by the second to third respondents as a result of interlocutory orders granted by the first respondent on 24 October 2001 and continued by orders made on 13 February 2003 until the interlocutory orders were dissolved on 14 July 2003;

(9) An Order that the second to fourth respondents pay the first to fourth applicants’ costs;

(10) Such further orders that this Court sees fit.

6 It is pertinent to note that the applicants had earlier instituted proceedings in this Court challenging the jurisdiction of the Industrial Court. Those proceedings were deferred pending the outcome of the appeals to the High Court in the trilogy of cases to which I will refer below. Eventually, the proceedings were discontinued by consent, in view of the amendments to the IR Act which modified the privative clause in such a manner as to reconfer the supervisory jurisdiction upon this Court, subject to the jurisdictional issue having been considered by the Full Bench of the Industrial Court. It has not been suggested that anything arises from the delay in resolving the jurisdictional issue.

7 The central issue to be determined is whether or not the Industrial Court has jurisdiction to determine the dispute on the basis that there is extant a “contract whereby a person performs work in any industry” within the meaning of s 106(1) of the IR Act. The correct approach to the interpretation of s 106 has been authoritatively established in three recent judgments of the High Court which are at the heart of the issues between the parties in the proceedings in this Court. (Fish v Solution 6 Holdings Ltd [2006] HCA 22; (2006) 225 CLR 180 (“Fish”); Batterham v QSR Ltd [2006] HCA 23; (2006) 225 CLR 237 (“Batterham”) and Old UGC Inc v Industrial Relations Commission of New South Wales [2006] HCA 24; (2006) 225 CLR 274 (“Old UGC”).)

8 There has been one relevant statutory amendment since these judgments in the High Court. This Court must apply those judgments, subject to the subsequent legislative change, if relevant.

9 The applicants are the United States parent company, Caterpillar Inc, one of the world’s largest manufacturers of construction and mining equipment and its Australian, Singaporean and Swiss subsidiaries. I will refer to the applicants collectively as “Caterpillar”.

10 Gough & Gilmour Holdings Pty Ltd (“Holdings”), the second respondent, and its predecessor companies, were Caterpillar dealers selling and servicing Caterpillar equipment in parts of New South Wales and in the Australian Capital Territory. The third respondent (“Mr Gough”) is the Managing Director of Gough & Gilmour Holdings. The fourth respondent (“Mr Gilmour”) is also a Director of Gough & Gilmour Holdings. Both worked full time as the senior executives of Holdings.

11 The basic contractual relationship between the parties is contained in three agreements, to which it is convenient to refer collectively as the “Dealership Agreements”, between, relevantly, Caterpillar of Australia Pty Ltd (“Caterpillar Australia”) and Holdings, being:

(i) The Sales and Service Agreement of 1 July 1991;

(ii) The Distribution Agreement for Engines, Parts and Service of 1 July 1991; and

(iii) The Product Support Agreement for Engines, Parts and Service of 12 November 1997.

12 The “work” said to be performed ‘in an industry’ by Messrs Gough and Gilmour is, in large measure, identified in the Dealership Agreements, as supplemented by other aspects of what is referred to as the ‘Overall Arrangement’.

13 The jurisdictional issues that fall to be determined in this Court are to be considered on the basis of the Sixth Further Amended Summons filed on behalf of Gough and Gilmour seeking orders pursuant to s 106 of the IR Act that the following be declared unfair, harsh or unconscionable:

(i) The Dealership Agreements;

(ii) The Overall Arrangement, as defined;

(iii) The collateral arrangement or related condition constituted by the Last Resort Policy, as defined; and

(iv) The collateral arrangement or related condition constituted by what is referred to as the ‘Fourth Assurance’.

14 As will appear below, Boland J found that there was an Overall Arrangement but did not find that it had all of the incidents alleged by Gough and Gilmour.

15 The Last Resort Policy was, effectively, common ground. It was identified in Judgment No. 11 by Boland J in the following terms:

“[780](27) Given the respondents' evidence that cancellation is a measure of last resort - that is, all other reasonable alternatives are explored before a decision to cancel is taken - and that such a policy is treated seriously by Caterpillar, it was incumbent upon the respondents to satisfy themselves that there were no other options open other than cancellation and that proper grounds existed to support cancellation …”

16 Relevantly for purposes of the present proceedings, with respect to the Fourth Assurance, the Sixth Further Amended Summons asserts:

“29A. In mid-1999, the Overall Arrangement was varied by the addition of the assurance by the first respondent to the second and third applicants that if they agreed to sell their shares in the first applicant, that process would be conducted on an amicable and reasonable basis without duress and would provide an opportunity for the second and third applicants to receive a fair value for the shares; that the first respondent would assist the applicants to achieve such an outcome; and, by implication, that if no agreement for a sale at a fair value could be reached the applicants would retain the dealership (the ‘Fourth Assurance’).”

17 As appears the Fourth Assurance post-dates the breakdown of the relationship which led to Caterpillar seeking to terminate the relationship.

The Proceedings in the Industrial Court

18 Gough and Gilmour instituted the s 106 proceedings in the Industrial Court of New South Wales in response to a notice of termination of the dealership dated 25 October 2000. The primary relief originally sought by Gough and Gilmour was for continuation of the dealership, albeit on varied terms.

19 In Judgment No. 11, Boland J refused the primary relief sought by the respondents. Gough and Gilmour amended the summons to seek alternative relief. In Judgment No. 15 his Honour determined that they were prima facie entitled to that relief on the basis that the conduct of Caterpillar was unfair. His Honour made orders varying the Overall Arrangement, as found by him to exist.

20 Negotiations conducted by Messrs Gough and Gilmour to sell Gough and Gilmour Holdings with Caterpillar’s approval had not succeeded.

21 Subsequent to these variation orders a further sale process was implemented. However, the shares and/or the assets comprising the dealership business were not sold to Caterpillar’s preferred alternative dealer. Accordingly, further notices of a termination were issued and the dealership was terminated. The variation orders created the basis for a claim for monetary compensation, which remains outstanding pending the resolution of this jurisdictional challenge.

22 Boland J made the following concluding observations in Judgment No. 17:

“[77] In Judgment No. 15 the Court varied the Overall Arrangement ab initio so that it reflected the Last Resort Policy and the Fourth Assurance (as found by the Court in Judgment No. 11), having found that the Overall Arrangement was unfair and had operated unfairly because the respondents had not honoured those two particular aspects of it. That is to say, the Court found in Judgment No. 11 that the respondents' conduct in relation to the sale process was completely at odds with the assurances given to the applicants that the respondents would assist the applicants in the sale process in achieving a fair price for the business and that the process would be amicable (Fourth Assurance) and that the respondents failed to adhere to their Last Resort Policy in that in March 1999 the first respondent decided to recommend to the second respondent that the relationship with the applicants should be brought to an end and did so without taking steps to allow the applicants every reasonable opportunity to retain the dealership. Further, in September 2000 the respondents decided to terminate the dealership agreements, again without satisfying themselves there were no options open other than cancellation and that proper grounds existed to support cancellation.
[78] The Overall Arrangement was varied in Judgment No. 15 to provide relief for the unfairness found in relation to the Fourth Assurance and the Last Resort Policy. Even if it were the case that the variations to the Overall Arrangement bore no relationship to the performance of work (and that is not conceded), it is arguable that the Fourth Assurance and the Last Resort Policy may be characterised as related conditions or collateral arrangements for the purposes of s 106(2A); they were, together with the Dealership Agreements, part of an overall, interrelated, arrangement. Further, as the earlier discussion in this judgment reveals, the performance of work was a significant purpose of the contractual arrangements, that is, the Overall Arrangement as found to exist by the Court.”

23 His Honour determined, with respect to the varied Overall Arrangement, that it was open to the Court to consider the amount of compensation that should be paid in connection with the arrangement as so varied (at [82]-[84]).

24 The Sixth Further Amended Summons seeks monetary compensatory orders which include:

(i) A nominal amount of $125 million for the lost opportunity of retaining the dealership and operating under it. That amount to be subject to due allowances by way of deduction for the net profits actually made in the relevant period.

(ii) Compensation for staff retention costs of $950,000 incurred in that period.

(iii) Compensation for the lost opportunity to sell their shares by reason of Caterpillar’s failure to comply with the Last Resort Policy and Fourth Assurance.

(iv) A nominal amount of $150 million for the lost opportunity of obtaining fair value for their shares subject to due allowances for matters such as the net profits they received and the value of net tangible assets retained.

(v) Compensation for costs incurred including valuation and advisory fees of $600,000, administrative legal and other fees of $450,000 and separate legal costs incurred in due diligence of $250,000.

(vi) Compensation for loss of net profits arising from “the management distraction and disruption caused by these proceedings and by the publicity and associated uncertainty concerning the applicants’ future as a Caterpillar dealer”.

25 Boland J found that the Industrial Court had jurisdiction under s 106 in Judgment No. 11 and did so on a number of bases. The aforementioned trilogy of High Court cases authoritatively established an approach which differed from that applied by his Honour. When his Honour redetermined the jurisdictional issue in Judgment No. 17, he made findings on a somewhat narrower basis. His Honour focused upon the activities of Messrs Gough and Gilmour, as “working proprietors” or “dealer principals”, as the matter which satisfied the s 106(1) test “whereby work is performed in any industry”.

26 Boland J expressed his conclusion on one occasion in the following way in Judgment No. 17:

“[62] The Overall Arrangement as found by the Court was, in my opinion, on reflection, akin to an employment relationship between the first respondent and the second and third applicants given the closeness of the relationship.”

27 The Full Bench adopted the same focus. So did Gough and Gilmour’s submissions in this Court. Although no explanation was proffered, this somewhat changed focus probably arose by reason of the High Court judgments in Fish, Batterham and Old UGC, which emphasised the necessity to establish the specific contract “according to which” or “in consequence of which” work was to be performed. (See eg Fish at [41]; Batterham at [22].) With respect to the Dealership Agreements and the Overall Arrangement, that could only be said of the “work” performed by Messrs Gough and Gilmour.

28 Absent any submission to the contrary, it is only necessary for this Court to consider the jurisdictional issue on the basis that the “work in an industry” said to have been performed, was the “work” of Mr Gough and Mr Gilmour (there being no attempt to differentiate between them). Furthermore, the “contract”, as defined in s 105 of the Act, “whereby” that “work” was performed was the Overall Arrangement as found to exist by Boland J and, particularly, the Dealership Agreements upon which the jurisdictional analysis by both Boland J and the Full Bench was based.

The Commercial Relationship

29 The Sixth Further Amended Summons pleads facts, which are not disputed, with respect to the development of the commercial relationship between the parties:

· In early 1989 Messrs Gough and Gilmour obtained approval from Caterpillar to conduct a dealership in New South Wales and the Australian Capital Territory;

· Shares in the existing dealership were acquired for a purchase price of about $32 million as a 50-50 joint venture between Caterpillar Australia and Messrs Gough and Gilmour;

· The group was restructured in 1991 resulting in the execution of the three Dealership Agreements;

· In March 1994, the 50% holding of Caterpillar Australia was acquired for $11 million;

· Major capital investments were made, including the construction of a $27 million purpose built facility in Parramatta between 1994 and 1996;

· The relationship broke down in various stages, culminating in a statement on behalf of Caterpillar that it intended to terminate the Dealership Agreements;

· Negotiations proceeded with a view to Messrs Gough and Gilmour selling their interests to a new dealer approved by Caterpillar;

· On 25 October 2000, Caterpillar served notices of termination of the Dealership Agreements.

30 The basis of the commercial relationship between the parties is the Dealership Agreements.

31 The Sales and Service Agreement contains a “primary purpose” clause which is of particular significance and should be set out in full:

“2(a) Both Dealer’s and Company’s primary purpose in entering into this agreement is to develop and promote the sale of products and to provide a high standard of parts availability and mechanical service to ensure satisfaction by users of products. Within the service territory described in Exhibit A, Dealer shall be primarily responsible for fully and adequately developing and promoting the sale to customers and prospective customers located within such territory and for the servicing of all of the products specified in Exhibit A. This is a personal contract entered into by Company in reliance upon the capability of Dealer to provide such sales and service to customers. Without the express written consent of Company, Dealer agrees not to appoint others to perform such sale and service responsibilities.
(b) Company and Dealer agree that Dealer’s effectiveness and ability in achieving such purpose could be adversely affected by Dealer’s affiliation with another organization which is a substantial operator of products. Dealer agrees that during the life of this agreement it will avoid any such affiliation whether by way of capital investment, source of capital, common management, common ownership, or otherwise, except to the extent that Company may otherwise agree in writing.
(c) Company relies upon the qualifications and abilities of the particular individuals named as principals in Exhibit A to achieve such primary purpose. Dealer agrees that such individuals will continue in the active management of Dealer, or will continue to own a substantial financial interest in Dealer. No substantial change shall be made in the management positions, ownership or voting control of such principals without prior approval of Company.”

32 The “primary purpose” clause is repeated in almost identical terms in each of the other two agreements.

33 The principals identified in Exhibit A to the Sales and Service Agreement are the third respondent, Mr Harcourt Gough, described as the “Managing Director” with an “Ownership and/or voting Control” of 90% and Mr Anthony Gilmour, the fourth respondent, described as the “Marketing Director” with an “Ownership and/or voting Control” of 10%.

34 Pursuant to cl 3, Caterpillar agreed to sell to Holdings for resale products being: “Machines and Replacement Engines. Attachments, parts, exchange components and special additions for” machines and replacement engines.

35 Pursuant to cl 4 Holdings agreed to maintain places of business at 19 locations at the beginning of the relationship: Parramatta, Penrith, Wetherill Park, Canberra, Wollongong, Eden, Albury, Wagga Wagga, Griffith, Dubbo, Bathurst, Cobar, Moree, Grafton, Gunnedah, Tweed Heads, Newcastle, Mt Thorley and Armidale. Clause 4 made provision for establishing additional or substituted places of business by agreement between the parties.

36 Pursuant to cl 5 Holdings agreed to “employ an adequate number of qualified salesmen to solicit orders for products … throughout Dealer’s service territory” and that they would “employ an adequate number of parts and service sales personnel at all times to serve the needs of the territory”.

37 Pursuant to cl 6 Holdings, as Dealer, agreed to provide diagnostic and mechanical services as well as delivery and inspection services to all users of the equipment the subject of the agreement and in this regard Holdings agreed to employ “an adequate number of experienced and competent service men, maintain adequate supplies of replacement parts and provide adequate field and shop service facilities to perform all required services …”.

38 Pursuant to cl 7 Holdings agreed to inform itself about the performance of products used in the service territory, to promptly report all accidents involving the products and to perform all product improvement programmes announced by Caterpillar.

39 Pursuant to cl 8 Holdings agreed to develop and execute promotion and market development programs to support sales for the products.

40 Pursuant to cl 10 Holdings agreed to provide warranties for Caterpillar products in accordance with specified terms.

41 Pursuant to cl 11 Holdings agreed to provide delivery, inspection and warranty services for the products and, subject to specifications to the contrary, such services would be provided without charge.

42 Further clauses of the Sales and Service Agreement make detailed provision for the maintenance of inventory sales records (cl 24) and inventory reports (cl 25) and, upon request, detailed reports with respect to the ownership, financial condition and operations of Holdings (cl 26).

43 Pursuant to cl 27 the parties agreed that the relationship between them was that of independent contractors and vendor and vendee and that nothing in the agreement should constitute Holdings the agent of Caterpillar Australia.

44 The Distribution Agreement for Engines, Parts and Service makes parallel provision in similar, and generally identical, terms to that of the Sales and Service Agreement with respect to “replacement parts for engines, attachments and exchange components”. Provisions which have implications for the employment of persons are adapted to the particular products to which this Agreement relates.

45 The same is true of the third agreement, the Product Support Agreement for Engines, Parts and Service, which extends to:

“[Exhibit A] All (i) models of engines sold by [Caterpillar] … (ii) generators, switchgear and marine transmissions for such engines and (iii) attachments, parts, exchange components and special additions for all of the foregoing.”

46 The agreed business locations under the second and third Agreements include many, but not all, of the business locations in the Sales and Service Agreement.

47 In my opinion, nothing turns on the differences amongst the three agreements in these respects. In each case it is clear that the commercial relationship is of a wide-ranging character involving an obligation to maintain facilities in numerous locations and envisaging the employment of numerous persons to carry out the obligations under the respective agreements.

48 The provisions of the Dealership Agreements, notably the cl 2(c) primary purpose clauses, which refer expressly to managerial work to be performed by Messrs Gough and Gilmour, were the subject of findings about the significance of such work in the relationship.

The Findings of Boland J

49 Boland J’s findings are set out in four judgments culminating in Judgment No. 17 referred to at par [2] above. The earlier judgments are Judgment No. 9 (Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 9) [2001] NSWIRComm 260); Judgment No. 11 (Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 11) [2002] NSWIRComm 354) and Judgment No. 15 (Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 15) [2003] NSWIRComm 173).

50 I set out a summary of his Honour’s most pertinent findings, inferences and conclusions together with references to the Full Bench judgment where they are adopted and, to some degree, supplemented.

(1) Nature of the Caterpillar business

· Caterpillar operates through a dealership network in Australia as a way to access premises and staff around the country to sell and service its products and parts. (Judgment No. 11 at [53], [112]; Full Bench at [34].)

· Caterpillar’s profit maximising strategy is to embrace a culture of trust and cooperation with its dealers, as outlined in certain Caterpillar publications and the evidence of various Caterpillar managers. (Judgment No. 11 at [112]-[117].)

· Among its requirements for dealers, Caterpillar looks for dealers with “good character”, “business capacity”, “working capital and established bank relationships” and experience in the business and the particular territory. (Judgment No. 11 at [114].)

(2) Nature of the Holdings business

· The work of Holdings is in the sales and service industry, specifically, selling and servicing Caterpillar products. (Judgment No. 9 at [1]; Judgment No. 11 at [1], [71]; Judgment No. 15 at [2]; Full Bench at [4].)

· Mr Gough is 90% owner of the issued share capital, Managing Director and driving force of Holdings. (Judgment No. 9 at [1]; Judgment No. 11. at [2], [119].)

· Mr Gilmour is 10% owner, director and, effectively, Marketing Director of Holdings. (Judgment No. 9 at [1]; Judgment No. 11 at [2], [125]-[126]; Full Bench at [36].)

· Holdings was the conduit by which Mr Gilmour and Mr Gough performed work for Caterpillar. (Full Bench at [188].)

· The work of Holdings is performed by some 700 employees. (Judgment No. 11 at [1], [71].)

· Messrs Gough and Gilmour experienced trouble securing finance to purchase the dealership. To secure Holdings as dealers, Caterpillar assisted them, in exchange for a 50% equity interest in Holdings. This interest was subsequently bought out. (Judgment No. 11 at [138]-[139], [158], [177].)

(3) The Relationship between the parties

· The “business relationship” between the parties is regulated by three Dealership Agreements. (Judgment No. 9 at [1]; Judgment No. 11 at [3]; Judgment No. 15 at [2]; Judgment No 17 at [2].)

· The Overall Arrangement between the parties, established in about February 1989, included the three Dealership Agreements, the Fourth Assurance and the Last Resort Policy. Contentions that other assurances had been given were rejected. (Judgment No. 11 at [7], [780](1); Judgment No. 17 at [6]; Full Bench at [9], [56].)

· The Last Resort Policy existed and was to the effect that Caterpillar has a policy that termination is a measure of last resort once other measures are exhausted. (Judgment No. 11 at [734]; Judgment No. 15 at [199].)

· The Fourth Assurance was made after Caterpillar indicated an intention to terminate. It was in the form: Caterpillar wanted to see an amicable transition of the dealership and would assist Holdings to obtain fair value for the sale. (Judgment No. 11 at [500], [565], [734]; Judgment No. 15 at [199].)

· The Dealership Agreements and Overall Agreement were akin to a franchisee/franchisor relationship. (See generally Judgment No. 11 [55]-[58], [62], [64], [65], [69], [71], [780](34), [786](8), [796](4); Judgment No. 17 at [45], [47]; Full Bench at [34], [54], [45], [62], [63].) This is evidenced by:

- the interdependent, relational and “unusually close relationship” between the parties, which was at odds with the traditional arm’s length commercial arrangement, notwithstanding the description of the relationship in cl 27 of the Sales and Service Agreement of the parties as “independent contractors”. (Judgment No. 11 at [57]-[58], [787]; Judgment No. 17 at [45], [47]; Full Bench at [62].)

- Caterpillar Australia had a right to exercise direction and control over important aspects of the dealership (Judgment No. 11 at [64], [65]; Judgment No. 17 at [43]), especially: that Holdings shall maintain a suitable place or places of business at particular locations; that Holdings shall sell Caterpillar equipment and provide mechanical services; that all places of business be maintained in a neat and attractive manner with adequate quantities of Caterpillar products; that Holdings develop market programs for Caterpillar products; that Holdings use their abilities and qualifications to actively manage the dealership; that Holdings employ other people to perform work. (See the list of terms in Judgment No. 11 at [60]-[62]; and Full Bench at [185]: cl 2(a), cl 2(c), cl 4, cl 5, cl 6(a), cl 6(b), cl 6(c), cl 8(a), cl 8(b), cl 10, cl 11, cl 24, cl 25, cl 26, and cl 27.)

- an article published in the Harvard Business Review by a senior Caterpillar executive supported the view that, while the dealers were independent, they in fact formed part of a close network with Caterpillar, which conducted marketing, sales and promotion through the dealer. (Judgment No. 11 at [56]-[57]; Full Bench at [173].)

· Trust, cooperation, confidence, loyalty and respect underpinned the relationship. (Judgment No. 11 at [54], [56], [113]-[118], [780](8), [786](8), [787], [796](4); Judgment No. 17 at [43], [45](5).)

(4) The Performance of work

· The Dealer Principals were required to use their qualifications and abilities to achieve the purpose of the Dealership Agreements – to develop and promote the sale of products, to provide high standards of service and to continue in the active management of the business. (Judgment No. 11 at [60]-[61], [65]; Judgment No. 17 at [45](2); Full Bench at [62], [167], [175], [186], [187], [188].)

· The Dealer Principals were required to actively participate in the management of the business of Holdings. Performance of work by them was a requirement of the relationship with Caterpillar. (Judgment No. 11 [65]-[66], [71]; Judgment No. 17 at [45](2), [47], [59]; Full Bench at [62], [164], [165], [175], [186]-[188].)

· Specifically, the requirements of cl 2(c) were active requirements. It was never open to Messrs Gough and Gilmour to cease managing and become mere investors. (Full Bench at [187].)

· Messrs Gough and Gilmour were involved in the promotion of sales as Dealer Principals, in accordance with cl 2(a). (Full Bench at [188].)

· Messrs Gough and Gilmour as managers and as Dealer Principals did work in accordance with cl 4, cl 5, cl 6 and cl 8 of the Sales and Service Agreement and parallel terms. (Full Bench at [188].)

· Messrs Gough and Gilmour were not only Dealer Principals and managers but pivotal workers in the business on a day to day basis. (Judgment No. 17 at [68]; Full Bench at [170], [171], [188].) They performed work in a managerial capacity and at a practical level. (Full Bench at [166], [169].)

· The Overall Arrangement was akin to an employment relationship because of the closeness of the relationship. A significant purpose of the Overall Arrangement was work. (Judgment No. 17 at [59], [62], [78]; Full Bench at [65](b) and (d), [68], [215].)

· The nature of the breakdown of the relationship between the parties indicated that Mr Gough and Mr Gilmour were performing management work. (Judgment No. 17 at [45]; Full Bench at [166](b).)

(5) Jurisdictional findings in relation to the Dealership Agreements and Overall Agreement

· The Dealership Agreements constituted contracts for the purpose of s 105 of the IR Act. (Judgment No. 11 at [780](1); Full Bench at [9].)

· The Dealership Agreements and/or the Overall Arrangement between Caterpillar and Holdings were the arrangements whereby work was performed within the meaning of s 106 of the IR Act. (Judgment No. 11 at [72], [780](2); Judgment No. 17 at [43], [47], [59]; Full Bench at [9], [62], [82](a); [186]-[189].)

· Messrs Gough and Gilmour performed work in an industry within the meaning of s 106 of the IR Act. (Full Bench at [62], [164], [166], [167], [169]-[171], [180], paraphrasing Judgment No. 11 and Judgment No. 17.)

(6) Jurisdictional findings in relation to the Fourth Assurance and the Last Resort Policy

· The Dealership Agreements, the Fourth Assurance and the Last Resort Policy are part of the Overall Arrangement. (Judgment No. 11 at [780](1); Full Bench at [9], [56].)

· Alternatively, even if the Fourth Assurance and Last Resort Policy are not part of the Overall Arrangement, they may be characterised as related conditions or collateral arrangements to the Dealership Agreements under s 106(2A) of the IR Act. (Judgment No. 17 at [78]; Full Bench at [68], [82](b), [211], [216].)

(7) Breakdown in the relationship

· Early relations between Caterpillar and Holdings were “indicative of a less than open, friendly and trusting relationship”. (Judgment No. 11 at [189].)

· There was a history of disagreements, tension, mistrust, strained relations and lack of cooperation between Caterpillar and Holdings. This largely involved concern about Mr Gough’s leadership and management, as well as Mr Gough’s domineering and adversarial conduct towards Caterpillar. (Judgment No. 11 at [227], [267], [272], [401], [406], [780](9), (10), [786](9)-(11).)

· The major contributor to the breakdown of the relationship was Holdings, despite Caterpillar’s aggravation through flawed policies and procedures. (Judgment No. 11 at [406], [780](7), [786](12), [793].) Mr Gilmour on the other hand was not problematic for Caterpillar and was not a reason for their termination of the agreement. (Judgment No. 11 at [128]; Full Bench at [163].)

· These factors made it appropriate for Caterpillar to decide that the dealer in the Australian Capital Territory should be changed. (Judgment No. 11 at [780](11), [786](13), [787], [796](2).)

· Mr Gough’s controlling manner in his dealings with Caterpillar and employees was the major reason for Caterpillar terminating the agreement. (Judgment No. 11 at [119]-[120], [124]; Judgment No. 15 at [167]; Full Bench at [162].)

· The option of asking Mr Gough to step back was not a realistic one given his controlling nature. (Judgment No. 11 at [462]-[463], [780](15).)

· It was unrealistic to maintain the dealership in a proper working relationship. (Judgment No. 11 at [796](3).)

(8) Unfairness

· Caterpillar’s proposal to change the dealership, while appropriate, breached the Last Resort Policy. (Judgment No. 11 at [780](14), (27) (28), [781], [786](13), (15), [790] [794]; Judgment No. 15 at [9], [167], [278], [284]; Judgment No. 17 at [77].)

· Caterpillar failed to adhere to the Fourth Assurance in terminating the agreement. (Judgment No. 11 at [654], [780](26), [781], [792]-[794]; Judgment No. 15 at [9], [168], [200], [211]; Judgment No. 17 at [77]; Full Bench at [12], [56], [57].)

The Full Bench Decision

51 The Full Bench, in a joint judgment of President Wright J, Vice-President Walton J and Staff J, set out the findings of fact by Boland J to which I have referred above and made some additional findings.

52 With respect to Boland J’s finding that the Overall Arrangement was unfair their Honours noted:

“[11] This conclusion was substantially based upon a finding that the appellants' conduct was inconsistent with particular assurances and understandings now known as the Fourth Assurance and the Last Resort Policy, which were found to constitute part of the ‘Overall Arrangement’. …”

53 Their Honours took account of the terms of the Dealership Agreements, and with respect to cl 2(c), which I have set out at par [31] above, said:

“[40] Clause 2(c) of the Agreement provided that the first appellant relied upon the qualifications and abilities of the second and third respondents. It outlined that the second and third respondents would have active management of the Dealer and that no substantive management changes could be made without the approval of the first appellant. …”

54 Their Honours went on to note:

“[41] We pause here to make the following preliminary observations: cl 2(c) of the Agreement when read with cl 2(a) and cl 2(b) makes plain that the Agreement both contemplated and required the second and third respondents to work: the work being the active management of the ‘Dealer’. This requirement must of course be read in light of terms of the earlier clauses which, inter alia, specify that both parties' ‘primary purpose’ in entering the Agreement ‘is to develop and promote the sale of products ...’ This in turn required the Dealer to be primarily responsible for the full and adequate development and promotion of the sale to customers and prospective customers within the relevant territory. It was also specified that the contract was a personal contract entered into in reliance upon the Dealer's capability to provide relevant sales and service to customers.
[42] The proscription in cl 2(b) against the Dealer having any financial or management affiliation in a similar field specifically proscribed common management or common ownership, and thus precluded the second and third respondents from working as managers in other organisations in the industry. The Agreement thus not only required the relevant respondents to work but also prevented them from undertaking certain other work.”

55 Their Honours referred to the principal provisions of the Sales and Service Agreement which I have summarised above: cl 4, cl 5, cl 6, cl 8, cl 10, cl 11, cl 24, cl 25, cl 26 and cl 27.

56 The Full Bench identified a range of issues that had been argued before it and said:

“[88] However, as we will later develop, we consider that, to resolve the jurisdictional issues raised in this matter, it is only necessary to address the question of whether the Dealership Agreements, Last Resort Policy and Fourth Assurance fall under the Court's jurisdiction under s 106 of the Industrial Relations Act and not the broader question as to whether there was an ‘Overall Arrangement’ which might be considered under the Court's jurisdiction under that section. The related question as to whether the Court has jurisdiction to make the monetary orders set out in the Sixth Further Amended Summons may then be considered in that light.
[89] Given the relevant principles, the contentions of the parties as to jurisdiction, and the limiting of our consideration of the jurisdictional issue to the Dealership Agreements, the Fourth Assurance and the Last Resort Policy the issues in the first instance may be refined to, firstly:
i) Whether the Dealership Agreements are contracts whereby a person performs work in an industry, for the purposes of s 106(1); and
ii) If the Fourth Assurance and the Last Resort Policy are not contracts whereby a person performs work in an industry a consideration we shall later discuss is whether those arrangements are nonetheless within jurisdiction in consequence of the provisions of s 106(2A) of the Industrial Relations Act ; and
Secondly, if it is determined that those contracts and arrangements are within jurisdiction it remains to be determined whether the money orders sought by the respondents in the Sixth Further Amended Summons fall within the Court's jurisdiction under s 106(5).”

57 After setting out the statutory provisions and considering relevant case law, their Honours set out the submissions of the parties.

58 On the question of whether or not work was performed in an industry their Honours referred at some length to the findings by Boland J. Their Honours then said:

“[164] Various findings in Gough & Gilmour (No 11) and the first instance judgment relate directly to the jurisdictional question as to whether work was performed in an industry by the second and third respondents. Although Boland J did not approach the analysis in the form of two sequential questions as this Court intends to, those decisions, nonetheless, addressed and resolved elements of those aspects of the jurisdictional question. See Gough & Gilmour (No 11) at [65], [66] and [71], as follows:
‘[65] ... The agreements require the applicants to set up a business in a certain way; they require the principals of the dealership to use their qualifications and abilities to achieve the primary purpose of the Agreements, for example, the development and promotion of the sale of products; they directly require the applicants to employ personnel to perform work in the business – the business could not operate unless relatively large numbers of personnel were employed to perform work for the business. Whilst the dealership does not operate under the business name of Caterpillar, the dealership is synonymous with that name. The dealership, through its employees, is required to develop and execute promotion and market development programs to support the sale of Caterpillar products and to solicit orders for Caterpillar products.
[66] ... Moreover, the performance of work is not merely a remote consequence of the agreements but a necessary requirement that, in the absence of the performance of such work, would render the agreements meaningless.
[71] ... The applicants are natural persons and a corporate entity conducting a sales and service business on land at a location determined by Caterpillar and required by Caterpillar to be suitable for the purpose, and selling Caterpillar equipment purchased from Caterpillar. The applicants, or their employees, work in the business both in consequence of the agreements and in fulfilment of them. The form of the agreement requires the applicants to perform work in the sales and service industry either personally or through employees and therefore it leads directly to the performance of work in that industry. Caterpillar has a real interest in the performance of that work. It results in the sale of Caterpillar products purchased from Caterpillar and tends to maintain and improve the value of its general goodwill.’

[165] See also the first instance judgment at [59]:
‘[T]he second and third applicants, as dealer principals under the Dealership Agreements, were, inter alia , required to actively participate in the management of the business of the first applicant (see, for example, clause 2(c) of the Sales and Service Agreement; clause 2(c) of the Product Support Agreement; clause 2(c) of the Distribution Agreement). Moreover, as the applicants submitted, the second respondent’s decision to terminate the agreements was based on its dissatisfaction with the work relationship between the first respondent and the second applicant in particular (because he was, amongst other things, too independent and not prepared to perform as a dealer in a manner that was to the first respondent’s “satisfaction”).’
[166] We set out earlier at para [62] the findings of the trial judge in Gough & Gilmour (No 11) as summarised in the first instance judgment, at [45]. It is appropriate in summary form to now isolate the findings from Gough & Gilmour (No 11) and the first instance judgment which bear specifically on whether the second and third respondents performed work in an industry. They are:
a) the second and third respondents performed work in the sales and service industry either personally or through employees;
b) that the second and third respondents actively participated in the management of the business of the first respondent;
c) the nature of the breakdown of the relationship between the parties indicated that the second and third respondents had been performing work in the management of the first respondent.
[167] Having carefully reviewed the evidence at first instance we conclude that these findings were reasonably open to his Honour.”

59 Their Honours then referred to submissions made on behalf of the respondents as to further findings about the performance of work that were open, and which they indicated they would accept. Their Honours said:

“[169] In our view, that these were arrangements where a company was involved does not obscure or detract from the plain fact that the second and third respondents performed work. The first appellant operated through its Dealers (the first respondent). True it is, the second and third respondents were Dealer Principals and Managing Directors of the Dealer, but they performed work in a managerial capacity and at a practical level. Work was therefore performed within a corporate structure.
[170] The second and third respondents were not distant directors running the dealership solely through and by their employees but were actively involved in work at a number of different levels. They were not only Dealer Principals and Managers but also workers who were full-time ‘hands on’ pivotal workers in the business on a day to day basis. Mr Gilmour, for instance, was the manager and operated as such as head of the sales team. Within the corporate arrangements it was inescapable that the second and third respondents were managers of work whose role was to perform work.
[171] It is evident that the Dealership would not have functioned without the management of the second and third respondents. Because of them employees were hired, places of business were maintained and sales were made. It is acknowledged that they performed some work themselves, and employed appropriate staff to do other work. But this does not preclude the finding that work occurred in the relevant sense.
[172] Several witnesses at first instance, suggested that work was performed by the second and third respondents in their relationship with the appellants. In cross-examination the second respondent revealed he had performed work by dealing with Caterpillar prime products, and other products. He worked with Caterpillar as part of a team. The third respondent also gave evidence that confirmed he had performed work in the sales and service industry under the Dealership Agreements for Caterpillar. …”

60 The Full Bench made further reference to the evidence at [172]-[179] and concluded:

“[180] On the basis of the foregoing it was open for Boland J to determine that the second and third respondents performed work in an industry in the sense contemplated in Fish . We therefore conclude that work was performed by the second and third respondents consistent with the jurisdictional tests stated in Fish .”

61 Their Honours then turned to the second issue they had identified: whether the Dealership Agreements were agreements whereby work was performed. Their Honours said:

“[184] Given that the performance of work by the second and third respondents was established (as considered) above, the next question is whether the work that was performed in an industry was performed in accordance with the Dealership Agreements.
[185] The trial judge determined that work was performed by the respondents in accordance with the Dealership Agreements. He found that they were contracts or arrangements, in consequence of which, or in fulfilment of which, work was performed. The relevant clauses of the Sales and Service Agreement relied on were:
Clause 2(a), Clause 2(c), Clause 4, Clause 5, Clause 6(a), Clause 6(b), Clause 6(c), Clause 8(a), Clause 8(b), Clause 10, Clause 11, Clause 24, 25, 26 and Clause 27.
[186] We consider that the Dealership Agreements were contracts whereby the second and third respondents performed work in an industry because clause 2(c) of the Sales and Service Agreement stated that the qualifications and abilities of the Dealer Principals, named in exhibit A as the second and third respondents, were relied upon to achieve the Dealership Agreements' primary purpose of effective sales and service. The Dealership Agreements also required the Dealer Principals to actively manage the Dealer. That being so, it was open to determine that the requirements of the Dealer within the agreement to perform obligations such as make sales, employ employees, promote, maintain equipment and maintain adequate locations etc, by their terms required the second and third respondents to apply their qualifications and skills to those tasks which would achieve the primary purpose of the Dealership Agreements. They were to achieve those tasks by their active management of the Dealer. The work performed by the second and third respondents conformed with the intention of the parties to the contract so expressed.
[187] The requirements set out in clause 2(c) were active requirements. On the facts found it has been shown that it was not practically open to the second and third respondents to cease managing or to transfer management of the Dealer to another party or to be mere investors. It was never open to them to cease applying their qualifications, skills and work to achieving the primary purpose of the Dealership Agreement.
[188] While the Court can determine that by their bare terms the agreements require the performance of work, earlier decisions in this matter have indicated that the Dealership Agreements do not provide a complete picture of the actual work relationship between the appellants and respondents. To the extent that the Court can in determining the jurisdictional question go beyond the requirements of the bare terms of the Dealership Agreements, it is important to note that the conclusions of Boland J were that the work relationship between the first appellant and second and third respondents was close and interrelated and that the Company structure was a conduit by which the second and third respondents performed work for the first appellant. The direct requirement to manage in clause 2(c) in bare terms reflected the broader reality of the Dealership Agreements, was open on the facts. It was an inherent understanding of both parties in engaging in the Dealership Agreements that the second and third respondents would perform work as Managers of the Dealer (their own company), and apply their qualifications and abilities to the task. This was the expected state of affairs on which the agreements were based and proceeded. Failure to exercise that managerial capacity would render the work of the Dealer meaningless or ineffective. That work was required. It was not an after-thought or extraneous. That was the context in which the contracts were made and the basis for the characterisation of interdependence and closeness. It follows that the Dealership Agreements were contracts whereby the second and third respondents performed work in an industry. As an overview, that analysis is expressed below by application of the question to the provisions of the Sales and Service Agreement:
(a) The second and third respondents were involved in the development and promotion of sales. They were involved in the development and promotion of sales in their capacity as Dealer Principals of the Dealer.
That work was performed in accordance with Clause 2(a) of the Sales and Service Agreement which required that the Dealer be primarily responsible for developing and promoting the sale to customers and potential customers.
(b) The second and third respondents actively managed the Dealer as Dealer Principals. They were pivotal, ‘hands-on’ workers who did the prescribed work in their managerial capacity.
That work was done in accordance with Clause 2(c) of the Sales and Service Agreement. Senior counsel for the appellants had contended this provision only required that the second and third respondents manage or invest, that is, management by them was not required by the Dealership Agreements. However we disagree with that contention and consider that it was established that the actual expectation of the agreement was active management and that mere investment was never a feasible alternative. The respondents required approval to change management positions and in reality the provision required the second and third respondents to exercise managerial capacity.
The true operation of the provision is best expressed in the terms of the revised Product Support Agreement for Enquiries, Parts and Service which has slightly different wording to the Sales and Service Agreement. Clause 2(c) of that Agreement states:
Company relies upon the investments, qualifications and abilities of the particular individual(s) named as principal(s) in Exhibit A to achieve such primary purpose. No substantial change shall be made in the management positions, ownership or voting control of such principals without the prior written approval of the company.
(c) The respondents because of their managerial role and as Dealer Principals of the Dealer maintained suitable places of business. That work was done in accordance with Clause 4 of the Dealership Agreements.
(d) The second and third respondents employed an adequate number of qualified salesmen to solicit orders for products, demonstrated and exhibited products, and employed an adequate number of parts and service personnel to service the needs of the territory. It appears that they employed so few staff at some stages that this was the cause of some consternation to Caterpillar.
The second and third respondents as Dealer Principals performed this work in accordance with Clause 5 of the Sales and Service Agreements.
(e) The rendering of prompt , competent , diagnostic and mechanical services was required work of the second and third respondents in their capacity of managers. It was established that the respondents managed the dealer in a 'hands-on' manner and ensured servicing took place. It has not been established whether they performed this work personally. The second and third respondents did that work in accordance with Clause 6(a).
(f) Under the active management of the second and third respondents the rendering or provision of delivery or inspection service and warranty service was done. This provision is read broadly so that the second and third respondents in their capacity as hands on managers of the first respondent did under Clause 6(b) perform the work needed to ensure the above work happened.
(g) The Dealer employed an adequate number of experienced and competent men, maintained adequate supplies of replacements and provided adequate field and shop service facilities to perform all the required services. Under the management of the second and third respondents' employees were hired and work was performed. They managed the work actively and at times performed it. At all times they performed work as managers of the Dealer, being Dealer Principals.
The second and third respondents performed this work in accordance with clause 6(c).
(h) the development and execution of market development programs was the relevant work.
As far as it can be established, the second and third respondents in their capacity as managers did develop and execute promotion and market development programs in accordance with Clause 8(b).
[189] We note that the Distribution Agreement for Engines, Parts and Service and the Product Support Agreement for Engines, Parts and Service were in similar terms (see clauses 2(a), 4, 5(a) to 5(d), 6(a) to 6(h), 8(b), 11(b), 24 and 25 of the Distribution Agreement and clauses 2(a), 4, 5(a) to 5(c), 8(a), 9(b)(ii) and 10(a) of the Product Support Agreement). For the reasons expressed above, we consider these also to be contracts whereby work was performed in an industry.”

62 Their Honours then considered the judgment of this Court in McDonald’s Australia Holdings Ltd v Industrial Relations Commission of New South Wales [2005] NSWCA 286; (2005) 223 ALR 78 (“McDonald’s”) upon which the applicants in this Court relied. Their Honours said:

“[202] As we have noted the appellants contend that the decision in McDonald's effectively places working proprietors with sufficient workforces out of jurisdiction because the agreements under which they operate their businesses reach a point where the arrangement becomes a commercial arrangement rather than one whereby a person works in an industry. The desire to construct such a dichotomy between the industrial worker and the commercial manager or ‘boss’ is understandable. However, there is no basis for the distinction under the Industrial Relations Act in situations where the commercial operator is also a worker (applying that notion broadly - for example, where a proprietor is specifically required to manage a company in accordance with a contract) under a contract whereby work is performed in an industry .
[203] The provisions of the Industrial Relations Act dictate that a contract whereby work is performed in an industry is within the ambit of s 106. The decision in Fish stresses that jurisdictional fact. It follows that a determination that a contract is outside jurisdiction, to be consistent with the current state of the law, can only be made on the basis that contract was not one whereby a person performed work in an industry.
[204] The basis for the determination cannot be that the arrangement was a commercial arrangement characterised for the most part because the company had a great number of employees. To accept Handley JA’s decision on that basis, essentially on the proviso that the existence of a commercial-industrial dichotomy puts an arrangement beyond jurisdiction is not warranted because the decision in Fish has determined that where the jurisdictional facts are established that the relevant contract will be within the jurisdiction of s 106.
[205] It is plain that s 106 is intended to be construed broadly. There is no basis to create a commercial and industrial dichotomy using as blunt an instrument as workforce numbers or the like, in order to characterise agreements as inside or outside jurisdiction. If there is to be such a conceptual dichotomy it must be based on a basis consistent with the stated provision itself, namely whether the contract is one whereby work is performed in an industry.
[206] However, as we have stated, the better view is that the decisions of Fish and McDonald’s may be reconciled on the basis that the commercial-industrial dichotomy is held to arise only on the application of the test in Fish . Those factors in McDonald’s such as size of business, staff levels etc, are relevant to and will inform the making of a determination of jurisdiction, but they are not in themselves determinative. Whether the necessary jurisdictional facts exist, as set out in Fish , are the only determinative factors ultimately involved in establishing jurisdiction. In this matter by the application of the approach in Fish , it has been established that the second and third respondents performed work in an industry in a managerial capacity and in other ways and that work was required by the Dealership Agreements.
[207] The Dealership Agreements are within the jurisdiction of s 106(1) of the Industrial Relations Act , and to the extent that the judgment under appeal is challenged in that respect, the appeal should be dismissed.”

63 Their Honours then considered the Fourth Assurance and the Last Resort Policy, with respect only to s 106(2A) of the IR Act as to whether or not they were “related conditions or collateral arrangements” to the Dealership Agreements. Their Honours said:

“[214] We consider that this requirement has been met. The Fourth Assurance and the Last Resort Policy are collateral arrangements because they are plainly auxiliary and related agreements to the Dealership Agreements. The three agreements were between the same parties and they concerned aspects of the same overall work arrangement. This is consistent with the finding that they were contractual components operating alongside the Dealership Agreements in the ‘Overall Arrangement’ in Gough & Gilmour (No 11) . The Fourth Assurance and Last Resort Policy were supplementary arrangements to the Dealership Agreements because they concerned how the Dealership Agreements would be cancelled, and how the second and third respondents' shares in the Dealership would be sold. It is clear that the three contracts made up a series of interconnecting agreements, all of which for a proper and complete appraisal should be considered by the Court in light of s 106 as comprising a total package of work agreements. On this basis, considering the intent of s 106(2A) was to place arrangements of this kind within the Court's jurisdiction, the Fourth Assurance and the Last Resort Policy fulfil the requirement of s 106(2A)(a) and are collateral contracts related to a contract whereby work is performed in an industry.
[215] In satisfaction of the second requirement, we consider the contractual arrangements made by the second and third respondents have the performance of work as their significant purpose. The Court agrees with the determination of the trial judge at [59] that the performance of work was a significant purpose of the ‘Overall Arrangement’ made by the second and third respondents, of which the Dealership Agreements, Fourth Assurance and Last Resort Policy were components. On that basis, such a conclusion is also open when a comprehensive view is taken of the total package of contracts and arrangements made by the second and third respondents and if the Dealership Agreements are considered to be the dominant contracts they clearly had the performance of work as their overriding purpose. In addition, we consider it arguable that the performance of work was a significant purpose of both collateral arrangements because the Fourth Assurance sought to provide fair value in compensation for the performance of work by the second and third respondents, and the Last Resort Policy had as its purpose the intention of giving the respondents' security in the performance of work.
[216] We conclude that the trial judge was correct in determining that the Fourth Assurance and the Last Resort Policy may be characterised as collateral contracts which fell within s 106(2A) of the Industrial Relations Act , and to that extent the appellants' challenge the findings of the trial judge the appeal must fail.”

124 When determining which contract or arrangement satisfied the “hinge” word of “whereby”, the industrial context of the legislative scheme remains significant. The identification of which of more than one possible contract or arrangement is or includes the contract or arrangement “according to” or “in accordance with” or “in fulfilment of” or “in consequence of” which work was performed, must have regard to the scope and purpose of the legislative scheme. Issues of fact and degree will arise. However, by reason of the industrial context, the further away the relevant contract is from something resembling an employer/employee relationship, the less likely it is that it satisfies the statutory “hinge”.

125 I have set out above the findings of Boland J, adopted and elaborated by the Full Bench. There is no doubt that Messrs Gough and Gilmour performed work. The issue remains, what is the contract or arrangement “in accordance with” or “according to” which it was performed.

126 I have set out at [31], cl 2 of the Sales and Service Agreement and at [32]-[43] I have referred to other pertinent clauses of the Dealership Agreements to which the Full Bench also had regard. I will focus on the clauses of the Sales and Service Agreement, but parallel provisions exist in the other two agreements.

127 It is pertinent to note that all of the obligations imposed by the clauses relied upon – cl 3, cl 4, cl 5, cl 6, cl 7, cl 8, cl 10, cl 11, cl 24, cl 25, cl 26 and cl 27 – are imposed upon Holdings as the Dealer, not upon Messrs Gough and Gilmour. The latter are not parties to the agreement but are identified, for purposes of cl 2 as “principals” in order to achieve the “primary purpose” identified in cl 2(a).

128 Clause 2(c) contains a promise by Holdings, as the party to the Agreement, that: “Dealer agrees that such individuals will continue in the active management of the Dealer or will continue to own a substantial financial interest in the Dealer” (emphasis added). The Full Bench found that, notwithstanding the use of the word “or”, in all the circumstances it was not an option for Messrs Gough and Gilmour to become passive investors. This finding was open, not least because the very next sentence of cl 2(c) provided that Holdings would not make a “substantial change … in the management, positions, ownership or voting control” of Messrs Gough and Gilmour, “without prior approval” from Caterpillar Australia. I would reject the applicants’ submission that the appearance of the word “or” was significant.

129 The facts of Fish give some guidance for the present case. The contractual terms are set out more fully in the judgment of this Court in Solution 6 at [22]. That case involved a Share Purchase Agreement in which the whole of Mr Fish’s business was to be acquired by Solution 6 Holdings Ltd. There were no provisions regulating an ongoing relationship, such as exist in the present case.

130 Relevantly for present purposes, there was a precondition to completion which required Mr Fish to continue in a senior managerial role with the business, which he would no longer own, for a minimum period of three years. His role was described as: “You will be responsible for delivering the strategy beginning in Australia”. Furthermore, a “lucrative option package” was envisaged to be developed during the three year period indicating an intention to extend the managerial role. (Solution 6 at [9].)

131 One of the “Conditions for Completion” of the purchase was:

“Completion will not proceed unless the Buyer is satisfied that before or simultaneously with Completion, Nick Fish … has entered into an employment contract with the Buyer, on terms acceptable to the Buyer.”

132 This precondition to completion is analogous to cl 2(c) of each of the Dealership Agreements under consideration. It has a similar general purpose to that identified in the first sentence of cl 2(c).

133 In Fish, the joint judgment said that the Share Purchase Agreement and employment agreement were related and concluded:

“[43] After the two agreements were made and the share purchase agreement was completed, Mr Fish performed work in an industry. But when one asks what was the ‘contract’ whereby he performed that work, the answer does not include the share purchase agreement.”

134 In my opinion, the same conclusion applies in the present case. Messrs Gough and Gilmour can be said to perform work in an industry “in accordance with”, “in fulfilment of” or “in consequence of” their contract or arrangement with Holdings, in the same way as Mr Fish was found to perform work pursuant to the employment contract. Similarly, when one has regard to the range of obligations expressly imposed upon Holdings under the Dealership Agreements, which, on the findings, were to be carried into effect by Messrs Gough and Gilmour, there is an analogy with the role envisaged for Mr Fish as a senior executive “responsible for developing strategy” in Australia.

135 There are numerous respects in which the expectations and obligations arising from the commercial interdependence and closeness of the relationship between Caterpillar and Holdings, required or envisaged conduct by Messrs Gough and Gilmour which goes beyond that encompassed in a managerial employment contract of the kind considered in Fish. (See the summary at [188] of the Full Bench judgment set out at [61] above.) However, these considerations, in my opinion, make it less, rather than more, likely that the Dealership Agreements answer the statutory description, by reason of the industrial context in which that description must be read and understood.

136 No doubt in a colloquial sense working as an entrepreneur/ manager/controller of a large corporate enterprise can be said to constitute ‘work in an industry’ and, accordingly, satisfy a dictionary definition of that term. However, there is no “industrial” element in such “work” by a person who occupies a position such as that which Messrs Gough and Gilmour occupied in Holdings. (I note that there was no suggestion that there was any occasion to differentiate Mr Gough’s more dominant position from that of Mr Gilmour.)

137 The characterisation of a person as a “working proprietor”, or an equivalent characterisation, is not determinative. The legislative scheme was clearly directed to regulating persons in situations where the formal contractual relations had changed from that of an employer/employee to that of an independent contractor. Contractual relations or arrangements which take the form of a dealership or franchise relationship are capable of answering the description of a contract ‘whereby work is performed in an industry’ within s 106. The section is concerned with matters of substance not form. The surrounding circumstances must be reviewed to assess whether the relationship has any analogy with an employer/employee relationship and is capable of falling within the industrial context in which the statutory formulation must be understood.

138 The “industrial” context of the legislative scheme must be taken into account. The High Court’s characterisation of the scheme as such was not a matter to which the Full Bench gave express regard in its reasons for judgment on the jurisdictional question.

139 There will be cases in which it is correct, or at least open, to conclude that the working proprietor of a franchise or dealership does perform ‘work in an industry’ in accordance with the dealership or franchise agreement. When exercising its supervisory jurisdiction, this Court would not substitute its own views on such a matter for those of the Industrial Court where the issue turns on matters of fact and degree. However, the fact that there may be cases in which drawing the line is difficult, does not mean, when a particular fact situation clearly falls on one side of the line, that the Court must refrain from exercising its supervisory jurisdiction. That, in my opinion, is the case in the present proceedings.

140 Messrs Gough and Gilmour conducted an enterprise in which they were the only investors and occupied the senior managerial positions. They were entrepreneurs who conducted a business of significant scale, involving tens of millions of dollars of capital investment, with 700 employees, over a score of business locations. No doubt they worked. They did not, however, ‘perform work in an industry’ “according to” the Dealership Agreements or the Overall Arrangement, within the meaning of s 106 of the Act.

141 Adopting a telling phrase of Kitto J from Ready Mixed Concrete (Victoria) Pty Ltd v Federal Commissioner of Taxation (1969) 118 CLR 177 at 184, to characterise the role of Messrs Gough and Gilmour as ‘the performance of work in an industry’ in accordance with the Dealership Agreements or the Overall Arrangement, is to ‘understate its nature to the point of misdescription’. (See McDonald’s Australia Holdings Ltd v Industrial Relations Commission [2005] NSWCA 286; (2005) 223 ALR 78 at [98].)

142 In the context of a business of this scale, the range of activities to be undertaken by Messrs Gough and Gilmour, as envisaged by or required by the Dealership Agreements or the Overall Arrangement, was devoid of any “industrial” content. Insofar as their activities could be said to constitute “work” within s 106(1), neither those Agreements nor that Arrangement can be said to be, or to be included in, the contract or arrangement “whereby” that work was done.

143 An argument was put by the respondents that the applicants’ submission that such work as was performed in connection with the dealership was performed according to and in fulfilment of contracts and arrangements between them and the second respondent was not open to be put in this Court. It was submitted that such a submission would challenge directly or indirectly findings of fact in Judgments No 11 and No 17, in circumstances where challenges to those judgments were not pursued. It was also submitted that the one consequence of putting the submission in this way by the applicants was to deprive the respondents of the opportunity of meeting the case by evidence. (See Suttor v Gundowda (1950) 81 CLR 418.)

144 I reject these submissions. The applicants’ arguments in this Court do not involve any appeal from the factual conclusions of Boland J as adopted by the Full Court. The applicants have submitted that certain conclusions were open on the established findings of fact. The principle in Suttor v Gundowda and like cases has no application.

The Legislative Amendment

145 Subsequent to the decisions in this Court which led to the trilogy of cases in the High Court, the New South Wales Parliament amended s 106 by the insertion of subsection (2A). The subsection was not applicable to the cases considered by the High Court in those judgments.

146 Part of the reasoning in the joint judgment in Fish referred to the fact that what may be declared void or varied pursuant to s 106(1) is the arrangement in accordance with which a person performs work. The addition of subsection (2A) confers a power to declare void or vary a related condition or collateral arrangement, even though it does not relate to the performance by a person of work in an industry.

147 Nevertheless, by express provision in par (a) subsection (2A) applies only if the contract or arrangement to which the condition is related or the arrangement is collateral “is a contract whereby the person performs work in an industry”. Accordingly, it remains accurate to say, as the High Court joint judgment said at [18] and [41] of Fish and [22] of Old UGC, performance of work in an industry is “the hinge about which s 106 turns”. Section 106(2A)(a) reaffirms that proposition.

148 In the present proceedings the only matters identified as a “related condition” or as a “collateral arrangement” are the Last Resort Policy and the Fourth Assurance. Pursuant to s 106(2A)(a) they must be related or collateral to a contract whereby a person performs work in an industry. The only contract or arrangement said to satisfy that requirement are the Dealership Agreements and/or the Overall Arrangement.

149 For the reasons given above, s 106(2A)(a) is not satisfied in the present case. Accordingly, the subsection could not be used as a basis for varying either the Last Resort Policy or the Fourth Assurance. It is unnecessary to determine whether the orders actually made could answer the description of a “variation” of either. (See McDonald’s at [82].)

The Challenge to the Orders

150 By reason of my conclusion on the performance of work in an industry issue, it is unnecessary to deal with the alternative case of the applicants to the effect that the Industrial Court exceeded its jurisdiction in making a number of the orders they did make. Nevertheless, as the High Court has again recently emphasised, it is desirable for an intermediate Court of Appeal to deal with alternative grounds of this character. (See Kuru v State of New South Wales [2008] HCA 26; (2008) 82 ALJR 1021 at [12].)

151 The challenge to the power to make orders turns on the scope of the express power to make an order “declaring wholly or partly void, or varying”, a contract within s 106(1) and in the parallel power to ‘declare void or vary’ a related condition or collateral arrangement within s 106(2A).

152 The challenge also involves the scope of s 106(5) which provides:

“106(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.”

153 With respect to s 106(5) it is again pertinent to have regard to the extended definition of “contract” in s 105 which, to repeat, is defined to mean “any contract or arrangement, or any related condition or collateral arrangement …”.

154 Consequent upon his Judgments No. 11 and No. 15, Boland J made orders on 14 July 2003 varying what his Honour had identified to be the Overall Arrangement. These orders which are lengthy had, relevantly, two distinct objects:

(i) Provision for what the order referred to as “an Improvement Plan”. This order was backdated, so that it took effect “if prior to 25 October 2000, Caterpillar holds a serious concern that relationship difficulties it has with Gough & Gilmour may require consideration to be given to terminating the dealership”. His Honour had already made findings of fact on the evidence that that condition was satisfied. The order made by his Honour required Caterpillar to take steps to implement a scheme giving notice to Gough & Gilmour of the steps required to remedy the situation, referred to as “the Improvement Plan”. The order expressly required Caterpillar to act in this way prior to 25 October 2003, ie, almost three years before the order was made;

(ii) To identify an “Additional Sale Period” of 90 days commencing on 5 June 2003 to give the respondents a further opportunity of selling the dealership business to a person nominated by Caterpillar as the “preferred dealer candidate”, in accordance with the terms of the Dealership Agreements. The order provided details as to the procedure during this additional sale period.

155 The basis of the challenge to the orders is twofold. First, the applicants rely upon observations I made in Solution 6 especially at [95] and also in McDonald’s especially at [66] and [84]. Secondly, with respect to the order concerning the Improvement Plan, the applicants challenge the power to make this notional variation, where the variation in its own terms had expired before the order was made, was incapable of ever taking effect, could never be complied with by the parties and was made solely for the purpose of providing a possible foundation for orders of compensation.

156 With respect to the challenge to the orders for payment of money, which are claimed in the Sixth Further Amended Summons and which have not yet been determined by the Industrial Court, the applicants rely on my observations in Solution 6 at [95] and in McDonald’s at [66] and [81]-[84], generally to the effect that orders should relate closely or otherwise to the performance of work in an industry. They submit that the introduction of s 106(2A) does not overcome what is characterised as a “requirement” arising from that reasoning.

157 In relevant respects, the reasoning upon which the applicants rely has been superseded by the approach of the High Court in Fish, Batterham and Old UGC. However, it is not necessary to seek to analyse the judgments in that respect because the introduction of s 106(2A) undermines the basis of the reasoning.

158 Where the legislature, albeit only with respect to a “related condition” and “collateral arrangement”, has indicated that orders can be made which do not involve performance of work in an industry, then it can no longer be said that the power to vary a contract, which does lead to such performance, must be so limited. As the respondents submitted, it would be perverse if a particular non-work related element could be set aside or varied if found in a collateral arrangement, but could not be set aside or varied if found in the contract for the performance of work itself.

159 In any event, the reasoning in Solution 6 did not refer to the broadly expressed power in s 106(5) to make monetary awards. That power was clearly intended to be available as a substitute for an order which could be seen to impinge on the contract or arrangement for the performance of work.

160 Finally, the applicants made no attempt to identify how it could be said that errors of this character could be jurisdictional. If there was error, for example in imposing an Improvement Plan incapable of compliance, it appears to me that it could have been no more than an error within jurisdiction. This was not the subject of detailed submissions and it is unnecessary to express a concluded view.

161 In the case of the monetary compensation orders the Court would, in these circumstances, in any event apply a policy of restraint and refuse to intervene before the Industrial Court made its orders. (See Kirk Group Holdings Pty Ltd v WorkCover Authority (NSW) [2006] NSWCA 172; (2006) 66 NSWLR 151 at [47]; Yim v The Industrial Relations Commission of New South Wales [2007] NSWCA 77; (2007) 162 IR 62 at [76]-[77].)

Orders

162 I have set out above the orders which the applicant seek. Subject to one matter, those orders should be made.

163 The respondents correctly submit that it is not appropriate, in the exercise of a supervisory jurisdiction, to make any order for costs with respect to the proceedings in the Industrial Court.

164 The orders I propose are:

(1) Order that the record of the Full Court of the Industrial Court of New South Wales in matter No. IRC 227 of 2007 be brought up to this Court;

(2) Order that the orders of the Full Court of the Industrial Court of New South Wales of 21 February 2008 and 13 March 2008 in the said proceedings be quashed;

(3) Order that the record of the Industrial Court of New South Wales in matter No. IRC 5227 of 2000 be brought up to this Court;

(4) Order that any findings of jurisdiction, unfairness or declarations or orders made in or consequent upon the judgments of the Industrial Court of New South Wales (Boland J) in matter No. IRC 5227 of 2000 delivered on:

(a) 23 October 2001 – Judgment No. 9;
(b) 19 December 2002 – Judgment No. 11;
(c) 27 February 2003 – Judgment No. 14;
(d) 4 June 2003 – Judgment No. 15;
(e) 2 February 2007 – Judgment No. 17.
be quashed.


(5) Declare that the Industrial Court of New South Wales does not have jurisdiction to make any declarations or orders sought by the second to fourth respondents in matter No. IRC 5227 of 2000 other than dismissing the proceedings and ordering costs against the second to fourth respondent;

(6) Subject to the Order in par 8, Order that the second to fourth respondents, or any of them are prohibited, from further proceeding in matter No. IRC 5227 of 2000 in the Industrial Court of New South Wales or upon the Judgments of the Trial Judge and the Judgment of the Full Court of the Industrial Court of New South Wales on 21 February 2008;

(7) Subject to the Order in par 8, an Order prohibiting the first respondent from taking any step to further exercise, or purport to exercise, its power pursuant to any provision of the Industrial Relations Act 1996 in matters No. IRC 5227 of 2000 and No. IRC 227 of 2007;

(8) An Order that the proceedings be remitted to the first respondent to determine the issue of costs in the proceedings before it and to conduct an inquiry into damages sustained by the applicants pursuant to an undertaking given by the second to third respondents as a result of interlocutory orders granted by the first respondent on 24 October 2001 and continued by orders made on 13 February 2003 until the interlocutory orders were dissolved on 14 July 2003;

(9) An Order that the second to fourth respondents pay the first to fourth applicants’ costs of the proceedings in this Court.

165 ALLSOP P: I agree with the Chief Justice.

166 TOBIAS JA: I agree with the Chief Justice.

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