JY Smile Centre Pty Ltd v Idameneo (No.123) Pty Ltd
[2013] FCCA 336
•28 May 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| JY SMILE CENTRE PTY LTD & ANOR v IDAMENEO (No.123) PTY LTD | [2013] FCCA 336 |
| Catchwords: INDUSTRIAL LAW – Services contract – whether there is an agreement that was covered by the Independent Contractors Act – whether services need to be provided by independent contractor to the other party to the contract – where dental services provided to third parties – where one party provides services to the independent contractor. |
| Legislation: Federal Circuit Court of Australia Act 1999, s.17A |
| ATS(Asia Pacific) Pty Ltd v Dun Oir Investments Pty Ltd [2012] FCA 1460 Jordan v Aerial Taxi Cabs Co-operative Society Ltd (2001) 108 IR 263 Lee v Aerial Taxi Cabs Co-operative Society Ltd t/as Canberra Cabs (1999) 97 IR 407 ProjectBlue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 |
| First Applicant: | JY SMILE CENTRE PTY LTD (ACN 149 457 894) |
| Second Applicant: | JAE HOON YOON |
| Respondent: | IDAMENEO (No.123) PTY LTD (ACN 002 968 185) |
| File Number: | BRG 708 of 2012 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 18 October 2012 |
| Date of Last Submission: | 18 October, 2012 |
| Delivered at: | Brisbane |
| Delivered on: | 28 May 2013 |
REPRESENTATION
| Counsel for the Applicants: | Mr Webster |
| Solicitors for the Applicants: | Pan & Partners Lawyers |
| Counsel for the Respondent: | Mr Dixon SC with Mr de Jersey |
| Solicitors for the Respondent: | King & Wood Mallesons |
ORDERS
The application in a case filed on 10 September, 2012 be dismissed.
The application be adjourned to 24 June 2013 at 9.30 a.m. for directions in the Federal Circuit Court of Australia sitting at Brisbane.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 708 of 2012
| JY SMILE CENTRE PTY LTD (ACN 149 457 894) |
First Applicant
| JAE HOON YOON |
Second Applicant
And
| IDAMENEO (NO.123) PTY LTD (ACN 002 968 185) |
Respondent
REASONS FOR JUDGMENT
In the principal application before the Court, JY Smile Centre Pty Ltd and Jae Yoon claim relief pursuant to ss.12 and 16 of the Independent Contractors Act 2006 (Cth) in respect of a written agreement entered into by them with Idameneo (No. 123) Pty Ltd on 2 March, 2011. Relief is sought on the basis that the agreement is a “services contract” which is, under the Act, unfair or harsh.
Idameneo opposes the relief sought by the applicants in the principal proceedings and, by application filed on 10 September, 2012 it seeks that the proceedings be summarily dismissed.
The applicants have delivered a Statement of Claim in the proceedings, but Idameneo has not delivered any Defence to the Statement of Claim. Idameneo has filed a Response to the applicants’ Initiating Application wherein it claims that the proceedings be summarily dismissed. It has filed no evidentiary material. Accordingly, in my view, I should approach this application on the basis that the facts pleaded by the applicants are true.
As set out in its Response, primarily Idameneo argues that the relief sought by the applicants is only available in respect of a services contract as that term is defined by the Act. Idameneo argues that the contract in respect of which the applicants seek relief is not such a contract and so, the Court has no jurisdiction to grant the relief claimed by them.
The Claim
In their Statement of Claim the applicants, relevantly, plead that:
a)the first applicant is an independent contractor within the meaning of that term as defined in the Act;
b)the respondent operates a multi-disciplinary medical centre in Southport, Queensland;
c)on or about 2 March, 2011 the first applicant, the second applicant and the respondent entered into a written agreement entitled “Option to Purchase” with the following annexures to it:
i)a deed entitled “Sale of Practice”;
ii)a deed entitled “Provision of Services to Incorporated Dental Practitioner”; and
iii)a deed entitled “Performance Guarantee: Incorporated Dental Practitioner”;
d)by clause 2.1 of the Option to Purchase the first applicant and the second applicant were required to render dental services at the medical centre for an “Initial Term” of up to 15 months;
e)by clauses 1.1 and 3 of the Option to Purchase and clauses 1.1 and 2.5 of the Sale of Practice deed there was payable an option fee of $10,000 and the first applicant granted the respondent an option to purchase the first applicant’s incorporated practice (the Call Option) for $90,000 exercisable between 12 and 15 months after execution of the agreement;
f)by clause 5, and by clause 2 of the Provision of Services to Incorporated Dental Practitioner deed, upon the valid exercise of the Call Option the second applicant and the first applicant were obliged to provide the second applicant’s dental services to the respondent for a period of four years.
Mr Yoon is a director of the corporate applicant and is a qualified dentist.
The Issue
The applicants, by their written submissions, suggest that the primary point of contention is whether “a contract obliging a dentist to render dental services at particular times, at a particular medical clinic, and regulating the provision of those services, is a services contract for the purposes of the Act.”
In my view, the general issue is whether, on the facts pleaded and accepted for the purposes of this application, the contract in respect of which the applicants seek relief is capable of being construed as a services contract for the purposes of the Act.
More specifically, there is one legal issue and, depending upon the answer to that legal issue, one factual issue at the heart of this application namely:
a)for a contract to be a services contract for the purposes of the Act, must the contract be for the provision of services by the independent contractor to the other party to the contract; and if so
b)does this contract require provision of those services by the applicants to the other party to the contract.
Consideration
The applicants seek relief pursuant to s.12 of the Act. That section gives the Court power to review a services contract which is either harsh or unfair, or both. At the relevant time, s.12 of the Act was in the following terms:
12 Court may review services contract
(1) An application may be made to the Court to review a services contract on either or both of the following grounds:
(a) the contract is unfair;
(b) the contract is harsh.
Note: A proceeding pending in the Federal Magistrates Court may be transferred to the Federal Court of Australia: see Part 5 of the Federal Magistrates Act 1999.
(2) An application under subsection (1) may be made only by a party to the services contract.
(3) In reviewing a services contract, the Court must only have regard to:
(a) the terms of the contract when it was made; and
(b) to the extent that this Part allows the Court to consider other matters—other matters as existing at the time when the contract was made.
(4) For the purposes of this Part, services contract includes a contract to vary a services contract.
Note: The effect of subsection (4) is that a contract to vary a services contract can be reviewed under this Part, as the contract to vary will itself be a services contract.
Section 5 of the Act relevantly provides:
5 Services contract
General meaning
(1) A services contract is a contract for services:
(a) to which an independent contractor is a party; and
(b) that relates to the performance of work by the independent contractor; and
(c) that has the requisite constitutional connection specified in subsection (2).
Note: Conditions or collateral arrangements relating to a services contract may be taken to be part of the services contract: see subsection (4).
…
Conditions and collateral arrangements
(4) A condition or collateral arrangement that relates to a services contract is taken to be part of that services contract if, were the condition or arrangement itself a contract for services, it would have the requisite constitutional connection.
For the purposes of these reasons, I will assume that there is no dispute that ss.5(1)(a) and (c) are satisfied in this case. The issues arise in respect of s.5(1)(b) of the Act.
Idameneo argues that to engage the definition of services contract the relevant contract must be a contract for services that relates to the performance of work by the independent contractor for the other party to the contract. That is to say, the independent contractor must provide services pursuant to the contract to the other party to the contract. Here, Idameneo argues, the relevant contract requires Idameneo to provide services to the applicants and that situation is not one which falls within the relevant definition.
The applicants argue that all that s.5(1)(b) requires is that the independent contractor provides services pursuant to the contract. Those services do not have to be provided to the other party to the contract, but might be rendered to strangers to the contract. In the context of this case, that means that the provision of dental services by the applicants to patients of the applicants’ practice is enough to engage the definition.
I was not taken to any authority directly on point, but I was taken to some authority on the way in which s.127A of the Workplace Relations Act 1996 (Cth) (now repealed) has been interpreted. The forerunner to s.12 of the Act was s.127A of the Workplace Relations Act. Whilst the two sections are not identical, Idameneo argues that the way in which s.127A has been approached in the past provides guidance as to how I should now approach the interpretation of s.12 of the Act.
There are two relevant decisions to which I was taken by Idameneo’s argument that concerned s.127A of the Workplace Relations Act. Both decisions are judgments of single judges of the Federal Court of Australia. Neither bind me, but I accept that both are persuasive.
The first case to which I was referred was Lee v Aerial Taxi Cabs Co-operative Society Ltd t/as Canberra Cabs (1999) 97 IR 407. In that case the applicant was a taxi-driver. The respondent was a co-operative society of taxi owners. The taxi driver was a bailee of the taxi he drove, which was owned by a third party. The respondent provided radio network booking services to the applicant and the drivers of other taxis, who in return agreed to be bound by the respondent’s rules and by-laws concerning the operation of the radio network and the conduct of drivers that utilised the network. In the proceedings, the applicant sought a determination that the agreement between he and the respondent whereby he agreed to be bound by the respondent’s rules and by-laws was an unfair or harsh contract. One of the issues that arose in the case was whether the agreement between the applicant and the respondent was a contract for services for the purposes of s.127A(1) the Workplace Relations Act.
When that case was determined, s.127A of the Workplace Relations Act was, relevantly, in the following terms:
127A Unfair contracts with independent contractors: Court’s
powers
(1) In this section and in section 127B:
contract means:
(a) a contract for services that:
(i) is binding on an independent contractor; and
(ii) relates to the performance of work by the independent contractor, other than work for the private and domestic purposes of the other party to the contract; and
(b) any condition or collateral arrangement relating to such a contract.
Note: the meaning of contract is limited by section 127C for Constitutional reasons.
(2) Application may be made to the Court to review a contract on either or both of the following grounds:
(a) the contract is unfair;
(b) the contract is harsh.
(3) An application under subsection (2) may be made only by:
(a) a party to the contract; or
(b) an organisation of employees of which the independent contractor is (or has applied to become) a member, if it is acting with the written consent of the independent contractor; or
(c) an organisation or association of employers of which the person contracting for the services is (or has applied to become) a member, if it is acting with the written consent of the person.
…
Gyles J accepted an argument that Mr Lee had not established that there was any contract within the meaning of s.127A(1) of the Workplace Relations Act. His Honour said:
[16] I agree with the submission of the respondent that the Driver's Agreement is not in itself a contract for services. The parties are the driver and the respondent. On no view of the facts does the driver provide services to the respondent.
His Honour approached the case on the basis that s.127A(1)(a)(ii) required that the relevant services under the contract be provided by the independent contractor to the other party to the contract. There was no discussion in the judgment of the basis upon which his Honour came to that view.
The other decision to which I was taken was Jordan v Aerial Taxi Cabs Co-operative Society Ltd (2001) 108 IR 263. As in Lee, the applicant was a taxi-driver and the respondent was a co-operative society of taxi owners that provided radio network services to the drivers of taxis. Mr Jordan sought a relief on the basis that the agreement between he and the respondent whereby he agreed to be bound by the respondent’s rules and by-laws governing the conduct of drivers was an unfair or harsh contract. The issue was whether the agreement between Mr Jordan and the respondent was a contract for the purposes of s.127A the Workplace Relations Act.
Madgwick J dismissed the application. His Honour determined that:
a)s.127A of the Workplace Relations Act was intended to be limited to cases where one party, the “independent contractor” performs work and thereby provides services to the other, the “person contracting for the services”;
b)the contract the subject of the litigation was fairly to be understood as one for access to the radio network, that is for a service provided by the respondent and not the driver;
c)while the fulfilment of the driver’s obligations provide some marketing or public relations benefits, and in that sense a service, to the respondent, the driver also benefited directly and substantially from the fulfilment of those obligations.
d)the contract at issue obliged the applicant to do what he was already legally bound to do. In the circumstances it could not be said that the applicant was providing the respondent with a service within the meaning of s.127A of the Workplace Relations Act.
His Honour referred to Gyles J’s decision in Lee. However, his Honour went on to explain why, in his Honour’s view, the relevant contract was not a contract for the purposes of the Act. Central to his Honour’s determination was the presence of s.127A(3)(b) and (c) in the Workplace Relations Act. His Honour said:
[38] Clearly, the respondent provided the applicant with services pursuant to the Agreement, namely its radio network services. In my opinion, but for the terms of s127A(3)(b) and s127A(3)(c), this would be enough to enable s127A to catch the Agreement: it is a contract for services; it is binding on an independent contractor and, in my view, it "relates to" the performance of work by him or her. There is no justification for reading down the language of s127A(1). However subs(3) indicates that the contracts touched by the section are to be those as to which the interested parties are, on the one hand, the "independent contractor" and, on the other, "the person contracting for the services". This is a clear indication that the section was indeed intended to be limited to cases where one party, the "independent contractor", performs work and thereby provides services to the other, the "person contracting for the services". It would not be enough that the applicant had provided services, for example, to the taxi-owner, for s127A(1)(a) to catch his contract with the respondent. (See below as to whether the arrangements between the applicant and respondent are, within s127A(1)(b), collateral to a contract of services with the particular taxi-owner.)
Subsections 127A(3)(b) and (c) have no counterparts in the Independent Contractors Act. Section 127A(3)(a) finds expression in s.12(2) of that Act, but the balance of s.127A(3) does not appear to have been re-enacted. It is clear from the foregoing paragraph that in the absence of s.127A(3)(a) and (b) his Honour thought that s.127A was apt to “catch” the agreement in that case. The provision of services from the taxi co-operative to the independent contractor (rather than the other way around) was sufficient to engage the definition in s.127A(1) of the Workplace Relations Act.
In the present case, the Option to Purchase contract is a contract whereby Idameneo is to provide “services” to the applicants. The contract “relates to” the “performance of work” by the applicants who, it may be taken for the purposes of this application, are independent contractors. The phrase “relates to” is “extremely wide”: ProjectBlue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [87]. “Ordinarily, a clause employing the words “relates to” or an expression of that kind should be construed according to its ordinary natural meaning and as giving a wide connecting scope to the factors to which the clause is directed.”: ATS(Asia Pacific) Pty Ltd v Dun Oir Investments Pty Ltd [2012] FCA 1460 at [5].
ATS (Asia Pacific) Pty Ltd (above), was an application for leave to appeal a decision of a judge of the Federal Court. Leave to appeal was granted and, as best as I can tell, the appeal has not yet been determined. At issue in that case was the primary judge’s determination that “The parties to the contract [there under consideration] did not contract for the provision of labour by Dun Oir for the benefit of ATS’ business on an independent contractor basis in contradistinction to an employer – employee relationship”. In fact, the contract did not require Dun Oir to perform any work for ATS in return for the contractual payments to which Dun Oir said it was entitled under the contract. In the primary proceedings, ATS claimed relief under the Act on the basis that the relevant contract was harsh or unfair. Dun Oir applied to strike out the proceedings. Drawing an analogy with s.106 of the Industrial Relations Act 1996 (NSW) the primary judge struck them out on the basis that the contract was not a contract for services for the purposes of the Independent Contractors Act.
In granting leave to appeal, Rares J pointed out:
[6] His Honour concluded, applying decisions under s 106 of the Industrial Relations Act:
“Given that ATS’ obligation to pay Dun Oir arises independently of the performance of work, it cannot be said that this agreement involves the performance of work and thus s (5)(1)(b) excludes the Act’s application.”
[7] The word “involves” is not used in s 5(1)(b) of the Act, and is arguably narrower than the scope of the words “relates to” in the expression “relates to the performance of work”. Something can “relate to the performance of work” without the contract requiring any work to be performed. That is unlike the operation of s 106 which required work to be performed.
[8] His Honour also considered that:
“... it was not the intention of Parliament to expand the scope of the Act to cover all circumstances where services are provided under an agreement to ‘Party A’ by a person who is independent of ‘Party A’.”
He held that the intention of the Act was to provide protection to persons who enter into independent contracting “as a form of work arrangement”.
Rares J went on to opine:
In my opinion, it is arguable that his Honour may have erred in that regard, as well, bearing in mind that s 4 of the Independent Contractors Act defined “independent contractor” as:
“Independent contractor is not limited to an actual person.”
In my view, it is not at all clear that s.5(1) of the Act is not wide enough to catch the Option to Purchase contract between the applicants and the respondent in this case. Madgwick J’s decision in Jordan (above) turned upon the words found in s.127A(3)(b) and (c) of the Workplace Relations Act. Those provisions do not exist in the Independent Contractors Act. In the absence of those provisions, Madgwick J would have found that the contract in that case was caught by s.127A(1) of the Workplace Relations Act. His Honour’s approach is consistent with the approach taken by Rares J in ATS (Asia Pacific) Pty Ltd.
In my view, it is not at all clear that the applicants have no reasonable prospect of successfully prosecuting their application. On the basis of the authorities set out above, it is plainly arguable that a contract does not have to require the “independent contractor” to provide services to the other party to the contract before it can be said to be a services contract for the purposes of s.5(1) of the Independent Contractors Act. The provision of services by one party to the contract to the other is, arguably, enough to engage the definition. Moreover, the contract does not have to involve the performance of work by the independent contractor for the other party, but need only “relate to” the performance of work by the independent contractor. The definition says nothing in my view about the identity of the recipient of the work.
If I am not satisfied that the applicants have no reasonable prospect of successfully prosecuting their application, no occasion to exercise the power given to the court by s.17A of the Federal Circuit Court of Australia Act 1999 or r.13.10 of the Federal Circuit Court Rules 2001 arises.
The application for summary dismissal must be dismissed.
I certify that the preceding thirty-two (32) paragraphs are a true copy of the reasons for judgment of Judge Jarrett
Date: 28 May 2013
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