Newnham & Anor v Production Spray Painting & Panel Beating Pty Limited

[1991] HCATrans 369

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S60 of 1991

B e t w e e n -

ROBERT HENRY NEWNHAM and

PAMELA JUNE NEWNHAM

Applicants

and

PRODUCTION SPRAY PAINTING &

PANEL BEATING PTY LIMITED

First Respondent

STEPHEN VALENTINE GOBERT

Second Respondent

SUZANNE MAREE GOBERT

Third Respondent

THE INDUSTRIAL COMMISSION OF

NEW SOUTH WALES

Fourth Respondent

Application for special leave

Newnham 1 13/12/91

to appeal

MASON CJ
DEANE J

GAUDRON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 13 DECEMBER 1991, AT 9.28 AM

Copyright in the High Court of Australia

MR P.G. HELY, QC: If the Court pleases, I appear with

MR R.M. SMITH, for the applicant. (instructed by

Redmond Partners)

MR J.W. SHAW, QC: If the Court pleases, I appear with

MR T.J. MORAHAN, for the first to third

respondents. (instructed by Rosier and Associates)

MASON CJ:  The Registrar has been informed by the State

Crown Solicitor for New South Wales who appears for the Industrial Commission of New South Wales that the Commission will not appear at the hearing of

the application and it will submit to such orders

as the Court may make except as to costs. Mr Hely?

MR HELY:  Might I hand to Your Honours a copy of the section

plus a copy of two authorities to which I propose

to refer in the course of my submissions.

Your Honours, the jurisdiction under

section 88F of the Industrial Arbitration Act is

enlivened when one finds a contract whereby the

person performs work in any industry, if one of the

five grounds referred to in the subsection is

otherwise established.

The meaning of the expression "whereby" was

considered by this Court in Stevenson v Barham,

136 CLR 190. In that case this Court laid down a

test of general application in order to determine

whether jurisdiction is attracted. That test as

appears from page 200 of the report is whether the

contract is one which leads directly to a person

working in an industry. If one looks at the bottom

of page 200, the last couple of lines, then across

to page 201 at about point 5 in the paragraph

commencing, "It follows", in the joint judgment of

Your Honour the Chief Justice and

Mr Justice Jacobs, one sees that test set forth.

As appears from page 192 of the report, in the decision of Sir Garfield Barwick, His Honour agreed

with that view and expressed the opinion:

that the language of s 88F of the Act is

intractable and must be given effect according

to its width and generality.

The matter was considered by the Privy Council

in Caltex Oil (Australia) Pty Ltd v Feenan, (1981)
1 NSWLR 169, which is the second of the cases
included in the bundle. At page 172F
Their Lordships adverted to the decision of this

Court without any expression of disapproval of the

reasons of the majority of this Court and on

page 173G expressed in their own words the import

Newnham 2 13/12/91

of the expression "whereby" and Their Lordships

said that it bore:

its ordinary meaning of "in consequence of

which" or "in fulfilment of which".

Since Stevenson v Barham, the Industrial

Commission has held, in a large number of cases,

that section 88F applies to contracts for the sale

of a business to persons who intend to become and

who in fact become working proprietors in

connection with that business. If one looks at

page 100 of the application book, commencing at

about line 17, the judges who constituted the

majority in the Court of Appeal refer to that trend
of authority in the Commission, and there has, I

think - - -

GAUDRON J: But there is nothing in the section, on your

approach, that would limit it to the sale of

businesses to persons who intend to work in the

business.

MR HELY:	No, that is so, Your Honour.
GAUDRON J:	Your approach would necessarily lead to the

consequence to any sale of business which is to be

continued.

MR HELY:  To any sale of business which is to be continued,

yes, Your Honour, in terms of the jurisdictional
threshold. When it comes to discretionary

considerations, of course, different - - -

GAUDRON J: Yes. So, section 88F would apply in every case

of the sale of business except, perhaps, where
somebody bought the business intending to close it

down on the completion of the contract for sale?

MR HELY: Subject to one possible qualification, yes,

Your Honour. That qualification is this, that in

some cases the Industrial Commission has held that

if there is a sale of a continuing business in

which continuing employees, in effect, continue in
their employment and the proprietor does not,

himself, work in the business, the Court has come

to the conclusion that that is not within 88F

because nobody is introduced to work into the

industry in consequence of the contract.

GAUDRON J: Is there anything in the subsection that would

point to that construction, that limitation?

MR HELY:  Not in express terms. It depends upon how one

applies the expression "whereby". We submit that

"whereby" simply gives rise to a factual inquiry

Newnham 13/12/91

which has to be determined in the light of the

circumstances of the particular case.

I referred to page 100 of the application book

simply to indicate that a trend of authority has

existed in the Commission in consequence of the

decision of this Court in Stevenson v Barham, and

we have filed a supplementary affidavit in support

of the application for special leave to appeal

which lists a number of reported cases where the by the court session, has either assumed or

adverted to the exercise of jurisdiction in these

circumstances.

I should say to Your Honours that I looked at

those cases myself last night. If I were preparing
that list myself I would perhaps delete half a

dozen of them from it so that perhaps the precise

number of cases should be a little less than

appears from that list.

Could I take Your Honours to page 45 of the

application book in the sentence commencing in the

last line over to page 46 at about line 18? The

majority of the Commission sitting in court session

considered the particular contract which was

involved in the present case and came to the

conclusion, as it appears at about line 17 on

page 46, that it was:

a classic example of such a contract and

arrangement envisaging the performance of work

in the conduct of the business sold as a

"going concern" .

At page 47, line 9 to line 20, the majority of the Commission found:

at least a condition or arrangement collateral

to the contract for sale -

of the business -

that the purchaser would operate and manage the business; the contract and arrangement here led directly to the second respondent

working in the business.

At page 52, lines 20 to 25, the majority of the Commission came to the conclusion:

that it was an integral part of the overall

arrangement, and ..... that work would be

performed by the -

applicant before this Court -

Newnham 13/12/91

in the conduct and management of the business

which was sold as a "going concern" having
goodwill.

MASON CJ: Is there any specific provision in the agreement which specifically contemplates that the purchaser will work in the business or is this all a matter

of implication from the general nature of the

agreement?

MR HELY: It comes from two things: first, it comes from

the fact that the business substantially consisted

of the goodwill. If that goodwill was to be

preserved or increased, the purchaser or somebody

else had to work in the business. That is the

first thing. The second thing:  if one goes to

page 43, one sees the relevant provisions of the

contract. Looking, perhaps, at clause 9 at about

line 25, the Vendors are to manage the business as

a going concern and, in effect, to put -

Purchasers in possession and enjoyment of the

business.

Page 45, clause 20:

The Vendors agree to allow the Purchasers or

their nominees to be in attendance at the

business ..... to observe the manner in which
the business is conducted and to receive
tuition in relation to the conduct of the

business.

And clause 21, at about line 30, oblige the

vendors:

to give tuition to the Purchasers in relation

to the conduct of the business.

That second matter would support what Their Honours

have said.

The third matter is that on the totality of

the evidence, the purchasers, to the knowledge of
the vendors, intended to work in the business

because the reason for its acquisition was to

afford the applicant just that opportunity. She

wanted to work in a dress shop. That is why she

bought this business.

MASON CJ:  Do the authorities place any limitation on the character in which work is performed? One can

understand, of course, that provisions of this kind

would be naturally directed at contracts for the

performance of work on the part of persons who are

not proprietors but has there been any discussion

at all as to whether or not the section

Newnham 5 13/12/91

contemplates a contract which provides for or

contemplates the performance of work by people in

the character of a proprietor?

MR HELY:  The Industrial Commission, in a number of cases,

has expressly applied the second section to the

cases - - -

MASON CJ:  On the footing that it does so apply?

MR HELY:  On the footing that it does so apply. The only

limitation, we would submit, is a limitation which

comes from the section itself. It must be work in

an industry. Once one discovers that it is work in

an industry, the particular layer at which that

work is performed, we would submit with respect, is

not germane.

DEANE J:  What if the purchasers had in fact closed the

business down immediately after purchase, would

this contract then be within section 88F or is it,

on the argument you support, that you do not know

whether a contract is within section 88F until you

find out what happens?

MR HELY:  We would submit that the answer to Your Honour's

question is that it is a factual inquiry to see

whether the contract directly led to a person

working in an industry. If the contract produced

that result, then it is within the section because

what the section is directed towards is a person,

in effect, who was induced to work in an industry

by a contract which suffers from one of the five

defects referred to in the section.

Can I take Your Honours to page 103? This is

in the joint judgment of Mr Justice Priestley and

Mr Justice Handley. At that page they are

considering the decision of this Court in

Stevenson v Barham, and commencing at the top of

the page and continuing to about line 10, they

treated the decision of this Court in that case as

confined to its particular facts.

GAUDRON J: Well, they did not say it must be confined, they

said it "must be understood by reference to the

facts".

MR HELY: That proposition is, of course, unexceptionable

but I would submit that they went a little further,

particularly at line 5 when Their Honours said that

the decision of this Court:

properly understood, do not directly support

any wider proposition.

Newnham 6 13/12/91

That is to say, any proposition than was broader than was necessary to dispose of that particular case.

At page 109, we would submit that what

Their Honours did was to develop their own and a different test for determining whether the

jurisdictional threshold was passed. At about

line 5, Their Honours said:

The impugned contract etc. therefore must

directly, that is under or pursuant to its

terms, provide for the performance of work in

an industry.

So that in substitution for the test as to whether

the contract which is one which leads directly to a

person working in an industry, they adopt a test of

looking at the terms of the contract itself to see

whether it calls for that consequence to flow.

MASON CJ:  Now, that expression "lead directly" comes from

V.G. Haulage, does it not?

MR HELY: Initially, yes.

MASON CJ:  And was not the relevant passage in V.G. Haulage

quoted, evidently with approval, at page 201 of

Stevenson v Barham?

MR HELY:  Yes, it was, at page 200 and, yes, as my friend

says, across to the top of page 201 as well.

But what the Court of Appeal is doing is to substitute for a factual inquiry as to whether the

contract has produced or has directly produced a

particular result a quite different test, that is

to say, "Does the contract, in its terms, call for

work in an industry?"

GAUDRON J: But why do you say that Stevenson v Barham

provides for an essentially factual investigation?

MR HELY: Because it talks in terms of whether a contract

directly leads to a result. And at page 201, at

about point 7, it was described by this Court as

being the relevant jurisdictional fact which needs

to be established. So that the Court described

this threshold test in terms of being a

jurisdictional fact.

If I could ask Your Honours to go to page 106

at about line 12. There Their Honours consider the

Privy Council decision in Feenan and notice that

the test there expressed was in the alternative:

Newnham 13/12/91

'in consequence of which' or 'in fulfilment of

which'.

Between lines 15 and 20 they say that it was not

necessary for the Privy Council to decide which of

those two alternatives should be adopted. Between

lines 20 and 25 Their Honours state that "in

consequence of" will catch many more contracts but

if the test is expressed to be "in fulfilment of"

and, ultimately, as I have taken Your Honours to at

page 109, they come to the conclusion that "in

fulfilment of" is the appropriate test.

So that we submit that the majority of the

Court of Appeal have so far done two things:

firstly, they have departed from the test as laid

down by this Court and, second, they have cut the

test, as laid down by the Privy Council, in half.

At page 108, commencing at about line 22,

continuing to the top of the next page,

Their Honours expressed the view that:

a contract is only within the section if it

has "an industrial colour or flavour".

We would submit that in approaching the matter in

that way Their Honours have ignored or have paid

insufficient weight to the statement of this Court

in Stevenson v Barham, at page 200 at the bottom of

the page, where this Court said that where one can

see a transaction which leads directly to work in

an industry, that fact is sufficient to give rise

to the necessary "industrial colour or flavour".

Could I take Your Honours to page 100, line 7 - - -

DEANE J: What do you say the word "directly" means as used

in Stevenson v Barham? I mean, how does a contract

for the sale and purchase of the business lead

directly to somebody working in the business? It

leads directly to the business being sold if it

does not provide or require for somebody to work in

the business; it only leads indirectly to somebody

working in the business?

MR HELY:  We would submit that that is still a direct

consequence because the transaction produces that

effect and it is within the contemplation of the

parties that it will do so.

DEANE J: Except if you are fastening on the words used in

Stevenson v Barham, I think you have got to give

them the ordinary meaning, and a contract for the

purchase of a business which imposes no obligations
upon anyone in respect to labour simply does not
lead directly as a contract to somebody working in

the business.

Newnham	13/12/91
MR HELY:	If I could respond to Your Honour's comment or to

Your Honour's question in this way: take a

business such as the present business which is

constituted almost entirely by its goodwill.

Unless somebody works in an industry upon

completion of that contract, the subject-matter of

the sale will self-destruct.

DEANE J: Well, the completion of the contract in that

factual situation does lead indirectly to somebody

working in the business but all the contract itself

does is lead directly to completion of the contract

which, unless there is a contractual obligation,

does not involve anybody working in the business.

MR HELY:  Your Honour, we would submit, in those

circumstances, one simply has a direct and

inevitable connection between the two things which

is sufficient to constitute "directly causing".

DEANE J:  I am taking you into detail, Mr Hely, because

obviously there is an important question involved here but looking at the tragedy of the history of these proceedings, unless there is a real prospect

of success in an appeal, we obviously should not

grant leave and that is why, as I say, I am taking

you beyond the ordinary - - -

MR HELY:  I do not, with respect, dissent from that

approach. That, I suppose, means that one should

focus more upon the particular rather than upon the

general run of contracts and in order to do that

could I take Your Honour to page 100?

DEANE J:  You can assume that we have read everything -

well, I think you can assume we have read

everything that is in the book.

MR HELY:  I, with respect, had made that assumption.

Page 100, line 7, the majority refer to the fact

that Justice Glynn, the trial judge:

did not find that an arrangement existed

between the parties in addition to or

independently of their written contract and

the order for avoidance was limited to that

contract.

Again, at page 110, at line 6, Their Honours state

that:

as already mentioned, the Commission did not

find that an agreement or arrangement existed

outside the contract of sale.

We would submit that they are two findings which

overlook or pay insufficient regard to the findings

Newnham 9 13/12/91

of the Commission at page 47 and at page 52 to

which I took Your Honours earlier. It is true to

say that Her Honour did not deal with the question

of jurisdiction in detail when the matter was

before her because the jurisdictional issue was not

agitated. The first time the jurisdictional issue

was agitated was before the Full Bench of the

Commission, and the Full Bench of the Commission

has found, as a matter of fact, that there was at

least a collateral arrangement between the parties

that the purchaser would operate and manage the

business.

GAUDRON J: That really does give a very odd meaning to the

word "arrangement" does it not? It simply means,

in that context that they knew or understood that

she intended to work. It does not give any sense

of obligation or - - -

MR HELY:  Not of any, perhaps, sense of obligation but it

goes to two things, I submit: first, it is the

rationale of the transaction; it is the purpose

that the transaction was intended to achieve.

Second, even though it may not have - - -

GAUDRON J: It doubtless was not intended to achieve that

purpose from the vendor's point of view. From the

vendor's point of view, the purpose was to effect a

sale.

MR HELY:  But from the vendor's point of view, what it wants

to get is the maximum it can get for its goodwill.

It can only achieve the maximum for its goodwill if

it can persuade purchasers that, for instance, by

working in the industry that goodwill can be

maintained or increased. But what I am seeking to

submit to Your Honours here, partially by way of

deflecting or moving to one side from

Mr Justice Deane's question, that it is not in this

case just a question of looking at the contract

because of this factual finding of the Commission

as to the existence of a collateral arrangement.

The Commission's finding on that matter, we would

submit, is conclusive having regard to the
probative provisions of the Industrial Arbitration
Act. It has found the fact which establishes its

jurisdiction and unless it were established that there was no evidence capable of supporting that

factual finding, we would submit that it is

sufficient.

GAUDRON J: It really would seem, however, Mr Hely, that you

cannot spell it out of the contract and it is very

difficult to say the knowledge or understanding

that the purchaser would work in the business

constitutes a condition or arrangement collateral

to that contract?

Newnham 10 13/12/91

MR HELY:  I would submit so because one can have a case in

which, in effect, it is represented that the

subject-matter of the contract is a subject-matter

which would be suitable for the purchaser to work

in that business.	The two things are inextricably
interconnected, in my submission.	An arrangement

is not necessarily founded in terms of obligation.

It can be founded in terms of mutual expectation.

If I could ask Your Honours to return once

more to Stevenson v Barham at page 200 where

Your Honours extracted the critical passage from

the V.G. Haulage case. A little over half-way

through that passage there is a reference to the

various paragraphs or subparagraphs in section 88F

and then this is said:

Presumably, this is because any transaction,

leading to work in an industry, which can be

so described is regarded as inimical to the

purposes of the Act.

And we would submit that that encapsulates the

rationale behind section 88F; that if a person is

led to work in an industry as a result of a
contract, the terms of which are unfair or which
otherwise satisfy the provisions of the section, it

is appropriate that the jurisdiction of the

Industrial Court should be enlivened.

Those are the submissions we would put, if the

Court pleases.

MASON CJ:  Thank you, Mr Hely. The Court need not trouble

you, Mr Shaw.

The extent or scope of the jurisdiction

conferred upon the Industrial Commission by

section 88F(l) of the Industrial Arbitration Act

1940 (N.S.W.) is an important question which would,

in an appropriate case, warrant the grant of

special leave to appeal in the public interest.

But it would not be in the interests of the applicant to grant leave in this case if the appeal

were to fail.

In our opinion, the proposed appeal does not

have sufficient prospects of success to justify the

grant of special leave to appeal.	The application
is therefore refused.

MR HELY: If the Court pleases.

MR SHAW:	We seek an order for costs, Your Honours.
MASON CJ:	Do you oppose an order for costs, Mr Hely?

Newnham 11 13/12/91

MR HELY:	No, Your Honour.
MASON CJ:	The application is refused with costs.

AT 10.04 AM THE MATTER WAS ADJOURNED SINE DIE

Newnham 12 13/12/91