The strange and slow death of the New South Wales unfair work contracts jurisdiction found in s 106 of the Industrial Relations Act 1996 (NSW) continues apace. The Court of Appeal in a judgment dated 17 April 2009 in Caterpillar of Australia Pty Ltd v Industrial Court of New South Wales [2009] NSWCA 83, has once again dealt a near mortal blow to what remains of the jurisdiction.

Some many years ago, in an unreported decision of the Industrial Relations Commission of Rolles v Donald Scott Surgical Pty Ltd (unreported, Industrial Commission (NSW), Fisher P, Cahill VP and Bauer J, 19 February 1988), the Full Bench of the Commission was somewhat tempting the arrival of Nemesis when it described the unfair contracts jurisdiction as “a major commercial jurisdiction exercised in circumstances frequently having little to do with the industrial arbitration and similar litigation normally encountered by industrial tribunals (at 20). The jurisdictional challenges to this legislation which had the ability to overturn contractual rights accelerated in cases such as Mitchforce v Industrial Relations Commission (2003) 57 NSWLR 212; 124 IR 79; [2003] NSWCA 151 when Justices of the Court of Appeal expressed their concern with the various commercial contracts which had been overturned on the pretext of re-writing “industrial” contracts. Justice Mason, the then President of the Court of Appeal was profoundly troubled by what he saw as “the march of the Commission’s jurisdiction into the heartland of commercial contracts” (at [147]). A trilogy of cases in the High Court further narrowed the jurisdiction (Batterham v QSR Ltd (2006) 225 CLR 237; [2006] HCA 23; Fish v Solution 6 Holdings Ltd (2006) 225 CLR 180; [2006] HCA 22; Old UGC Inc v Industrial Relations Commission (NSW) (2006) 225 CLR 274; [2006] HCA 24). The WorkChoices legislation continued the demise of the legislation when it abolished the jurisdiction where one of the parties to the contract sought to be impugned was a corporation (Workplace Relations Act 1996 (Cth), s 16(1)(d)).

A number of cases filed prior to the operation of the Work Choices legislation have continued in the Courts. The decision in the Caterpillar case is one such matter which has further reduced the scope of the jurisdiction.

The Caterpillar proceeding, prior to it coming before the Court of Appeal, had been instituted in the Year 2000 and been subject to 17 individual judgments by His Honour Justice Boland (at [1]). The case came before the Court of Appeal on the basis of a challenge to the jurisdiction of the Industrial Court. The contracts sought to be varied under s 106 were various Dealership Agreements between the United States parent company Caterpillar, the world’s largest manufacturer of construction and mining equipment and the dealers selling and servicing such equipment in New South Wales and the Australian Capital Territory (at [9], [10]). It was claimed that the Dealership Agreements constituted the work said to be performed in an industry in order to come within the gateway of s 106. The proceedings were instituted in response to a notice of termination of the Dealership Agreement. Gough & Gilmour, the local dealers, sought a continuation of the agreement albeit on varied terms (at [18]). Orders had been made in the Industrial Court to vary the overall arrangement as found to exist (at [19]). Ultimately, further notices of termination were issued upon the failure to sell to Caterpillar’s preferred alternative dealer and the variation orders then sought monetary compensation (at [21]). In the Industrial Court, Justice Boland had resolved the jurisdictional issue on the basis that the personal applicants were “working proprietors” or “dealer principals” and as a consequence of which, there was a relationship akin to an employment one (at [25], [26]). The fundamental stumbling block for bringing cases of such commercial magnitude before the Industrial Court under s 106 is neatly summed up by Chief Justice Spigelman as follows:

“The IR Act, including the whole of Chapter 2, is not concerned to regulate multi-million dollar investments or relationships which cannot be seen to involve anything analogous to the employer/ employee relationship that lies at the heart of the concept an “industrial” matter.” (at [99])

By reading the statute as a whole and considering the context in which s 106 finds itself, that is the basis on which the unfair contracts jurisdiction must be interpreted (at [100]). This, he says, is consistent with the High Court’s contemporary approach to statutory interpretation (at [101]). Spigelman CJ ultimately looked at the whole relationship governing the various contracts including the personal applicants’ employment relationship and their characterisation as working proprietors as not being determinative. He said that the legislative scheme was directed at regulating persons where the former contractual relations had changed from that of employer/ employee to that of independent contractor. His Honour said that the surrounding circumstances must be reviewed to assess the nature of the relationship (at [137]). The Judge, however, said that dealerships or franchise relationships are still capable of falling within the jurisdiction of s 106. It depends upon which side of the line the relationship falls as to whether it truly is akin to employment or whether it is one of entrepreneurs conducting businesses of significant scale involving millions of capital investment with hundreds of employees (at [137]-[140]). Ultimately, this decision, which was unanimous, was a fundamental and complete blow to the use by the local dealers of the unfair contract legislation against Caterpillar. Also, an order of significant magnitude was made in relation to the calculation of damages sustained by Caterpillar as a result of the interlocutory orders made for the benefit of the local dealers in 2001.