This is a speech given by Justice Handley at the book lauch of  “The Law of Unfair Contracts in New South Wales” in November, 2003.

“I would like to thank Jeffrey Phillips SC and Michael Tooma for inviting me to launch their book and thus continue my association with the Commission’s jurisdiction over unfair contracts.

Their book has arrived at an opportune but critical time. In Mitchforce v Industrial Relations Commission the Court of Appeal gave judgment on 13 June this year differing, by majority, from the Full Bench of the Commission in holding that a long-term private lease of a hotel was not a contract whereby work was performed in an industry. The government also appears to be considering legislative amendments which would reinstate the jurisdiction of the Court of Appeal to review for jurisdictional error and exclude commercial contracts from the ambit of s.106.

The authors have had to deal, almost at the last minute, with the judgments of the Court of Appeal in Mitchforce and have had to do a lot of re-writing. Other well known authors have had a similar fate. Harvey MacGregor had a new edition of Mayne on Damages at the proof stage in January 1961 when the Privy Council gave judgment in The Wagon Mound [1961] AC 388, in an appeal from NSW, which changed much of the law of damages overnight and major revisions of his text were necessary.

The authors examine the historical antecedents of the Commission’s jurisdiction in the common law, in equity and in legislation dealing with money lending and hire purchase agreements. Thus there were already some remedies for contracts that were unfair, harsh and unconscionable, but that tautological trinity, to use the words of Sheldon J, has rightly taken on new life in this legislation. An important reason for the vitality of the jurisdiction was and continues to be the culture of the Commission and its predecessors. Because of its award making functions the Commission is accustomed to overriding contracts and imposing fair minimum terms on parties to contracts of employment. One could say that it is varying contracts of employment almost daily. This is in marked contrast with the ordinary courts whose normal function is to enforce existing contracts in accordance with their terms.

It is not surprising then that the powers given by this legislation to the Commission have been vigorously exercised. On the whole the superior courts have supported this jurisdiction and most jurisdictional challenges have failed. Indeed in Stevenson v Barham (1977) 136 CLR 190 the Court of Appeal and High Court took a wider view of the jurisdiction than the Commission had done and mandamus issued to compel the Commission to exercise its true jurisdiction.

One notable exception to this pattern was the decision in Production Spraypainting and Panelbeating Pty Ltd v Newnham (1991) 27 NSWLR 644 where the Court of Appeal held that the outright sale of a business was not a contract whereby work was performed in an industry. The High Court declined to grant special leave. Mitchforce may or may not prove to be another notable exception. On the 22nd of August the Full Bench reserved its decision on an application by the hotel owner to re-open its earlier decision. In due course the jurisdictional issues may reach the High Court.

The authors favour a wide view of the Commission’s jurisdiction, and robustly criticise all the judgments in Mitchforce including, would you believe, my own. They also criticise the judgments in Production Spraypainting. They have comprehensively and systematically collected and reviewed the Commission’s jurisprudence under s.106 and its predecessors. The book contains separate chapters on such important topics as incentive schemes, unfair terminations, franchise agreements, partnerships and relief.

It is surprising that after nearly 40 years of reported decisions on this legislation recently reported cases have shown that much uncertainty still remains. The authors have reviewed the recent case law in the Commission dealing with the application of the section to commercial agreements, its territorial reach, its application to employment covered by Federal workplace agreements, the relevance of post contractual unfairness due to changes of circumstances or unfair conduct and the relief available.

The book brings together and organises a large body of caselaw in the Commission and the superior courts. As a result it will, I am sure, prove invaluable to the judicial members of the Commission, other judges and the profession. The authors are to be congratulated for their efforts on our behalf.

I would like to make two final comments. Parliament has dealt with unfair contracts in different ways in two statutes. Section 106, in a statute dealing with industrial relations, can be seen as part of the statutory safety net for the protection of employees and others who work in an industry in New South Wales. For this reason I believe that the philosophy behind the relief granted by Hungerford J in Mitchforce was wrong. It seems to me that it is no part of the function of s.106 to protect entrepreneurs as such or to underwrite their business contracts.

In Mitchforce I said in paragraph 196 of my judgment that when jurisdiction was attracted in that case “the appropriate relief … was to treat the Starkeys from that time onwards as managers employed at a salary and to write off the arrears of rent, rather than to adjust the contract so as to restore to them the chance of profits and a capital gain with the risk of further losses … It might have been thought that relief of [the latter] kind was more appropriately granted, if at all, under the Contracts Review Act …”.

I do not think that the authors have taken up this point and perhaps for good reason. Nevertheless it seems to me that a working entrepreneur who has been unsuccessful should not get relief under s.106 as an entrepreneur but only as a quasi employee.

In the truck and work cases the quasi employer attempted to convert an employee into an entrepreneur and the relief reversed the process and treated him as an employee. The contractual arrangements that were avoided transferred business risks to someone in the position of an employee who realistically and fairly should not have been asked to assume those risks. The Commission’s orders transferred those business risks back to the real entrepreneur leaving the person who did the work with fair remuneration as if he had been an employee.

If this principle is observed the section can continue to fulfil its proper role as part of the statutory safety net in this State for persons who perform work in an industry.

My final point is based on the extraordinary popularity that this jurisdiction has enjoyed ever since that first decision in Agius v Arrow Freightways in 1965. The section was immediately perceived as providing a much needed remedy for injustice affecting persons who worked in an industry without the protection of an award. The overwhelming impression from reading the facts in worker and quasi-worker cases is that the defendants had indeed acted unfairly or even harshly and that right thinking members of the community would agree with this description of their conduct and with the relief granted by the Commission.

As Mr Justice Haylen said at his private welcome by the Bar Association the contracts of employment, and I would add of quasi employment, that workers make are the most important contracts they will make in their lives. In my judgment the practical results of the exercise of this jurisdiction in true worker and quasi-worker cases have been overwhelmingly beneficial and many injustices have been remedied that otherwise would have gone without remedy.

It is now my pleasure to formally launch Phillips and Tooma on “The Law of Unfair Contracts in New South Wales”.