A Matter of Choice
Unfair Employment Contracts---The Current Position
I will discuss the area of industrial law which is
concerned with what is generally called Unfair Employment
Contracts. Most of you will be aware that the various
Federal and State Industrial Relations Commissions
have expansive powers relating to the supervision of
the terms and conditions of work of award employees.
What is perhaps not as widely recognised is the fact
that the Industrial Relations legislation of Queensland
and New South Wales and, since 1992, the Commonwealth,
also confers a broad power to review and to vary the
terms of individual contracts between employers and
Three pieces of legislation will be considered in
the course of this discussion:
- sections 127A, 127B and 127C of the Industrial Relations
Act (Cth) 1988 as amended (the Federal Act);
- section 39 (formerly section 4.21) of the Industrial
Relations Act (Q) 1990 as amended (the Queensland
- sections 275 and 276 of the Industrial Relations
Act (NSW) 1991 as amended (the NSW Act).
I propose to deal with this topic by reviewing the
purpose of the legislation, by discussing specific
provisions of the legislation, and by discussing the
scope of the jurisdiction by reference to some recent
decisions. For the most part I will concentrate on
the Federal situation because, with some limitations,
it applies Australia-wide. Where appropriate I will
refer to State variations, and of course most of the
reported decisions to date are by the State tribunals.
I am, however, mindful that the law of unfair contracts,
interesting though it is in practice, may suffer from
a certain lack of excitement when viewed in the abstract.
Therefore, I would like to set the scene by discussing
a case recently determined in the Industrial Court
of New South Wales. New South Wales has been the most
fertile jurisdiction for cases of the type under consideration,
and the New South Wales tribunal has shown the greatest
willingness to push out the envelope as far as the
"unfair contracts jurisdiction" is concerned. The New
South Wales legislation is in broader terms than the
Federal legislation in some respects, particularly
in relation to the types of orders which can be made,
but there is no reason in principle why other industrial
tribunals cannot exercise similar powers.
Gibbs v. Gold Coast Giants
The case is that of Ronald James Gibbs v. Gold
Coast Tweed Giants Rugby League Football Club Limited
& Ors, a decision of Her Honour Judge Schmidt
of the Industrial Court. The decision was handed down
on 17 December 1993. What I hope to do by taking you
through this case in detail, is give you an understanding
of how potentially broad the legislation can be. I
should state that my analysis of the case is not a
critique of the decision itself.
The facts of the case may prove interesting for those
who are sport minded. Mr Gibbs was a professional rugby
league footballer. He was a regular starter for New
South Wales in the all-important State of Origin rugby
league clashes between New South Wales and Queensland.
Supporters of the Manly Football Club will have fond
memories of Mr Gibbs' glory days as a hard-tackling
utility forward with that club in the mid 1980s. His
dispute with the Gold Coast Rugby League Club (now
called the Gold Coast Seagulls) occurred during what
one might label the later years of his career. It was
in 1987 when he first entered into negotiations with
the Gold Coast Football Club.
It was found as a fact in the proceedings that in
conversations with various officials of the Club in
mid 1987 (whom I will call the promoters), Mr Gibbs
was offered a five acre block of land described as
Lot 16 if he agreed to play for the Club. The Club
itself was a separate legal identity, which held the
relevant licence from the New South Wales Rugby League.
One might have supposed the promoters were negotiating
on the Club's behalf, but the finding was that it was
the promoters, and not the Club, who made this promise.
He then signed a contract with the Club which did not
mention Lot 16 and made no provision for its transfer.
The 1988 season proceeded unhappily for the Gold Coast
Club, and also apparently for Mr Gibbs. In discussions
with the promoters during that year, Mr Gibbs was told
that Lot 16 would not be transferred to him until the
end of the season. At the end of the year he was told
that it would not be transferred until his three year
contract had been played out and that if he breached
his contract in any way he would not get the land at
In April 1989 Lot 16 was sold by its owner who, it
turned out, was unfortunately not a party to any of
the arrangements between Mr Gibbs, the Club and the
Mr Gibbs was then offered and accepted a substituted
block of land described as Lot 52 which was greatly
inferior to Lot 16.
In January 1989 the Club sold the right to enter the
Gold Coast team in the league competition to another
consortium. The promoters, or some of them, conducted
the negotiations on the Club's behalf. The new consortium
agreed only to be responsible for the obligations set
out in Mr Gibbs' written contract. The promoters and
the Club accepted this. Mr Gibbs was not represented
during these negotiations and his consent was not obtained.
He did, however, play out the remainder of his contract,
which expired in 1990, for the new consortium.
In 1992 Mr Gibbs commenced proceedings pursuant to
the unfair contracts legislation against firstly, the
Club, secondly, the promoters, and thirdly, the new
consortium. He sought against each an order for the
payment of $53,000.00 which was said to be the value
of Lot 16, as well as orders varying the contracts
and arrangements which he had with the various entities.
He submitted, and it was found to be a fact, that
the promoters had offered him land in order to induce
him to sign a contract with the Club. Mr Gibbs argued
that if this was the case then either he had a written
contract with no contractual right to the land or alternatively
he had a written contract with an oral term providing
for the transfer of the land. Mr Gibbs' argument was
that on the first scenario the contract was unfair
because what had been promised was not delivered. On
the second scenario the contract was unfair because
an oral contract for the transfer of land cannot be
enforced. and he thereby lost the benefit of the promise.
He also said that the contract became unfair when Lot
52 was substituted for Lot 16.
Mr Gibbs claimed that the contract or arrangement
which arose between him and the new consortium was
also unfair because, being aware of the entirety of
the arrangement between Mr Gibbs and the Club and the
promoters, the new consortium was prepared to take
the benefit of Mr Gibbs' services but was not prepared
to pay the proper price which was the money and the
The new consortium submitted that the claim related
to matters in issue between Mr Gibbs and the Club and
the promoters and did not concern them. They also submitted
that the Court had no jurisdiction because it was really
a claim for damages for breach by the promoters of
a collateral contract.
It was found that the totality of the contracts and
arrangements amenable to the Court's jurisdiction included:
- (a) a contract between Mr Gibbs and the Club which
required Mr Gibbs to play football (which came to an
end in January 1989);
- (b) a contract between Mr Gibbs and the new consortium
which required Mr Gibbs to play football (which commenced
in January 1989 and expired in 1990); and
- (c) what was described as a "collateral arrangement"
between Mr Gibbs and the promoters relating to Lot
16 which was subsequently varied to Lot 52. It was
also found that this arrangement was collateral to
each of the other contracts including the contract
with the new consortium.
It was held that the contract between Mr Gibbs and
the Club was unfair because there was no provision
in the written contract imposing an obligation to ensure
that Mr Gibbs received all that he had bargained for,
including the transfer of the land.
It was held that the arrangement between Mr Gibbs
and the promoters was unfair because the arrangement
enabled the promoters to vary the arrangement by substituting
an inferior lot of land and because the arrangement
between them was made in circumstances where the promoters
required the acquiescence of a third party, being the
owner of the block.
It was held finally that the contract between Mr Gibbs
and the new consortium was also unfair because the
new consortium had the benefit of Mr Gibbs playing
for the Gold Coast for two years but had not accepted
an obligation to ensure that Mr Gibbs obtained the
The following orders were made:
- 1. An order that the written contracts and arrangements
between Mr Gibbs and the Club and the new consortium
be varied to require them each to ensure that Lot 16
was conveyed to Mr Gibbs prior to the determination
of those contracts and arrangements and, failing such
transfer, to ensure that Mr Gibbs be paid a sum equal
to the value of Lot 16 prior to the termination of
his contract with the new consortium at the end of
the 1990 football season.
- 2. The arrangement between Mr Gibbs and the promoters
be reduced to writing and varied to require them to
ensure that title to Lot 16 be conveyed to him prior
to the termination of his contract or that he be paid
the value of the land prior to the end of his contract.
- 3. The Club and the promoters pay to Mr Gibbs one third
of the value of Lot 16 ($53,000.00) plus interest from
the date of termination of his contract with the new
consortium to the date on which payment is made.
- 4. The promoters and the new consortium pay to Mr Gibbs
two thirds of the value of Lot 16 plus interest in
a similar manner.
If one examines the respective positions of the three
respondents, it can be seen that the application of
the Legislation in these circumstances produced results
which go well beyond what might have been the result
if ordinary commercial legal principles were applied.
Firstly we need to look at the position of the promoters.
They had made representations to Mr Gibbs to the effect
that, if he entered into a contract to play football
for the Club (a separate entity) he would receive a
particular block of land. They were not his employer
and did not stand in a position which could be described
as analogous to that of an employer. Nevertheless,
the legislation allowed enforcement of the arrangement
against them as if they had personally contracted to
provide the land themselves.
Turning to the position of the new consortium, they
had negotiated and contracted for the purchase of the
license and presumably for an assignment of the benefit
of the written contract which the Club had with Mr
They expressly negotiated and contracted on the basis
that they did not want to be responsible for whatever
arrangements Mr Gibbs had with the promoters. Presumably
their position was that to the extent that the promoters
had a problem with Mr Gibbs that was to remain their
problem. Nevertheless, and notwithstanding their commercial
position, an order was made against them which held
them responsible, in a broad sense, for what one might
term Mr Gibbs' full employment entitlements.
As to the Club, the only contractual relationship
it had with Mr Gibbs was held to be the written contract,
which made no reference to the land transfer. The
Club had not been involved in promising Mr Gibbs a
block of land. The land was promised by the promoters.
Nevertheless, the Club was held jointly responsible
with the promoters to pay one-third of the value of
the land, and the written contract was varied to include
an obligation to ensure that title was transferred,
or that Mr Gibbs was otherwise compensated.
Let me make a couple of comments about the implication
of this decision.
1. Mr Gibbs was not an "employee" in the sense that
industry generally understands that word. Mr Gibbs
was a man who had contracted his services in what might
be thought of as a free and open market. He was a man
of stature and superior skill within his field and
undoubtedly was not without bargaining power in his
market. Nevertheless, he was able, under the legislation,
to ask the Industrial Court to review the entirety
of his commercial arrangement with the Club and its
2. Second, the orders made included variations to Mr
Gibbs' contracts and arrangements, including too the
written contract which he had with the Club. Once
ordered, these variations must stand for all purposes
and not just for the purposes which might be described
as Industrial. It is more than possible that the order
may have ramifications for the relationship between
the new consortium and the New South Wales Rugby League.
The tax positions of the parties may have been affected.
Furthermore, the new consortium may well have an action
against the Club on the basis that what they have finally
ended up with in terms of their contract with Mr Gibbs
was not what they bargained for when contracting to
take over the organization.
3. Third, and perhaps most fundamentally, none of the
parties including Mr Gibbs ended up with that for which
they had initially bargained. Mr Gibbs did substantially
better. Mr Gibbs bargained for, and got, a written
contract together with a promise expressly not in writing
that he would or might also get a block of land. Later,
he apparently agreed to a variation of that promise
to substitute a different block of land. He did not
bargain at all with the new consortium; his only relationship
with them was derived from an assignment of his written
contract with the Club.
In more obvious ways, it can be seen that the respondents
did not receive that for which they thought they had
I hope that I have succeeded in demonstrating so far
that once the jurisdiction is triggered, the scope
to make orders varying commercial relationships is
People who are associated with contracts involving
the provision of labour, but who do not consider themselves
parties to the contract, may find themselves with positive
I now return to a more structured discussion of the
The Purpose of the Legislation
His Honour, the Chief Justice of the High Court, Sir
Garfield Barwick (as he then was) said in a 1970 case
when discussing the New South Wales legislation:
- It must be borne in mind that one of the purposes
of the section is to deal with subterfuges, subterfuges
which will take the worker out of the relationship
of master and servant and therefore out of the operation
of an industrial award designed, amongst other things,
for the protection of workers in industry.1
Harsh critics of the legislation have dismissed the
purpose of the 1992 insertion of these provisions into
the Federal Industrial Relations Act as a knee-jerk
response to the activities of the Trouble Shooters,
who provide labour on a contract basis and thus avoid
the application of awards to their activities and their
This may be a little unfair, but certainly the purpose
of the legislation is to regulate, through the legislation
and its Commissions and Courts, contracts which fall
outside the traditional employerÄemployee relationship
but which deal with the performance of "work".
What is required in general terms is a contract of
service. The Queensland Act and the Federal Act do
not apply to employees in the traditional sense; there
is a specific exclusion in the Queensland legislation
and the Federal legislation is solely concerned with
contracts for services with independent contractors.
The New South Wales legislation is not so limited,
but plainly it is intended to operate for the benefit
of independent contractors and others rather than those
who enjoy the protection of the award system.
Apart from this, a clue to the spirit of the new Federal
jurisdiction can be found in a list of considerations
provided by the legislation to guide the Commission
in the exercise of the jurisdiction; in other words,
when deciding whether to vary a contract or make some
other order. The Commission is not obliged to have
regard to these considerations. but is permitted to
do so. The specified considerations draw on long-established
legal doctrines for relieving parties from unfair or
unjust contracts at general law, but also include concepts
peculiar to the industrial arena.
The specified considerations which are listed in the
new 127A of the Federal Act are:
- (a) The relative strength of the bargaining positions
of the parties to the contract and, if applicable,
any persons acting on behalf of the parties;
- (b) whether any undue influence or pressure was exerted
on, or any unfair tactics were used against, a party
to the contract;
- (c) whether the contract may have an adverse effect
on the development of the skills of employees performing
work of the relevant kind in the industry, including
any system designed to provide a trained labour force
(for example, apprenticeship or any arrangement for
improving the skills of employees)
- (d) whether the contract provides total remuneration
that is, or is likely to be, less than that of an employee
performing similar work; and
- (e) any other matter that it thinks relevant.
While this may seem open ended, sub-section 127A (7)
requires the Commission to exercise its powers to further
the objects of the Act. Munro J in the first major
case decided under the Federal legislation, said:
- The considerations enumerated in s127A(4)(a) to (b)
are themselves plainly associated with 'industrial'
objectives. There is a selective emphasis and weighting
in the shopping list of four considerations. Each
is a form of test for whether the contract under review
is objectionable as a means of circumventing relevant
awards, industrial standards or fair bargaining practices
as may be perceived by the commission.2
That case is TWU v. Wagner, referred to as
the TWU case.
Clearly there is scope for contracts with independent
contractors to be brought into line with Federal Award
It must be remembered that at common law there was
considerable reluctance by the Courts to interfere
with employment contracts otherwise than by refusing
to enforce contracts of servitude or taking action
in limited categories of cases, for example, cases
involving duress or fraud. Statute has altered that
The use of the term "employee" in paragraph (d) is
referring to employee in the strict legal sense ¾ an
individual performing work under a contract of service
as opposed to an independent contractor performing
work under a contract for services. It compels a comparison
with ordinary employees.
In the consideration above (a) and (b) may be considered
procedural dealing with bargaining positions and unfair
tactics whereas (c) and (d) are substantive and industrial
in their nature ¾ dealing with adverse effect on skills
and total remuneration.
Munro J said:
- There may be nothing to preclude a relevant opinion
being formed by reference to either procedural or substantive
indicators of unfairness etc. I would incline to the
view, however, that an opinion under the Act might
more readily be formed if there was both procedural
and substantive unfairness where the enumerated considerations
are relied upon. The most immediate reason is that
weakness of bargaining strength and coercive influence
are not necessary or sufficient conditions for an industrial
agreement induced by them to be considered unfair.
In other words, it does not always follow in the real
industrial world that because a process is unfair the
outcome will also be unfair. In my view, normally,
any procedural defect attributable to a disparity of
bargaining strength would need to substantively infect
the bargain, or the formation of the contract itself,
before the contract should be adjudged unfair in the
past so infected.3
The matters to which the Commission may have regard
also suggest that the Commission is to look at the
industry generally and to consider whether the independent
contractors will be paid less than their counterparts
in the award system. There is an invitation to treat
this as a matter which should be rectified pursuant
to the legislation. The Commission may also have regard
to the effect on development of skills: one of the
complaints of the union movement about the Trouble
Shooters system is that it tends to reduce the incentive
an employer might otherwise have to train his staff.
This is because he simply contracts for the services
of skilled labour as and when required, and has a lesser
need to nurture the skills of his workforce.
Finally when discussing the purpose of this legislation
in the way in which it is intended to operate, one
should note that the legislation operates only in relation
to specific contracts which are brought to the attention
of the Court. It does not mirror the award system
by mandating minimum conditions in a general sense
or by prohibiting other types of conditions. In other
words, a contract of employment stands until an order
This means that someone has to bring an action before
the Industrial Court. Either party to the contract
of service may do so. The unions also have standing
under the Act but only if the independent contractor
is a member of the union or has applied for membership.
Employer groups have a similar standing.
The possibilities for collective action are therefore
reduced. It remains a mechanism which is likely to
be used only by disgruntled independent contractors,
and historically this class has shown no great affection
for either the Federal Act or the centralised wage
The Specific Operation of the Act
- 1. The Constitutional Limitation
I have spoken of a limitation on the scope of the
Federal Act stemming from the limited constitutional
powers of the Commonwealth Parliament to make law.
In broad terms, the legislation applies to contracts
entered into or relating to the business of a corporation,
relating to interstate trade or commerce, affecting
matters that take place in or are connected with a
Commonwealth Territory or to which the Commonwealth
or a Commonwealth Authority is a party.
If you therefore reach an arrangement with your daughter
pursuant to which she agrees to mow your lawn once
a month for the next ten years and you agree to pay
her $5.00 an hour to do so, then you have nothing to
fear from the Federal Act unless your lawn is owned
by a company or exists partly in one State and partly
in another State. Such an arrangement might also be
thought to be one of a private or domestic nature,
which is also excluded from the operation of the Act.
At the time of writing the legislation has been challenged
in the High Court as one which goes beyond the power
of the Commonwealth, but no decision has been delivered.
I do not venture an opinion as to whether such a challenge
- 2. What types of Contract?
The definition of "contract" is as follows: "Contract"
- (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.
The definition neatly catches the Trouble Shooters
style of arrangement. It is also likely to catch a
variety of other arrangements depending how broadly
the word "services" and the phrase "Collateral Arrangement"
are interpreted in this context. It is not likely to
catch the variety of commercial arrangements, some
far removed from the employment context, which have
been held to be within the purview of the New South
- 3. Review on What Basis?
Once the above conditions are satisfied, an application
may be made to the Commission to review a contract
on any or all of the following grounds:
- (a) The contract is unfair;
- (b) The contract is harsh;
- (c) The contract is against the public interest.
We have already looked at the types of matters which
the Court may take into account in reaching this decision.
- 4. What Can the Commission Do?
If one of the grounds stated is made out in an application
then the Commission's powers are as provided for in
The Commission may set aside the whole of the contract
(or the part of the contract affected), or vary the
contract. The Commission must record whether its decision
relates to the whole or a specified part of the contract
Significantly, the Commission has no power to order
monetary compensation. In an early version of the
amending bill a provision was proposed which empowered
the Commission to make "any other orders in respect
of the contractual relationship between the parties
to the contract," including, one assumes, the power
to make money orders, but that provision never passed
The Queensland and New South Wales legislation have
such powers, and Mr Gibbs' case provides an example
of their use.
- 5. Two Points to Remember
There are two further points to make to complete this
overview of the new Federal provisions.
First, an order of the Commission (setting aside or
varying the contract) may only be made for the purpose
of placing the parties to the contract as nearly as
practicable on the footing they would have been on
if the ground on which the Commission's opinion that
the contract should be reviewed no longer applied.
The exact effect of this interestingly worded rider
to the Commission's power will no doubt be explored
early in the case law that develops around these provisions.
Presumably it means that if, for example, the finding
is that the contract breaches the public interest,
the Commission will have to decide what is the minimum
variation which can be made which will address this
Second, one must wonder whether the Federal Commission
will see its powers as being as extensive as the New
South Wales Commission and Court have considered their
powers to be. In this regard, the issue of the meaning
of the phrase "relating to the business of a corporation"
was discussed in the TWU case.
Munro J said that the words "relating to":
- ...given their ordinary meaning, may demand no more
than that a 'relevant nexus' exists between the contract
and the business of a corporation. However given the
constitutional limits on the use of corporations power
to impose duties on non-corporate persons, in the absence
of a suggestion that any other head of power justifies
s 127C(l)(b), it is necessary to construe the paragraph
in a manner consistent with its validity.
- That obligation leads me to conclude that the words
should be construed to require a higher and less elastic
degree of relevant nexus or basic connection between
the contract and the business of a corporation than
might be the case if the ordinary meaning of the words
alone were to be considered.
He went on:
- ...Section 127C(l)(b) will need to be read down to
limit the contracts for service made subject to the
regime of ss 127A and 127B. In my view the corporations
power may authorise commission jurisdiction only over
contracts falling within a class appropriate to be
controlled in order to make effective the control
directly imposed in respect of similar contracts entered
into by corporations with independent contractors.
That requirement would appear to be satisfied if the
contract subject to review directly relates to the
business of the corporation in the sense of having
a basic or relevant connection with it. I consider
it is likely to have such a relationship if it is a
contract for the performance of work for the purposes
of the trading activities of the corporation, including
probably the related business activities.4
The word "arrangement" has been given an expansive
meaning in other contexts.
In the context of the Trade Practices Act Justice
Smithers adopted the following passage:
- The word 'arrangement' is apt to describe something
less than a binding contract or agreement, something
in the nature of an understanding between two or more
persons ¾ a plan arranged between them which may not
be enforceable at law.5
There are numerous other comments to like effect.6
First, it is worth mentioning that, while an application
is pending, the Commission may make an interim order
if it thinks it is desirable to do so to preserve the
position of a party to the contract. In view of the
length of time involved in any hearing, this in itself
is a significant power.
An Examination of Some Reported Decisions
- in Baker v. Surfers Paradise Golf Club Ltd,7
a golf professional requested that his service agreement
with the Golf Club be varied ab initio, and
further that a related lease over the pro shop be declared
void. It was alleged that he was acting under coercion
in accepting variations of the service agreement, and
that he had been "deviously lured" into the related
lease. The complaints of the professional were essentially
based around an allegation that he was coerced into
accepting a reduction in his commission while at the
same time an increase in his workload and responsibility.
The Commission found that there were grounds for "limited
intrusion" into the professional arrangements between
the professional and the Club, however there was no
justification for intervention with respect to rental
payments under the lease;
- in Re: Grevsmuhl and Gorski8 an arrangement
between a dental technician and a part-time worker
essentially for the making of deliveries was not interfered
with primarily because the technician's evidence as
to the nature of the arrangements was preferred over
that of the applicant.
In Swann and Trazdo Pty Ltd v. Ultra Tune Australia
Pty Ltd and Smart,9 it was noted that the provision
is not designed to "provide a form of rescue to entrepreneurs
who may wittingly or advisedly enter into business
arrangements which ... turn out to be unprofitable
However, the enormous breadth of the Court's power
is well settled.
The provisions have been used to recover superannuation
for an injured employee where the application of the
contract, but not the scheme itself, was unfair.10
In one case, the Commission dismissed an appeal against
a decision that a contract of franchise relating to
a retail computer centre was unfair and harsh or unconscionable.
The contract had been voided ab initio. In addition
to the voiding of the contract, the vendor was ordered
to pay to the applicants the sum of $615,307.00.11
In Australian Business Centres v. Smith it
was held, under the former section 88F of the New South
Wales legislation, that the jurisdiction extended to
contracts for the sale of a business where the purchaser
under the contract subsequently worked in the business.
It seemed for a while that a significant decision
in 1991 had begun to pull the New South Wales Act back
from such a wide operation.
In Production Spray Painting and Panel Beating
Pty Ltd v Newham & Ors12 the New South Wales
Court of Appeal held that a contract for the sale of
a retail business where the purchaser works in the
business after purchase was not a contract whereby
that person "performs work in an industry" within the
meaning of the old New South Wales provision. The Commission
noted that the vendors retained no interest in the
business after completion. The contract for sale was
not a franchise agreement.
Accordingly, the Commission concluded that Section
88F had no application and noted that "it is clear
that many more contracts will be within the section
if it is enough that work is done in an industry in
consequence of the making of the contract".
The Production Spray Painting case was distinguished
in Tilburg & Anor v. Nagle13 by Marks J.
In that case an oral contract for the purchase of
a truck and the goodwill of a delivery run was held
to be under S275 because the vendor would maintain
a visible profile for customer relations and perform
a back-up delivery role. In that way there was a contract
of performance of work which continued after the completion
of the purchase.
The broad view re-emerged in the 1993 case D N
Stock v. Associated Lithographers Pty Limited &
Ors14. This case is probably the high water mark
of the expansive view.
In this case, it appears an employee, Mr Stock, was
advised by his employer that his superannuation arrangements
would result in a payout at retirement of approximately
$200,000.00. Mr Stock took advice from the manager
of the superannuation fund, Legal & General, and
was told that everything was in order. This occurred
in 1979. In August or September 1980, Mr Stock received
a further assurance from Legal and General that the
new superannuation arrangements were in fact in place.
In 1990, when Mr Stock was approaching retirement,
Legal & General provided a summary of the benefits.
The estimated cash value on retirement was substantially
less than $200,000.00.
There seems to have been a finding that the arrangement
between Legal & General and the employer obliged
Legal & General to advise the employer in relation
to the level of premiums required to achieve the desired
outcome of a retirement benefit of $200,000.00 at age
In turn, Mr Stock relied upon his employer to implement
that advice. It was held that the agreement to pay
superannuation was an arrangement collateral to the
contract of employment, and one able to be examined
pursuant to Section 275 of the New South Wales legislation.
The Court went on to determine that even though there
was no arrangement between Legal & General and
Mr Stock, Legal & General had failed to effect
the wishes of the employer in order to fulfil the employer's
agreement with Mr Stock, in that it had failed to advise
properly what the correct premium was to achieve the
desired outcome. An order could therefore be made that
Legal & General pay compensation to Mr Stock. Accordingly,
Legal & General was ordered to pay the sum of $11,700.00
to Mr Stock and to pay Mr Stock's costs for two days
of the hearing. The jurisdiction to make such an order
was said to be Section 275(3) which reads:
- In making an order under this Section, the Industrial
Court may make such order as to the payment of money
in connection with any contract, arrangement, condition
or collateral arrangement declared wholly or partly
void, or varied, as the Industrial Court considers
just in the circumstances of the case.
It is central to the determination of the case that
this section permits orders in relation to people who
are not parties to the contracts or arrangements which
have been varied. There was no finding that the superannuation
schemes constitute collateral arrangements themselves.
Whether such a finding was open, even under the New
South Wales legislation, is a subject for conjecture.
Certainly it would not be open under the Federal legislation
or the Queensland legislation.
In another decision of the Full Industrial Court in
New South Wales, the Court has found that an employment
contract which did not include a redundancy benefit
was unfair and ought to be varied to include a redundancy
provision. Money orders followed that finding. The
letter of appointment which originally constituted
the contract provided expressly for termination of
employment on one month's notice in writing.
In Jennings & Ors v. Autoplaza Limited &
Ors (1993) AILR 222, the New South Wales Industrial
Court held that a lease which required the lessees
to establish and carry on a restaurant business during
lawful trading hours amounted to a contract under which
a person performs work in any industry and was therefore
amenable to the jurisdiction. It has been said:
- Faced with a novel section drawn in wide terms, the
courts have managed successfully to confine s. 88F
within wide, but, it is submitted, generally correct
boundaries and within those confines have demonstrated
that the legislation provides a quicker, wider and
more certain remedy than equity or the common law,
in spite of some liberality in cases involving inequality
of bargaining power. 15
This might have been an accurate comment in a jurisdiction
in which the court system or for that matter industrial
tribunals were experiencing inordinate delay in processing
disputes. I am not sure that it is a valid comment
in any other context.
The real question for the future, however, is whether
the Federal Industrial Court will resist the temptation
which the Queensland Industrial Relations Commission
has resisted, namely to adopt the same expansive view
of its power to review employment contracts as the
New South Wales Commission and subsequently the Industrial
Court have adopted.
However the decisions evolve, one thing is crystal
clear, and I will leave you with this final comment.
Constitutional questions aside, every contract for
services from that of a professional footballer to
that of the managing director of BHP can now be scrutinized
by the Industrial Court and, where that Court thinks
it appropriate, varied. It is likely that the concepts
of fairness adopted by the Court from time to time
will vary markedly from those of the employer who has
drawn the contract.
1. In Brown v Rezitis (1970) 127 C.L.R. 157 at 164.
2. Print K8216 30/6/93 at 59.
3. Print K8216 30/6/93 at 61.
4. Print K8216 30/6/93 at 20-23.
5. Smithers J, in Top Performance Motors Pty Ltd
v Ira Berk (1975) 24 FLR L86(a) 290 adopting Newton
v Federal Commission of Taxation (1958) 98 C.L.R.
1 at 7.
6. Miller, Annotated Trade Practices Act, (13th
ed., 1992) para 615.40.
7. 127 QGIG 167.
8. 1986 AILR 32.
9. 1983 AILR 481.
10. Fernance and Wreckair: 1993 35 AILR 108.
11. 1989 AILR 310.
12. 1991 AILR 219.
13. 1993 AILR 203.
14. 1993 ILR 123.
15. Macken JJ., McGarry G, and Sappideen C., The
Laws of Employment The Law Book Company Limited.
3rd edition at page 480.