In a landmark case for the recruitment industry, a full bench of the Federal Court has given a former Clarius contractor leave to amend her appeal and have it re-heard, while also ruling that the contract between the two parties was unfair.
The case is crucial for recruitment companies and employers because it challenges the legality of some common provisions of both preferred supplier agreements and contracts between recruitment companies and their on-hire contractors.
In the latest round of what has become a costly and complex legal battle, the court heard that Clarius (then Candle) placed the contractor with Woolworths in 2007, and when the placement ended in 2008 she used her contacts to secure work directly with Woolworths.
When Candle became aware of the arrangement, it contacted Woolworths to enforce the terms of its PSA, which prevented the supermarket chain from engaging Candle workers directly for 12 months after their placement.
Woolworth then ended its relationship with the contractor, who launched legal action against Candle last year, claiming it restrained her trade in breach of the Independent Contractors (IC) Act (2006).
Under the provisions of the IC Act, the trial judge, Justice Nye Perram, ordered two variations to the contract between Candle and the contractor effectively preventing it from restraining her from working directly for Woolworths.
In a subsequent decision, Justice Perram established that these variations couldn't act retrospectively, and therefore Candle had not breached the contract. The contractor appealed this ruling.
Variations did not apply from start of contract
In the full bench decision handed down today, Justices Anthony Besanko, Jayne Jagot and Mordy Bromberg affirmed the finding that the contract variations could not be enforced retrospectively.
The bench said enforcing the variations from the date the contract was made, "would impose upon Candle duties, obligations or liabilities which would operate from a time prior to the making of the order".
The bench said, however, that given it had ruled that the contract between Candle and the contractor was unfair (see below), it declined to dismiss the appeal entirely, and instead gave the contractor seven days to amend her appeal. It gave Candle fourteen days to lodge submissions in response.
Candle-Woolworths contract was relevant
Importantly, the full bench dismissed Clarius's argument that Justice Perram had erred by considering the contract between Candle and Woolworths when determining the fairness of the contract between the contractor and Candle.
"The primary judge was required to consider whether there were any matters relevant to the question of unfairness," said the bench.
"[He] was entitled to consider the provisions of the Candle-Woolworths contract as those provisions were matters existing at the time the [contractor's] contract was made."
The bench upheld the decision that the contract between the contractor and Candle was unfair under s12, and dismissed the cross-appeal.
Clarius managing director Kym Quick told Shortlist at the company's AGM today that the costs of defending the litigation would be borne by Clarius's insurer, and would not have a material impact on the company's results.
Informax International Pty Ltd v Clarius Group Limited [2012] FCAFC 165 (20 November 2012)