FEDERAL COURT OF AUSTRALIA

Lee v Aerial Taxi Cabs Co-operative Society Ltd

[1999] FCA 1727

INDUSTRIAL LAW – application pursuant to s 127A of the Workplace Relations Act 1996 (Cth) (“the Act”) on the ground that a contract between the applicant, a taxi driver, and the respondent, a co-operative society which operates the only taxi network in the Australian Capital Territory (“the Driver’s Agreement”) was unfair and harsh – by entering into the Driver’s Agreement the applicant agreed to comply with the respondent’s by-laws and disciplinary procedures in return, inter alia, for the use of its radio system – whether the Driver’s Agreement was a “contract” for the purposes of s 127A of the Act in its own right or as collateral to a contract with the taxi owner

RESTRAINT OF TRADE – whether the necessity for the applicant to subject himself to the by-laws of the respondent over which he had no control and to the respondent’s disciplinary procedures constituted a restraint of trade – whether the restraint affords no more than adequate protection to the interests of the respondent

Workplace Relations Act 1996 (Cth) s 127A(1)

Motor Traffic Act 1936 (ACT)

Taxi and Private Hire Car Regulations (ACT)

Taxi Industry (Contract Drivers) Contract Determination 1984 (NSW)

Finch v Herald & Weekly Times Ltd (1996) 65 IR 239, referred to

Dillon v Gange (1941) 64 CLR 253, applied

Northern District Radio Taxicab Co-operative Ltd v Commissioner of Stamp Duties [1975] 1 NSWLR 346, applied

Commissioner of Taxation (Cth) v De Luxe Red & Yellow Cabs Co-operative (Trading) Society Ltd (1998) 82 FCR 507, applied

Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16, referred to

Queensland Co-operative Milling Association Ltd v Pamag Pty Ltd (1973) 133 CLR 260, cited

Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288, cited

Adamson v NSW Rugby League Ltd (1991) 31 FCR 242, applied

Buckley v Tutty (1971) 125 CLR 353, applied

Eastham v Newcastle United Football Club Ltd [1964] 1 Ch 413, applied

Peters (WA) Ltd v Petersville Ltd [1999] FCA 1245, applied

McEllistrim v Ballymacelligot Co-operative Agricultural & Dairy Society Ltd [1919] AC 548, referred to

ROBERT ANDREW LEE v AERIAL TAXI CABS CO-OPERATIVE SOCIETY LIMITED t/as CANBERRA CABS

A 70 OF 1999

GYLES J

CANBERRA

10 DECEMBER 1999

THE COURT ORDERS THAT:

The matter stand over to a date to be fixed.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR ORDER

1                     This application commenced pursuant to s 127A of the Workplace Relations Act 1996 (Cth) (“the Act”) on the ground that a contract between the applicant and the respondent was unfair and harsh.  By later amendment the applicant claimed breach of contract, and by still later amendment claimed that the contract was an invalid restraint of trade at common law.

FACTS

2                     The respondent, Aerial Taxi Cabs Co-operative Society Limited, had entered into what was called a “Taxi Network Contract” on 1 July 1997 with the Minister for Urban Affairs on behalf of the Government of the Australian Capital Territory, for the right to provide a Taxi Booking Service within a specified area, namely, the Australian Capital Territory and surrounding region – in effect, it was said that this means the right to operate a taxi radio network.  The agreement covers the period up to 2002.  It is not entirely clear what express advantage the respondent obtains from this agreement, as it is said not to be exclusive and envisages a further contract being issued to another contractor at any time without any liability or obligation for compensation.  Nonetheless, the reality is that the respondent has conducted the only taxi network in the Australian Capital Territory for many years and, in particular, the only taxi radio network.  The agreement obliges the respondent to meet various operational requirements, including:

3.                 The taxi booking services must operate continuously and must cover bookings from all parts of the area covered by the Taxi Network Contract.

4.         Every taxi operator must be affiliated with a taxi network.  A taxi operator may be a member of one taxi network only at any point in time.  A taxi network may not accept a taxi operator when it is a member of another taxi network.  Affiliation means:

(A)              the taxi uses the name of the contracted taxi network, and

(B)               the taxi network provides the taxi operator with a booking service and bookings.

…

8.         The taxi network must take all reasonable steps to ensure (and have procedures in place to reasonably ensure) that every taxi operator is accredited, and complies with all the requirements of taxi operator accreditation including the meeting of all relevant safety standards or requirements.

9.                  The taxi network must take all reasonable steps to ensure that all taxi drivers are authorised, receive appropriate ongoing structured training to accommodate changes to basic entry training requirements, and are at all times properly attired in the network’s approved uniform.

…

17.              The taxi network must maintain a register of complaints, including the date, name and contact of complainant, nature of the complaint and action taken in response.

…

25.              The taxi network shall have in place a set of regulations/rules/By-Laws which are directed at provision of an efficient and equitable service for the public and for those affiliated to the taxi network.  A taxi network’s regulations will support the Motor Traffic Act 1936 and its Regulations in every respect, including the application of no more than the maximum applicable fare, and a taxi network will provide the appropriate forum for the enforcement of these procedures.”

3                     As the name implies, the respondent is a co-operative society, and membership is limited to those who are licensed to use at least one of his or her motor vehicles as a taxi.  Part 3 of its current Rules deals with complaints from members of the public, Part 4 with discipline of members, including a Supervisory Committee to which matters are referred and an Appeal Committee, and Part 8 deals with the constitution of the Supervisory Committee.

4                     Rules 14, 15, 16, 55, 56 and 70 provide as follows:

“DISCIPLINE

14 (1)  If a Director, the Chief Executive or a member has reasonable grounds to suspect that a member has:

(a)               contravened or failed to comply with a provision of these Rules or the by-laws or allowed a driver of his or her taxi to contravene or fail to comply with these Rules or the by-laws;  or

(b)               acted in a way, or allowed a driver of his or her taxi to act in a way, that is likely to bring the Society into disrepute or contempt, or to harm the proper operation of the business of the Society or the common interests of its members;  or

(c)                breached, or allowed a driver of his or her taxi to breach, the code of conduct for drivers of taxi cabs established by the By-laws;  or

(d)               failed to comply with a requirement made in accordance with by-laws made for the purposes of paragraph 70(1)(d);  or

(e)                been convicted of a criminal offence of a serious nature;

he or she may refer the matter to the Supervisory Committee in writing.

(2)           The Supervisory Committee shall hold a meeting to consider a matter referred to it under this Rule.

(3)           If a matter is referred to the Supervisory Committee, a member of that Committee shall, at least 7 days before the meeting is to take place, notify the member concerned in writing:

(a)               of the details of the matter;  and

(b)               of the time and place of the meeting of the Supervisory Committee at which the matter is to be considered.

(4)           The member may:

(a)               appear before the Supervisory Committee at the meeting to make submissions, and call witnesses to give evidence on his or her behalf;  or

(b)               make written submissions in relation to the matter.

(5)           If, after considering those submissions and all other evidence in relation to the matter that is available to the Supervisory Committee, the Committee is satisfied that the member has:

(a)               contravened or failed to comply with a provision of these Rules or the by-laws or allowed a driver of his or her taxi to contravene or fail to comply with these Rules or the by-laws;  or

(b)               acted in a way, or allowed a driver of his or her taxi to act in a way, that is likely to bring the Society into disrepute or contempt, or to harm the proper operation of the business of the Society or the common interests of its members;  or

(c)                breached, or allowed a driver of his or her taxi to breach, the code of conduct for drivers of taxi cabs established by the By-laws;  or

(d)               failed to comply with a requirement made in accordance with By-laws made for the purposes of paragraph 70(1)(d);

the Supervisory Committee may do one or more of the following:

(e)                recommend to the Board that the member be expelled;

(f)                 fine the member an amount not exceeding $1,000;

(g)               suspend the provision of radio services to that member, to the relevant taxi cab or to all taxi cabs of the member for a period not exceeding 4 weeks;

(h)               reprimand the member;

(i)                 require the member to attend all or part of the Aerial Taxi Cabs Co-Operative Society Limited Driver Training Course for refresher training.

(6)           If, after considering those submissions and all other evidence in relation to the matter that is available to the Supervisory Committee, the Committee is satisfied that:

(a)        the member has been convicted of a criminal offence;  and

(b)       the offence is of such a serious nature as to warrant the member’s expulsion;

the Committee may recommend to the Board that the member be expelled.

(7)           The Supervisory Committee shall, as soon as practicable after it has made a decision, cause the member to be notified in writing of the decision and of the reasons for the decision.

(8)           Any fine imposed on a member shall be paid:

(a)               within 14 days of being notified of the decision of the Committee;  or

(b)               if the member appeals against the decision in accordance with Rule 15 and the Appeal Committee confirms the decision of the Supervisory Committee, within 14 days of being notified of the decision on appeal.

(9)           If a fine is not paid within the period, the Supervisory Committee may suspend the provision of radio services to the member’s taxi cab or cabs until the fine is paid.

(10)       Any other punishment imposed on a member is, if the member appeals against the decision in accordance with Rule 15, not to be effected unless the Appeal Committee confirms the decision of the Supervisory Committee.

(11)       If:

(a)               the Supervisory Committee is satisfied that a member has contravened the By-laws by making or attempting to make unauthorised modifications to a mobile dispatch terminal owned by the Society;  and

(b)               the member has previously been punished under these Rules for a contravention of the same kind;

Subrule (5) applies as if the reference in paragraph (5)(g) to a period not exceeding 4 weeks were a reference to a period not exceeding 3 months.

(12)       The Supervisory Committee must notify a member who has referred a matter to the Supervisory Committee under subrule (1) of the results of the referral.

APPEALS

15.(1)            A member aggrieved by a decision of the Supervisory Committee under Rule 14 may, within 7 days after being notified of the decision, notify a Director or the Chief Executive in writing that he or she wishes to appeal against that decision.

(2)           A notification of an appeal shall state the grounds on which the appeal is to be made.

CONSTITUTION OF APPEAL COMMITTEE

16.(1)            If a Director or the Chief Executive receives notification under Rule 15 that a member is to appeal against a decision of the Supervisory Committee, the Director or the Chief Executive shall notify the Chairman of the member’s intention.

(2)           The Chairman shall, as soon as practicable, nominate:

(a)               a Director;  and

(b)               2 other persons, neither of whom is a member or an officer or employee and each of whom has had experience in:

(i)                business;  or

(ii)               public administration;  or

(iii)             arbitration of disputes;  or

(iv)             legal matters;

            to constitute an Appeal Committee to hear the appeal.

SUPERVISORY COMMITTEE

55.(1)  There shall be a Supervisory Committee consisting of three members of the Society, none of who are Directors and when available one nominee appointed by the Motor Registrar.  A person who has brought the society into disrepute on more than one (1) occasion, thereby rendering himself a person unfit to conduct business on behalf of the members, will be ineligible to be elected to or to retain a position on the Supervisory Committee.

(2)               Persons who, at the commencement of these Rules, held office as members of the Supervisory Committee under the rules that were in force immediately before the commencement of these Rules continue, subject to these Rules, to hold office for the remainder of their terms of office.

(3)               Each member of the Supervisory Committee shall be elected for a period commencing on the day of the holding of the Annual General Meeting at which he or she was elected and ending on the day of the holding of the second Annual General Meeting after that election.

(4)               If one member of the Supervisory Committee retires on the day on which an Annual General Meeting is held, one member shall be elected in his or her place, and if two members of the Supervisory Committee retire on that day, two members shall be elected in their place.

(5)               The Board may appoint a member (not being a Director) to fill a casual vacancy on the Supervisory Committee.

(6)               A member appointed to fill a casual vacancy on the Supervisory Committee will retire when the member he or she replaced would have been required to retire.

(7)               A retiring member of the Supervisory Committee is eligible for re-election.

(8)               A member of the Supervisory Committee may resign his or her office by notice in writing given to the Chairman.

(9)               The members of the Supervisory Committee shall be paid an honorarium.

(10)           All necessary expenses incurred by the members of the Supervisory Committee in the business of the Society shall be refunded to them on presentation of a statement of the expenses so incurred.

ELECTION SYSTEM FOR ELECTION OF MEMBERS OF SUPERVISORY COMMITTEE

56.(1)  The Board is to determine a system for the election of members of the Supervisory Committee, and is to notify members of that system in the notice of the Annual General Meeting at which members are to be elected.

(2)               If:

(a)               one position of member of the Supervisory Committee remains to be filled;  and

(b)               after the counting of all votes, the votes in favour of two candidates are equal, one of them is to be elected on the toss of a coin.

BY-LAWS

70.(1)   The Board of Directors may make by-laws not inconsistent with these Rules, the Act or the Regulations to facilitate the proper, efficient and orderly functioning of the Society and, in particular, relating to:

(a)               the specification of vehicles to be used as taxi cabs;  or

(b)               the qualifications required for drivers of taxi cabs;  or

(c)                a code of conduct to be observed by drivers of taxi cabs (including members), which may include provisions relating to:

(i)                standards of dress;  and

(ii)               penalties for breaches of that code of conduct, including suspension of access to the radio system;  or

(d)               requiring a member who employs a driver who has been found, in accordance with the by-laws, to have breached the code of conduct for drivers of taxi cabs established by the by-laws:

(i)                to discontinue the employment of the driver;  or

(ii)               to discontinue the employment of the driver for a period determined under the by-laws;  or

(e)                the procedure to be used in relation to the operation of the radio equipment, the allocation of radio hirings and the use of taxi ranks.

(2)               The by-laws that were in force immediately before the commencement of these Rules continue in force as if they had been made under subrule (1).”

5                     Pursuant to this last Rule, By-laws are in force (“the By-laws”). By-law 16 is as follows:

“16.    Drivers are required to sign an agreement to abide by the Rules and By-laws of Aerial Taxi Cabs Co-operative Society Limited (Aerial) prior to driving a taxi operating in Aerial’s fleet.  Operators who allow drivers to drive their taxis without first having signed the agreement will be responsible for the driver’s actions and may have their taxi(s) suspended from the radio network as a result of the driver breaching a Rule or By-law.”

6                     The By-laws provide a set of working rules governing the operation of the network and the radio control of it, including a complaints and discipline system with provisions for a supervisory committee and an appeals committee.  The By-laws apply to all drivers, whether they are also operators or not.  The principal relevant provisions are as follows:

“DISCIPLINE

SUPERVISORY COMMITTEE

18.              There shall be a Supervisory Committee in accordance with the Rules of the Society which state in part:-

“There shall be a Supervisory Committee consisting of three members of the Society, none of whom are Directors and when available one nominee appointed by the Motor Registrar”

19.a.    Any driver who allegedly contravenes or fails to comply with any provision of the Rules or the By-laws may be informed by the dispatcher.  The driver may be offered the option of taking two penalty points immediately or have the matter referred to the Supervisory Committee as hereinafter provided.

b.                   Any driver summoned to appear before the Supervisory Committee will be notified in writing at least seven (7) days prior to the proposed hearing and be given details of any alleged breach of the Rules or By-laws to be discussed at the hearing.  The driver may choose to either appear in person at the hearing to answer any charges, may call witnesses to give evidence on his behalf, or make written submissions to the Committee.  Failure to appear before the Supervisory Committee or make written submission without reasonable excuse will incur suspension from the Radio Network and cancellation of PIN number.  In the event of a subsequent non-appearance, the Supervisory Committee will have the discretion to suspend the driver until he appears or to make a decision on the alleged incident based on the information available.

c.                   If the Supervisory Committee is satisfied that a driver has contravened or failed to comply with a provision of the Rules or the By-laws the Supervisory Committee may-:

(1)               Reprimand the driver and/or

(2)               Require the driver to attend all or part of the Aerial Taxi Cabs Co-operative Society Limited approved driver training course for refresher training and/or

(3)               Fine the driver an amount not exceeding $1,000.00 and/or

(4)               Suspend the provision of the radio services to that driver and/or that operator’s taxi cab or cabs for a period not exceeding four (4) weeks, and/or

(5)               Recommend to the Board that the driver be suspended from access to the radio network and/or

(6)               Impose a suspended sentence and/or

(7)               Recommend to the Board that the matter be referred to the Motor Registrar, and/or

(8)               Award the driver demerit points where the Committee considers a monetary fine to be inappropriate.

The driver concerned is to be notified in writing of that decision and the reasons.

APPEALS

20.             The Appeals Committee will consist of:

(1)               A Director, and

(2)               Two (2) other persons, neither of whom is a member or an officer or employee of the Society and each of whom has had experience in:

(a)               Business;  or

(b)               Public administration;  or

(c)                Arbitration of disputes;  or

(d)               Legal matters.”

7                     “Driver” means the driver of an Aerial Taxi Cab and includes a member.  The “Supervisory Committee” is that referred to in the respondent’s Rules.  The “Appeal Committee” is the Committee constituted in accordance with Rule 16.  Each of these bodies also has functions in relation to complaints about members.  The “Chief Executive” is the Chief Executive from time to time of the respondent, and “Board” and “Director” are the Board of Directors of the respondent and a member of the Board respectively.

8                     The By-laws envisage, and the evidence establishes, that a driver requires a PIN number in order to access the network.  The evidence is that the applicant received a PIN number on or about 15 April 1994, having signed and submitted what was described as a driver’s agreement (“the Driver’s Agreement”) bearing that date, together with a driver information sheet.  The substantive part of the Driver’s Agreement is as follows:

“In consideration of being given bailment of a taxi(s) bearing Aerial taxi cab markings and belonging to a member of the Aerial Taxi Cabs Co-Operative Society Limited (“The Society”) and of being permitted to use such of the Society’s facilities, including its radio system, as is agreed, I hereby agree to comply with the By-laws, a copy of which I have this day received, or as amended by the Society in accordance with its Rules from time to time.  I hereby consent, as part of my bailment, to any breach of those By-laws by me being dealt with under the disciplinary procedures of the Society as set out in Part 4 of the Rules of the Society which, for the purposes of this agreement, shall be interpreted as though I were a member of the Society.  I further agree to abide by any decision made in accordance with these procedures and that any monetary penalty imposed may be recovered from me as a debt due to the Society in a court of competent jurisdiction.”

9                     At that time, the applicant was driving cab number 163.  Mr Gary Whitby also signed the Driver’s Agreement.

10                  On 23 May 1994 the applicant entered into what was described as a taxi bailment agreement with Whitby Developments Pty Ltd in relation to taxi 163, which governed the terms and conditions upon which the driver (described as the bailee) would have possession and use of the taxi (“the Whitby Bailment Agreement”).  The applicant says that he has driven taxis for approximately 20 operators since May 1994, and that the Whitby Bailment Agreement was the only bailment agreement he has entered into.  The Whitby Bailment Agreement entered into by the applicant is similar to, but not identical with, the current standard bailment agreement recommended by the respondent for use by its members.

11                  The applicant has driven cabs for Mr Les Wassell on nightshift on a full-time basis since 2 March 1999 pursuant to an informal oral arrangement.  The arrangement is that Mr Wassell pays for the fuel, maintenance and other costs, including insurance, of operating the vehicle.  After each shift the applicant gives Mr Wassell half of the takings for the shift, less any expenses paid during the course of the shift.  Although Mr Wassell is able to maintain contact with the applicant during the whole of the shift, he does not interfere with or tell the applicant how to do his job provided that he complies with Mr Wassell’s requirements, including a requirement that he abide by the By-laws of the respondent.  Mr Wassell does not pay him any superannuation, sick leave, annual holidays or long service leave.  The applicant purchased his own uniform as approved by the respondent.

12                  Mr Wassell is the owner or operator of 19 taxi cabs in the Australian Capital Territory, and is a member of the respondent.  He has current arrangements with some 70 drivers.  He has never used the respondent’s standard bailment agreement.

13                  The applicant has fallen foul of the complaints and discipline system provided for by the By-laws of the respondent, and this has led to him incurring fines and also two periods of suspension, the second of which was the immediate spark for these proceedings.  The applicant has some detailed objections to the manner in which he has been dealt with on various occasions, but expresses fundamental objection to the system as such.

WORKPLACE RELATIONS ACT 1996 (Cth)

14                  The relevant part of s 127A is as follows:

“127A(1)        In this section and in section 127B:

            contract means:

                        (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.

(2)        Application may be made to the Court to review a contract on either or both of the following grounds:

(a)               the contract is unfair;

(b)               the contract is harsh.

…”

15                  The respondent submits that the applicant has not established that there is any contract within the meaning of s 127A(1).  The applicant submits that the Driver’s Agreement is such a contract either in its own right or as collateral to his contract with the taxi owner.

16                  I agree with the submission of the respondent that the Driver’s Agreement is not in itself a contract for services.  The parties are the driver and the respondent.  On no view of the facts does the driver provide services to the respondent.

17                  The respondent submits that the Driver’s Agreement is not collateral to any or any relevant, contract for services. The respondent argues that the only agreement to which the Driver’s Agreement could arguably have been relevant at the time it was entered into was the Whitby Bailment Agreement, which has long since been terminated.  It was submitted that the section contemplates the review of contracts as formed, rather than the conduct of the parties following formation (Finch v Herald & Weekly Times Ltd (1996) 65 IR 239 at 251).  It was submitted that, in any event, the Whitby Bailment Agreement was a contract of bailment rather than a contract for services (Dillon v Gange (1941) 64 CLR 253;  Northern District Radio Taxicab Co-operative Ltd v Commissioner of Stamp Duties [1975] 1 NSWLR 346;  Commissioner of Taxation (Cth) v De Luxe Red & Yellow Cabs Co-operative (Trading) Society Ltd (1998) 82 FCR 507).  The last submission is in accordance with the authorities cited.  Whilst there may be differences between the present case and the facts and precise legal questions considered in those cases, they require the conclusion that the Whitby Bailment Agreement was a bailment agreement, rather than an alternative such as a contract for service or a contract for services.

18                  Thus, any case under s 127A based on the Whitby Bailment Agreement must fail, and, in that connection, I do not need to consider the correctness, or the application to these facts, of the opinion of North J in Finch (supra) as to the scope of s 127A compared with the similar New South Wales provisions, which was relied upon by counsel for the respondent. 

19                  The applicant submitted that the Driver’s Agreement was collateral to his arrangement with Mr Wassell and that this arrangement amounted to a contract for services.

20                  The respondent submits that there is no evidence that the parties contemplated that the applicant would enter into any such arrangement at the time the parties entered into the Driver’s Agreement, or that the respondent was later notified that the applicant was using a taxi pursuant to this oral arrangement, or that it was a party to it in the sense that it continued to permit the applicant access to its radio network knowing his possession of the taxi was pursuant to this oral arrangement. 

21                  The respondent further submits that s 127A is concerned with (and can only be concerned with) the review of contracts at the time when they are entered into, not with the review of conduct of the parties following entry into the contract, appealing again to North J in Finch (supra) at 251.  Thus, it is the contractual arrangements as they existed at the time when the Driver’s Agreement was entered into which are relevant.  If at that time there was a contract for services to which it could be said that the Driver’s Agreement was collateral, then the Driver’s Agreement could be rendered a reviewable contract by operation of s 127A(1)(b).  But, the submission concluded, the Driver’s Agreement cannot be rendered a reviewable contract by reason of the conduct of the applicant and a third party long after the Driver’s Agreement was entered into. 

22                  The Driver’s Agreement was signed by Mr Whitby and taxi 163 is identified.  The language of the Driver’s Agreement could be read as being restricted to a particular bailment in relation to a particular cab.  It is, however, capable of being read as a standing agreement between the applicant and the respondent which would apply to any bailment of any cab bearing Aerial markings and belonging to a member of the respondent, at least where use of the respondent’s facilities occurs. 

23                  I prefer the latter construction, as it accords more with the commercial reality of the industry.  Owners need drivers.  Drivers need to use the radio network.  The respondent needs to have a relationship with non-member drivers who use the network.  There are 223 cabs that access the network and some 900 drivers with PIN access to the network.  Mr Wassell, as one operator, had arrangements with 70 drivers.  It is not likely that undue formality as to paperwork would be practical. 

24                  This is certainly the manner in which the relationship between the applicant and the respondent has been conducted.  The applicant has been permitted to use the network since receiving a PIN number as a consequence of signing the Driver’s Agreement, and in that time has driven many taxis for approximately 20 operators.  Each party has, until these proceedings, acted on the basis that the applicant is bound by the By-laws.  The system is such that the respondent knows which cab makes and receives calls, and knows who owns them.  The respondent must be taken to know that the applicant has been driving cabs other than No. 163 owned by others than Whitby Developments Pty Ltd or Mr Whitby for some years. 

25                  This leads to the conclusion, in my opinion, that whatever the position may have been originally, it can now be taken that the Driver’s Agreement records the terms upon which the applicant is given access to the radio network.  These terms have not changed.  This is not to construe the contract in the light of subsequent conduct, but rather to ascertain the present contractual relationship between the parties.

26                  In my opinion, the fact that the terms of the contract have survived without challenge for some time does not preclude a challenge under s 127A, subject to any limitation period.  No limitation period has been suggested here.  Furthermore, if the terms have changed content because, for example, of changing By-laws, then I see no reason why the section would not permit examination of the contract in the light of the changed circumstances.  In any event, it is always acceptable to test potentiality for unfairness or harshness which a contract may always have had, by examining what has occurred in administering it. 

27                  The next step is whether the applicant’s contention that the arrangement with Mr Wassell is a contract for services is correct.  Viewed in isolation, there is substance for the contention.  The word “bailment” does not seem to have been mentioned between them.  If the question were whether the applicant were a servant or an independent contractor, the answer would be the latter (Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16).  Normally, an independent contractor would be said to be engaged pursuant to a contract for services.  Section 127A was obviously drawn with these concepts in mind. 

28                  That, however, is not the issue here.  Nobody is suggesting that the applicant is a servant.  The contest is as to whether the applicant is a bailee or is engaged pursuant to a contract for services.  This assumes that the two are mutually exclusive in the present case.  This is not an aspect of the matter which received separate consideration during argument.  It cannot be generally correct that bailment and a contract for services cannot coexist.  Many independent contractors would use chattels of the other party – tools are an obvious example – and so are bailees.  I do not doubt that in particular circumstances bailment can be of such a character as to exclude other relationships.  In the present case, there is undoubtedly a bailment of the taxicab.  If it can be concluded from the terms of the bailment that the driver does not perform services for the owner, but operates on his own account, then there is no contract for services.  In the case of the Whitby Bailment Agreement, the express terms of the document, taken with the established authorities, enabled the arrangement to be categorised as one rather than the other.  It is not so easy to do so here, as the express terms of the agreement are neutral.

29                  When the matrix of facts against which the informal oral arrangements are to be understood is taken into account, it seems to me that there is no difference essential for present purposes between the Whitby Bailment Agreement and the arrangements with Mr Wassell.  Mr Wassell is a member of the respondent, and bound by its Rules.  The applicant adhered to the respondent’s system by entering into the Driver’s Agreement, and by using the radio network.  The respondent’s system provides for and assumes a bailment relationship between owner and driver.  In particular, the Driver’s Agreement, which is the subject of the application, expressly refers to bailment.  There is no suggestion in the evidence that Mr Wassell had deliberately chosen to depart from the industry norm in his arrangements with one of many drivers. In cross-examination, Mr Wassell said that he abided by the Rules of the respondent and directed his drivers to do so.  He also agreed that he had heard the term bailment to commonly describe the relationship between owners such as himself and drivers such as the applicant.  He said that he had heard that the owner-operator of the car is a bailor and the drivers are bailees. 

30                  The applicant has argued that the respondent’s contention as to “services” is too restrictive.  It was submitted that the Act does not define the term, that dictionary definitions are wide and that the definition of “services” in s 4 of the Trade Practices Act 1974 (Cth) is a good guide to its meaning in the present context.  However, the problem does not lie in the definition of services.  There is no doubt that driving a cab for someone is the provision of a service.  The problem lies in concluding that the present arrangements were a contract for the provision of such services by the applicant to the respondent.    In my opinion, they were not.

31                  I therefore conclude that in the case of the arrangements with Mr Wassell, as with the Whitby Bailment Agreement, there is no contract for services to which the Driver’s Agreement is collateral.  The claim under s 127A is rejected.  I should record that no argument was addressed to me as to whether an agreement between the contractor and A can be collateral, for the purposes of this section, to an agreement between the contractor and B;  as to whether, in those circumstances, both A and B are necessary parties or as to the constitutional validity of s 127A in its present form.

COMMON LAW RESTRAINT OF TRADE

Restraint

32                  The applicant complains that in order to ply his trade he must enter into the Driver’s Agreement and so subject himself to complying with the By-laws of a body over which he has no control and in which he has no interest, by which he is party to a complaints and discipline system devised and administered by a third party which has the capacity to, and has, interfered with his freedom of trade.  In particular, he complains about the imposition of fines and penalties, backed by suspension from use of the radio network.  It is argued on his behalf that the form of the Driver’s Agreement means that he is subject to unilateral variation of the terms of operation each time the By-laws are altered, which can be done without his consent.

33                  Counsel for the respondent submits that there is no restraint of trade.  The contract between the parties was consensual, and there is no suggestion that the will of the applicant was overborne.  It is argued that the respondent’s network is a commercial product (or service), which it is prepared to make available to all comers provided they adhere to the respondent’s terms of use.  The applicant chose to enter into the arrangement because he saw a commercial advantage in his business as an independent contractor.  Counsel relied upon Queensland Co-operative Milling Association Ltd v Pamag Pty Ltd (1973) 133 CLR 260 and Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288.

34                  In my opinion, the applicant is correct.  Access to the facilities of a monopoly provider of a service cannot be equated with access to similar facilities where real competition exists.  The practical effect of exclusion from the radio network is revealed by the fact that Mr Wassell withdrew the offer of shifts from the applicant after some period of suspension due to inadequate returns.  Furthermore, there is substance to the complaint about the open-ended nature of the obligation.  The question is to be judged at the time the restraint is entered into and on the basis of potential as well as actual restraint (see generally Adamson v NSW Rugby League Ltd (1991) 31 FCR 242, particularly at 285-6).

35                  The Driver’s Agreement is, in reality, merely the result of By-law 16.  It is no barrier to a restraint of trade claim, that the real restraint is, in this case, between parties other than the applicant (Buckley v Tutty (1971) 125 CLR 353;  Eastham v Newcastle United Football Club Ltd [1964] 1 Ch 413).

Reasonableness between the parties

36                  The principal issue is whether the restraint is reasonably related to the objects of the respondent and affords no more than adequate protection to the interests of the respondent (per Gummow J in Adamson (supra) at 289-90;  Peters (WA) Ltd v Petersville Ltd [1999] FCA 1245 at para 27).  The respondent bears the onus of proving facts to justify the restraint (Adamson (supra) at 286).

37                  The respondent called evidence from its chief executive officer, who explained the working of the radio network accessed by some 223 taxis and approximately 900 drivers.  He said that the Rules and By-laws of the respondent are designed to ensure that the system works efficiently and minimises delays, and that the disciplinary provisions are designed to provide a reasonable system of enforcement.  He also referred to the obligation that the respondent has pursuant to the taxi network contract to ensure service to the public and to have appropriate complaint and enforcement procedures.  His evidence was that the respondent’s system was consistent with like procedures in other comparable jurisdictions.  His evidence was not shaken in cross-examination.

38                  Counsel for the respondent puts that the number of cabs and drivers requires a system of this type, and points out that it applies to all drivers, whether members or not, and is therefore not discriminatory.  He submits that natural justice adequate in the circumstances is provided.  The respondent’s counsel argued that where a consensual restraint is entered into, it is very difficult for the party to later say that it was not reasonable.  This is no doubt correct, but has limited application where, as here, the applicant had to take it or leave it and not ply his trade (Peters (WA) Ltd v Petersville Ltd (supra) at para 25).

39                  The applicant has some particular criticisms of the system, but the principal argument advanced on his behalf was as follows:

“The overriding issue is whether the Respondent is entitled to supervise and discipline taxi drivers who are not members of the Respondent co-operative society, but who are bound and required to use the Respondent’s taxi network operations if they wish to work as a taxi driver in the ACT.  On the one hand, the Respondent says that supervisory and disciplinary control over taxi drivers is necessary to provide “satisfactory, competent, efficient (taxi) services” (refer oral submission of counsel for the Respondent).  The Applicant submits that the Respondent is not entitled to protect its own interests pursuant to its obligations under the Taxi Network Contract because there is no evidence that such close supervision is warranted and the By-laws (as distinct from the Taxi and Private Hire Car Regulations) inherently protect the interests of the Respondent, that is its own goodwill and reputation (as distinct from the public interest) at the “expense” of the drivers.  The Applicant says that it is unreasonable for the Respondent as the sole taxi network operator in the ACT, to bind the Applicant to meeting the Respondent’s obligations to the ACT Government which it has apparently negotiated and entered into freely with the Government.  On the other hand, the drivers as a class are over-regulated in terms of the performance by them of their work – for example, the Motor Traffic Act and Taxi and Private Hire Car Regulations in addition to increasingly prescriptive By-laws – but the drivers (and specifically the Applicant in this case) do not have any regulations or determinations governing their conditions (compare the NSW Taxi Industry (Contract Drivers) Contract Determination, 1984), they have no power to negotiate their Driver’s Agreements with the Respondent or its members, and, as a result of a combination of circumstances, the drivers are denied access to due process as a result of the Respondent’s inadequate disciplinary rules and procedures.”

40                 The statutory framework to which reference is made is the Motor Traffic Act 1936 (ACT) and, in particular, the Taxi and Private Hire Car Regulations made under it.  These regulations contain a detailed set of provisions governing the operation of taxis and drivers.  Some of the obligations overlap with obligations under the respondent’s By-laws, for example, regs 6 and 7 and parts of By-law 40.  I cannot see any actual inconsistency, however, between one and the other.  More importantly, the regulations do not deal with the conduct of a radio network.  The other reference in the submissions of the applicant which should be explained is the Taxi Industry (Contract Drivers) Contract Determination 1984 (NSW).  This is an arbitrated determination pursuant to particular statutory provisions in the New South Wales industrial jurisdiction between bailor and bailees on topics going well beyond the complaints and discipline system. It is more fully explained in Commissioner of Taxation (Cth) v De Luxe Red & Yellow Cabs Co-operative (Trading) Society Ltd (supra).

41                 I am quite satisfied that a system of the kind under consideration is necessary in the interests of the respondent in conducting an efficient business, and that, subject to some specific matters, goes no further than is necessary.  There must be rules, and they will be empty unless they can be enforced by sanctions.  The rules should and do apply to all who drive cabs.  The present scheme affords natural justice appropriate to the situation.  I do not agree that it is necessary in a scheme such as this for a driver to be able to confront the accuser.  Further, I regard the power to suspend to enforce a fine rather than leaving it to be sued upon to be justifiable in this kind of scheme.

42                 My major concern is whether it is reasonable to subject a driver to a system where owner-operators make the substantive rules to be obeyed, make the rules concerning enforcement and administer the rules, with no contribution to the process by the driver concerned or anyone else in the same interest.  What may be reasonable between members may not be reasonable so far as outsiders are concerned (although cf McEllistrim v Ballymacelligot Co-operative Agricultural & Dairy Society Ltd  [1919] AC 548)

43                 My concerns are alleviated by reason of the fact that the By-laws apply to owner-operators who drive as well as to drivers and are thus unlikely to discriminate between owners as a class and drivers as a class.  Furthermore, the substantive rules in question are related to the practical operation of a radio network, rather than to traditional industrial issues such as shifts, rights of pay and so on.  Furthermore, the fact that a majority of the Appeal Committee is constituted by outsiders is a significant safeguard.

44                 There is no evidence of any particular reform of the Rules or By-laws which has been proposed either by this applicant or by any representative group of drivers which has been unreasonably refused and there has been no evidence called to support any particular change in the system.  Although the applicant says that he is supported by others in this application, it is not and should not be regarded as a representative action in any sense.  No particular solution has been proposed in submissions.

45                 On the other hand, as the Court has no role in devising restraints which might be proper, it may be said that evidence of the character to which I have referred, and submissions along the same lines, would be directed to a false issue.  If the respondent cannot carry the onus of supporting the present restraints, it is not for the applicant to propose a particular solution (Adamson (supra) at 297).

46                 I must also bear in mind that I am not exercising a statutory jurisdiction to reform contracts nor am I to strike a balance between different interests.  The question is what is necessary for the interests of the respondent to be protected rather than what I, or some other judge, might regard as the best overall structure of the industry, or what is necessary to impose some idiosyncratic form of industrial democracy.  I also bear in mind the evidence that this system is similar to that prevailing in other jurisdictions.  I am not sure I can give too much weight to this consideration, bearing in mind that the industry will be structured in different ways in different places, and that there is a de facto monopoly in the Australian Capital Territory.

47                 Nonetheless, although I am clearly of the view that the principal submission of the applicant, namely, that regulation of drivers should be left to the public authorities rather than to the respondent, should not be accepted, I am not satisfied that it is appropriate to entirely exclude drivers as a class from any involvement in the disciplinary system in order to do no more than protect the reasonable interests of the respondent.  The respondent has therefore failed to justify the restraint.  However, I am concerned that the manner in which the issue has arisen has not given the respondent an adequate opportunity of meeting this particular point.  The issue was added by amendment very late.  As I have said, no particular evidence or submissions were directed to it by the applicant.  I propose to give the respondent the opportunity of further addressing that point by evidence or submission if so advised.

48                  There is another aspect of the system which, in my opinion, may well lead to the same result, although it is not necessary to come to any final view about it yet.  It is that the fines which are imposed are paid to the respondent as part of its general funds.  In my view, this involves a conflict of interest and cannot be objectively justified.  The evidence is that most of the fines which have been received (perhaps as high as 90%) are paid to charity.  This illustrates the problem rather than solving it.

49                  It becomes unnecessary to consider yet whether the applicant has made out a case that the restraints are not reasonable in the interests of the public.

50                  The applicant was critical of the way in which the particular complaints against him were dealt with.  In my opinion, these submissions were misconceived.  The validity of a restraint does not depend upon the particular way in which the restraint is exercised.  In any event, I could see no valid reason for criticism.

51                  I should also say, for the sake of completeness, that I would not regard the open-ended nature of the commitment to abide by the By-laws as being an unreasonable restraint per se, even granted that it permits of unilateral alteration.  In my opinion, if unilateral alteration leads to the restraint becoming unreasonable, then the new provisions can be reviewed on their merits and action brought at that time.  The alternative would be to have all drivers sign fresh agreements each time there is a variation to the By-laws.  For reasons I have referred to earlier, this is not an industry in which such formality would be lightly provided for.

BREACH OF CONTRACT

52                  I confess to finding the applicant’s case on this basis confusing as a matter of pleading and as a matter of argument.  Insofar as it relates to the manner in which the By-laws have been operated, I can find no evidence of breach, assuming validity.  Insofar as the applicant makes a point about differences between the Rules, on the one hand, and the By-laws, on the other, whilst there is a technical argument based upon the wording of the Driver’s Agreement, it does not bear any scrutiny.  It is obvious that the procedure which applies to the driver is the By-law procedure, but that cannot be looked at in isolation from the fact that it is picking up a system which is also applicable to members for wider purposes than breach of the By-laws.  In my opinion, insofar as there is any relevant difference between the Rules and By-laws, it is plainly the By-laws which prevail so far as the applicant is concerned.

53                  I agree with counsel for the respondent when he submitted that some of the arguments which seem to have been advanced under this head, and some in relation to restraint of trade, were misconceived.  The applicant is not a member of the respondent and has no role in relation to the administering by it of its own Rules and By-laws except insofar as  the applicant’s interests are directly affected.

54                  The claim for breach of contract is rejected.

RELIEF

55                  Although it is too early to come to a view about relief, I should indicate my present thinking if I do find an invalid restraint.  As presently advised, my disposition would be to make a declaration of invalidity, the particular terms of which would be framed after hearing submissions, but only after a sufficient time has elapsed to enable the respondent, if it is so advised, to amend its Rules or By-laws or both before any declaration comes into effect.  I would not be presently disposed to grant relief in relation to the particular criticisms which the applicant has made concerning the way the complaints against him have worked.  The bases upon which his case might be upheld have existed for some years, during which each party has operated upon the basis of validity.  If I have a discretion in the matter, and I think I have, I would presently be disinclined to disturb what has taken place in individual cases and any declaration would be limited to the future.  Those views, however, are provisional, and I will hear further submissions if that becomes necessary.

56                  I have referred to the current version of the Rules and By-laws in these reasons.  The position has not been different in any respect essential to this case since 1994, although there have been amendments during that time.

57                  I propose to stand the matter over to enable each side to consider these reasons.

Associate:

Dated:              10 December 1999