Australia: First ´Unfair´ Contract Claims Under The Independent Contractors Act

Last Updated: 3 March 2009
Article by Andrew Tobin

One of the 'evils' eradicated from the industrial relations system by the Work Choices reforms was the 'unfair contracts' jurisdiction operating in NSW and Queensland, previously available to workers of all stripes, including employees, contractors (whether companies or individuals), and other 'arrangements' or 'understandings' for the performance of work. However, a more limited substitute jurisdiction was established by the Independent Contractors Act from March 2007, applicable only to contractors. The Federal Magistrates Court has now had two opportunities to consider and determine claims made in the jurisdiction which, at this stage, is unaffected by the Forward with Fairness reforms.

In the first of these, the Federal Magistrates' Court found that the contracts of three owner-drivers were unfair, to the extent that they allowed the principal to require them to upgrade their trucks.

In the second case, $36,000 in damages was awarded to the contractor after their contract was terminated without notice.

Keldote v. Riteway Transport

Riteway involved an unfair contract claim by 3 ownerdrivers contracted to Riteway – all long term corporate contractors – following a direction from the company to upgrade their equipment from singletrailers to B-doubles. They were told that, if no upgrade occurred, they would eventually be offered no further work. While the company offered some compensation for the upgrade, in the nature of an increased trip-rate, the owner-drivers all argued that the compensation offered would not compensate them for the increased costs they would have to incur.

While the drivers sought to negotiate the matter, the company was intransigent upon its requirements. That was ultimately its undoing.

The Court found that the contractual arrangements between the parties were unfair to the extent that they "permitted Riteway to require the [drivers] to renew their vehicles with replacements that were materially different from the vehicles which had previously been acceptable" in circumstances where Riteway had no corresponding obligation to reasonably compensate the drivers for their additional expense.

The Court ordered that the contracts be amended to limit Riteway's power to require the drivers to provide new vehicles, so that the company could only require replacements "having specifications reasonably equivalent to" the vehicles to be replaced. The proceedings were adjourned for the later consideration of damages and other remedies.

The case was originally decided in August 2008. However, in December upon Riteway's application, the August order was withdrawn, upon the basis that the order made had not been actively considered by any of the parties at the hearing. The drivers had originally only sought payment of compensation for the cost of the new equipment required by Riteway.

At the time of writing, the proceedings were continuing with final orders yet to be determined.

Fabsert v. ABB Warehousing

The contractor, Fabsert Pty Ltd, had a contract with ABB Warehousing (NSW) Pty Ltd for Fabsert to manage a warehouse and load containers. The contract was made in 2005. In 2007 it was terminated by ABB without notice. Fabsert brought proceedings in the unfair contracts jurisdiction seeking compensation, alleging that the contract had been unfair in a range of respects. Among other things they argued that a term should be implied into the contract requiring ABB to provide reasonable notice of between 6 and 9 months prior to terminating the contract.

The 'unfairness' in the contractual arrangements alleged by Fabsert included that:

  • it had a significantly weaker bargaining position to ABB when the contract was made;
  • ABB had used unfair tactics to encourage Fabsert into contracting. In particular, it was alleged that ABB had "promised" to pay Fabsert an extra $20,000 "once the business was up and running"; and
  • the weekly amount paid to Fabsert ($3,000) was less than an employee performing similar work would have received.

As a threshold question, Fabsert had to establish that the Independent Contractors Act applied to its situation.

The Act provides that a contract made by a contractor that is a body corporate cannot be the subject of an unfair contract claim unless the work to which the contract relates is "wholly or mainly performed by a director [including a de-facto director] of the body corporate" or a family member of a director.

Unfair contract claims by companies

Federal Magistrate Driver held that significantly more than half of the work under the contract must have been performed by the directors if the company's claim was not to be excluded from the jurisdiction. In Fabsert's case he decided that the company was able to make a claim, despite having employed casual staff and sub-contractors to do some of the work, because it was the skill, experience and judgement of Fabsert's directors that was brought to bear in the provision to ABB of warehouse management services under the contract. Through that contribution they had done more than half of the work required under the contract. It did not matter that one of the company's two directors had only been appointed director for the last 5 months of the contract.


In all but one area Fabsert's complaints of "unfairness" were dismissed. It was found, for example, that there had not in fact been any unequivocal promise of an additional payment "once the business was up and running". A related claim for damages for misleading and deceptive conduct under the Trade Practices Act was rejected for the same reason.

However, Fabsert was successful in claiming that reasonable notice should have been given upon termination of the contract, with the Magistrate finding that a requirement for 12 weeks notice of termination should be implied into the contract. Relevant factors included:

  • the time required for Fabsert to hand over the management services to ABB's new contractor; and
  • the time that the directors of Fabsert, who had been substantially dependant upon the ABB contract, would require to find new employment. They were aged 44 and 58 so that their employment options for the immediate future were limited.

In the absence of actual notice the Court ordered ABB to pay the remuneration that Fabsert would have otherwise earned over the 12 weeks notice period.

Avoiding unfairness in the engagement, and management of contractors

There are no hard and fast rules, but here are the three fundamentals:

  1. Don't engage workers as contractors if, legally, they are more appropriately engaged as 'employees'. Not only is there a risk that the engagement will be 'unfair', there is a further risk of prosecution for a penalty for contravention of the sham contracting provisions under the Workplace Relations Act (these are retained in the Fair Work Bill).
  2. Clearly and comprehensively document the arrangement, including the negotiations leading up to it. There is more to a sound contracting arrangement than a lick, promise and an ABN.
  3. The overall fairness of the proposed arrangements should be considered. Sensitive areas will include:
  • remuneration arrangements; and
  • termination provisions, particularly where the contractor has had to incur particular set-up or capital costs including, for example, the acquisition of particular plant or equipment, such as a vehicle.

© HopgoodGanim Lawyers

Australia's Best Value Professional Services Firm - 2005 and 2006 BRW-St.George Client Choice Awards

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Andrew Tobin
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.