Akinsanya and Secretary, Attorney-General's Department
[2021] AATA 172
•9 February 2021
Akinsanya and Secretary, Attorney-General's Department [2021] AATA 172 (9 February 2021)
Division:GENERAL DIVISION
File Number: 2019/5162
Re:Mr Ayobami Akinsanya
APPLICANT
AndSecretary, Attorney-General's Department
RESPONDENT
DECISION
Tribunal:Ms A E Burke AO, Member
Date:9 February 2021
Place:Melbourne
The Tribunal affirms the decision under review.
[sgd]........................................................................
Ms A E Burke AO, Member
Catchwords
FAIR ENTILEMENTS GUARANTEE – whether applicant was eligible to receive an advance under the Fair Entitlements Guarantee Act 2012 – applicant resigned more than six months before appointment of insolvency practitioners – assessment of basis of applicant’s resignation – whether employer was insolvent at the time of termination of the applicant’s employment – meaning of insolvency – indicia of insolvency – whether end of applicant’s employment due to insolvency of employer – decision affirmed
Legislation
Administrative Appeals Tribunal Act 1975 (Cth)
Corporations Act 2001 (Cth)
Fair Entitlements Guarantee Act 2012 (Cth)Fair Work Act 2009 (Cth)
Cases
Milardovic and Secretary, Department of Employment [2019] AATA 213
REASONS FOR DECISION
Ms A E Burke AO, Member
9 February 2021
Mr Akinsanya (the Applicant) is seeking review of the decision made by the Secretary, Attorney-General’s Department (the Respondent) that he was not eligible for an advance under the Fair Entitlements Guarantee Act 2012 (the FEG Act) as he did not satisfy section 10(1)(c) of the FEG Act.
On 8 August 2019 the decision-maker at the Fair Entitlements Guarantee Branch (FEG branch) advised Mr Akinsanya that he was not entitled to an advance under the FEG Act. The decision maker advised:
As your end of employment took place outside of six months of the appointment of an insolvency practitioner for your former employer, and as there is no evidence to suggest that the reason for the end of your employment, that is, the personal conflict between yourself and the director, was due to the insolvency of the company, you do not met the criteria for eligibility under section 10(1)(c) of the FEG Act and you remain ineligible for a FEG advance.
On 18 August 2019 Mr Akinsanya sought a review of the determination by this division of the Tribunal. His reasons for seeking a review were that:
This letter is to explain the reasons why I was unable to lodge an application within the 6 months timeframe stipulated for FEG assistance. I resigned my position with IDroppedIt Pty Ltd in July 2018 and contacted the company immediately, providing them with a breakdown of all my underpaid salaries and outstanding leave entitlements. Please note that I was acting here based on the advice received from Fair work Ombudsman. However, after several emails and lots of back and forth with the company, I started legal proceeding with the company in August 2018. The legal proceedings dragged up until February 2019 until I eventually got a court judgement in my favour. (I have attached here a copy of the court judgment). The company eventually ceased operation in December 2018 and did not appoint an Insolvent practitioner until February 2019.
My case is a unique one and I humbly request that the reviewer takes time to study the case before deciding on the case. This is because, I could not possibly lodge an application with FEG for a case that is yet to be decided in Court. In addition, as at the time I started the legal proceedings, the company was still in operation, and a FEG application can only be lodged after the appointment of an Insolvent practitioner.
At the hearing of this application on 12 October 2020 by videoconference, Mr Akinsanya was self-represented and Ms Laura Crick, solicitor at Clayton Utz, appeared for the Respondent. The Respondent lodged a set of paginated documents (the T-Documents) and the Applicant provided supporting documents. Mr Akinsanya provided oral evidence under affirmation.
BACKGROUND AND EVIDENCE
On 15 August 2018 Mr Akinsanya’s then legal representatives wrote to iDropped It demanding they rectify the underpayment of Mr Akinsanya’s wages identified by the Fair Work Ombudsman. The letter outlines the background to Mr Akinsanya’s employment with iDropped It, his commencement date and date of resignation and the basis of his underpayment claim, which has in turn lead to him subsequently seeking a FEG advance. The letter states:
On 8 September 2015 Mr Akinsanya commenced permanent full-time employment with iDropped It as a Technician.
Throughout his employment Mr Akinsanya worked 38 hours per week.
Mr Akinsanya initially received $18.46 per hour.
On 4 January 2016 Mr Akinsanya's salary increased to $21.25 perhour.
On 6 July 2018 Mr Akinsanya gave notice of his resignation from iDropped It effective 26 July 2018.
In or around mid-July 2018 Mr Akinsanya was advised by the Fair Work Ombudsman (FWO) that he was covered by the Manufacturing and Associated Industries and Occupations Award 2010 (the Award) during his employment with iDropped It. The FWO further advised that Mr Akinsanya had been underpaid in his employment and that he should send a letter of demand to iDropped It. The FWO advised that Mr Akinsanya would have been classified as a C5 employee under the Award given that he possessed an Advanced Certificate or National Diploma (3 years of relevant work experience) during his employment. Therefore, he ought to have received the following minimum amounts:
(a) from 1 July 2016 to 1 July 2016, $23.55 per hour;
(b) from 1 July 2016 to 1 July 2017, $24.11 per hour;
(c) from 1 July 2017 to 1 July 2018, $24.91 per hour; and
(d) from 1 July 2018 to 1 July 2019, $25.78 per hour.
On 1 August 2018 Mr Akinsanya sent an email to you and Chris Clark (Mr Clark) on the advice of the FWO, demanding that iDropped It rectify the underpayment of wages. The email attached two spreadsheets in which Mr Akinsanya set out his underpayment calculations.
On 2 August 2018 Mr Akinsanya received an email from you (CC to Mr Clark and Jeanette McGinley (Ms McGinley)). You stated that iDropped It needed to retrieve records and hold discussions with staff, management and former company directors.
That day Mr Akinsanya sent an email in reply to you (CC to Mr Clark and Ms McGinley) expressing his intention to seek legal counsel should you not pay the outstanding amount by 7 August 2018.
On 10 August 2018 you sent an email to Mr Akinsanya (CC to Mr Clark) stating that your understanding was that Mr Akinsanya was employed as a Level 1 Technician. iDropped It is yet to rectify the underpayment.
Breach of the Award
It does not appear to be in dispute between the parties that our client's employment was covered by the Award. However, the assertion that our client was classified as a Level 1 Technician under the Award is incorrect.
Firstly, the position that our client applied for was not advertised as a Level 1 Technician role. At no stage was our client informed that this was the case, nor were the duties and responsibilities of the position consistent with such a classification.
Secondly, in a reference letter dated 29 August 2016 you referred to our client as a "Senior Technician". This would again suggest that he was employed at a more senior level than a Level 1 Technician.
Thirdly, our client has instructed us that he has 11 years of experience as a technician and that his National Diploma in Electrical/Electronic Engineering is recognised in Australia.
For these reasons it is clear that our client is classified as a C5 employee under the Award and that he had been significantly underpaid as a result of his misclassification. The full extent of this underpayment is detailed in the attached spreadsheet. You will note from this spreadsheet that our client is owed $17,773.36 in wages and $1,688.47 in superannuation.
On 15 February 2019 in the Federal Circuit Court, His Honour Judge JD Wilson QC ordered iDropped It to pay Mr Akinsanya compensation fixed in the amount of $21,303.62 pursuant to s 545(3) of the Fair Work Act 2009.
On 21 February 2019, Dye & Co advised creditors that they had been appointed as liquidators for iDropped It which had ceased to trade and had been placed into liquidation. The advice from Dye & Co did not list Mr Akinsanya as a creditor.
On 14 May 2019, Mr Chris Clarke, former Director of iDropped It, advised Dye & Co of the following in respect of Mr Akinsanya’s employment:
1. Approx. June 2018, Mr. Akinsanya handed to me a letter of resignation stating his intent to leave after his 2 week notice period, with no reasoning stated
2. Mr Akinsanya served his 2 week notice period
3. In the pay cycle immediately following his departure, Mr Akinsanya was paid all monies owed to him by the business
4. Approximately a month later, Mr Akinsanya emailed me … stating his belief he had been underpaid due to his qualifications, along with a calculation suggesting the business had failed to properly record his annual leave. Neither of these claims had any basis, so after ensuring the numbers were correct we informed him via return email that we will not be entertaining a claim
5. Approximately a month after this McDonald Murholme (representing Mr Akinsanya) informed us that they would be pursuing a case against iDi should we refuse to pay. At this point we engaged Maddocks to advise us
6. On Maddocks’ advice, we decided this claim was so ridiculous they couldn’t possibly proceed to court, and requested Maddocks write a letter to McDonald Murholme outlining the fallacies in their case. After some back and forth, the case seemed to disappear
7. Some months later, iDi received a letter from BDL, stating they are now representing Mr Akinsanya and would be filing a statement of claim. We again requested Maddocks write a letter informing BDL we would not entertain and would defend any claim against us
8. BDL filed their claim in December 2018, however due to procedural errors in their filing we allowed them another attempt, rescheduling the directions hearing to mid-February
9. Maddocks withdrew as our lawyers approx. 2 days before the directions hearing. Given iDi’s circumstances, it was not possible to obtain new representation in time, and an order was made at the directions hearing for around $18-20k
10. By this stage, iDi has already discussed and taken steps towards liquidation, with liquidation officially commencing the following week.
11. Liquidation commenced on a Thursday, with the courts final judgement made on the Friday after (which as far as I’m aware should not have proceeded)
…
On 15 May 2019, Dye & Co provided advice to the Department about iDropped It’s liquation and Mr Akinsanya’s employment status at the time of liquidation. In the letter they advise:
I provide you with the particulars based on company records that were existent at 27 July 2018 as follows:
1. The company had two directors, …
2.On 14 June 2018 the Company entered into a licence agreement for a new trading premises situated at … Melbourne.
3.The claimant resigned from his employment with the Company and served the requisite two weeks’ notice.
4.….
5.Other than the claimant, no other employees ceased employment between 5 December 2017 and 19 December 2018
6.The company ceased to trade on 19 December 2018, at which time all employees were terminated without notice.
Whilst I consider that the Company was insolvent from 1 July 2017, based on various indicators and subject to defences that may be available to its directors, it does not appear that there are any factors that impinged on the employment of A. Akinsanya to provide any direct link to his cessation with company.
The sole director has advised me that prior to my appointment the Company was subject to proceedings brought by the claimant for entitlements, these were disputed by the company. The director asserts that any entitlements owed to the claimant were paid at the time of his resignation and that the Company always paid its wages on time.
On 20 May 2019, Dye & Co provided a Statutory Report to Creditors in which it advised what led to iDropped It being placed in administration:
The sole director,… has advised that he invested in the business in 2017 and came on as a co-director, where the remaining founding partner of the business exited. The Company was managed and operated by…[the sole director] noted that subsequent to his investment he became aware that the company was losing money since 2017.
I note the externally prepared financial statements disclose that the accumulated losses of the company at 30 June 2017 totalled an amount of $1,033,891.76, which had predominantly been funded by its share capital.
In June 2018 the company entered into licence agreement for a new trading premises situated at… Melbourne. …
The Company ceased to trade on 19 December 2018. At this date the Company was subject to legal proceedings commenced by creditor and a former employee of the Company.
The Company subsequently vacated its premises and stored its assets and records in two commercial storage facilities. The Company did not recommence to trade its business or transfer its business prior to its liquidation on 21 February 2019.
On 10 July 2019 via email to the FEG branch investigator, Mr Akinsanya explained his reasons for resigning from iDropped It. He stated:
I eventually resigned in July 2018 as the workplace became an extremely hostile environment to work in and I just could not bear it any longer.
An undated letter from Mr Akinsanya requested assistance from the FEG branch. In his letter he stated:
Firstly, I have sent a formal request to my former employer requesting for these owing to be paid since 2nd of August 2018. Please note that prior to sending this request, I had previously contacted Fair Work Ombudsman about these owing amounts and was advised to send the former employer a formal request stating clearly the outstanding amounts. However, the employer refused the request, and this prompted me to involve a Lawyer, which eventually led to filing a case at The Federal Circuit Court to enforce these payments. I am certain you know that any Legal proceedings usually takes time and a lot of factors are to be considered before starting a Court process. Please also find attached a copy of the application made to The Federal Circuit Court, and I did not get a hearing date until 15th of February 2019. Please note that I have been involved in this legal battle since 15th of August 2018, and there is no way I could possibly have lodged an application for Fair Entitlements Guarantee as the company was still in operation as at that time, and, I was also in the process of starting a court process. (please find attached a copy of the Court Judgement)
Furthermore, I have contacted former colleagues at the company and was duly informed that the company stopped operation as far back as December 2018, yet the company did not appoint an insolvency practitioner until 2months after (21 February 2019). Even after I secured a Court Judgement (please find attached a copy of the Court Judgement), and I still did not receive any response from the former employer as to how the owing amounts will be paid. After months of delay, (please note here that I never received any response from Former employer for about 2months after I had gotten the Court Judgement). I even contacted Maddocks (Former employer’s lawyer) back in December 2018 and was told they have not received any further instructions from the company. Only, few weeks back my lawyer received a letter from the appointed insolvency practitioner, then I lodged an application.
Secondly, in addressing the point raised about the end of my employment in July 2018, please note that I joined the company since September 2015, and I throughout my time with the Company, I was discharging my duties to the best of my abilities. Please find attached a letter written by Manager confirming that I have made significant contributions to the growth and expansion of the Business. However, the company became a very hostile environment to work in months after Chris Clark assumed in position of a Director in June 2017. Not only that, he was partly responsible for the mismanagement of the funds generated in the Business which eventually led to the Company going into liquidation.
I would implore you to carefully study this case and review the decision previously made about my application. I believe the Department of Jobs and Small Business stands for Fairness and is charged with the responsibility of providing financial assistance with regards to work entitlements.
On 12 October 2020 Mr Akinsanya provided a written statement he sought to rely upon at the hearing:
Whilst I understand the policies surrounding FEG’s mode of operation, I am making a humble appeal to this tribunal to kindly review this case.
Honorable member, before coming to realize that I was been underpaid, I had made contacts with Fair Work Commission and received advise on the correct rates I should have been receiving under Occupation award 2010, which implies that there are some outstanding entitlements owing.
Honorable member, this case is an exceptional case as the major reason for rejecting my claim was based on the timing of my application to FEG. FEG maintains as per their policies that an application should have been lodged within 6months that my employment ceased with the Company. However, I was unable to make a claim to FEG firstly because the matter was still in court, and It was humanly impossible for me to have lodged an application with FEG when the case was yet to be decided in court. Honorable member, even after Honorable JUDGE J D WILSON QC ruled in my favour, my lawyer and I spent several months trying to chase the company with the court judgment. This made me loose further months.
Furthermore, Honorable member, I have carefully read the findings presented by FEG, where they were unable to establish a link between the Company’s Insolvency and my cessation to the Company. Honorable member, this is not quite accurate as the company has been Insolvent as far back as 1 July 2017 (Please kindly refer to Page 248 T18 Under the heading Initial decision). However, the Company never filed for Insolvency until they were challenged with my outstanding entitlements. Please Honorable member note that the company suddenly filed for Insolvency after they received a Court hearing date to decide on my owed entitlements.
Honorable member, this leads me to my final point. There have been some inaccurate statements also presented by the company. The Company claimed to have been unable to attend the court hearing because their lawyer withdrew few days before the court hearing. Please kindly refer to a copy of the court judgment (Please kindly refer to Page 19, T1 please kindly note here that one court judgement has been omitted from my file), where Honorable JUDGE J D WILSON QC outlined the court proceedings. Please kindly note that prior to this date of the hearing, the company made no efforts to inform the court of their non-appearance. Honourable member, the company simply did not show up in court. This makes me strongly feel they had no line of defence and were simply trying to dodge their responsibilities and reinforces the recklessness of the company who has been in clear breach of the award as stipulated by Fair work Commission.
Overall, this case has taken an emotional toll on me. For years now, my mind has been troubled as am struggling to come to terms with the facts that a court ruling in my favour is yet to be executed.
Mr Michael Kot, a former colleague of Mr Akinsanya, provided a statutory declaration dated 18 October 2020 in respect of the cessation of the company. In it he advises:
… as a former employee of iDropped It Pty Ltd, do solemnly declare and affirm that I was present at a staff meeting organised by Mr Steve Zanin at the company' s office address…
In this meeting, Mr Zanin told the employees present that the company was in a worse financial position than the management had initially realised, and that staff wages were very expensive for the company. In this meeting he also asked the employees if any of us would volunteer to have part of our wages withheld temporarily to help the company overcome its financial difficulties, stating that the company would pay back the withheld amount later on.
He further advised that he could not force employees to agree to this, but that if no one volunteered and the company' s financial position did not improve, then the management would potentially have to look at lowering wage costs by other means, such as possibly cutting hours/days worked.
ISSUES IN CONTENTION
The issue for the Tribunal is whether Mr Akinsanya is eligible for an advance payment under the FEG Act.
LEGISLATIVE FRAMEWORK
The FEG Act provides for the Commonwealth to make payments owed to employees if their employer becomes insolvent. The Commonwealth advances the entitlements to the employees and then seeks to recover the advances from the insolvent employer.
Section 3 of the FEG Act clearly outlines the objectives of the Act:
The main objects of this Act are:
(a) to provide for the Commonwealth to pay advances on account of unpaid employment entitlements of former employees of employers in cases where:
(i) the employers are insolvent or bankrupt; and
(ii) the end of the employment of the former employees was connected with that insolvency or bankruptcy; and
(iii) the former employees cannot get payment of the entitlements from other sources; and
(b) to allow the Commonwealth to recover the advances through the winding up or bankruptcy of the employers and from other payments the former employees receive for the entitlements.
Section 6 of the FEG Act identifies kinds of employment entitlements which can be included as payment:
Annual leave entitlement
(2) The person's annual leave entitlement is the amount the person is entitled to under the governing instrument from the employer for paid annual leave that the person:
(a) had accrued at the end of the employment; and
(b) had not taken by then.
Long service leave entitlement
(3) The person's long service leave entitlement is the amount the person is entitled to under the governing instrument from the employer:
(a) for long service leave that the person had accrued at the end of the person's employment and had not taken by then; or
(b) on account of long service leave that, had the person's employment continued until the person qualified for long service leave, would have been attributable to the period before the actual end of the person's employment.
Payment in lieu of notice entitlement
(4) The person's payment in lieu of notice entitlement is the amount the person is entitled to under the governing instrument from the employer for a shortfall in the period of notice of termination of the employment.
Redundancy pay entitlement
(5) The person's redundancy pay entitlement is the amount of redundancy pay the person is entitled to under the governing instrument from the employer for termination of the employment.
Wages entitlement
(6) The person's wages entitlement is the amount of wages the person is entitled to under the governing instrument from the employer for work done, or paid leave taken, in the wages entitlement period.
Entitlement unaffected by payment
(7) The person's receipt of some or all of an amount he or she was entitled to under the governing instrument does not affect what is the person's annual leave entitlement, long service leave entitlement, payment in lieu of notice entitlement, redundancy pay entitlement or wages entitlement under this section.
Example: If:
(a) under the governing instrument, the person accrued 8 weeks of annual leave that had not been taken by the end of the person's employment; and
(b) the employer paid the person for 3 of those weeks;
the person's annual leave entitlement is the entitlement to be paid for 8 weeks annual leave.
The wage entitlement period is defined in section 5 of the FEG Act:
"wages entitlement period" for a person whose employment by an employer has ended means the 13 weeks ending at the earlier of the following times (or either of those times if they are the same):
(a) the time the person's employment ended;
(b) the first time an insolvency practitioner has power (however expressed) to control or manage employment by:
(i) the employer; or
(ii) if the person was employed for a partnership by 2 or more partners--any of the partners who employed the person.
Section 10 outlines the conditions of eligibility for an advance under the FEG Act:
General conditions
(1) A person is eligible for an advance if the Secretary is satisfied of all of the following:
(a)the person’s employment by a particular employer has ended;
(b)after the commencement of this section, an insolvency event happened to the employer;
(c)the end of the employment:
(i) was due to the insolvency of the employer; or
(ii) occurred less than 6 months before the appointment of an insolvency practitioner for the employer; or
(iii) occurred on or after the appointment of an insolvency practitioner for the employer;
(d)the person is (or would, apart from the discharge of the bankruptcy of the employer, be) owed one or more debts wholly or partly attributable to all or part of one or more employment entitlements;
(e)the person has taken steps, so far as reasonable, to prove those debts in the winding up or bankruptcy of the employer;
(f)if the person was owed any of those debts before the insolvency event happened, the person took reasonable steps before that event to be paid those debts;
(g)when the employment ended, the person was an Australian citizen or, under the Migration Act 1958, the holder of a permanent visa or a special category visa;
(h)an effective claim (see section 14) that the person is eligible for the advance has been made to the Secretary by or on behalf of the person.
Note: Subdivision B excludes certain persons from eligibility.
CONTENTIONS
Mr Akinsanya’s argument was fairly straight forward. He cannot comprehend how the ruling of His Honour Judge JD Wilson QC, which had awarded him compensation fixed in the amount of $21,303.62 for underpayment of wages, has not been executed. Mr Akinsanya argued that he had pursued his underpayment of wages in accordance with the advice of the Fair Work Ombudsman and won, and he now has a legally recoverable debt against iDropped It and he should have a recourse available to him to recover this debt.
Mr Akinsanya argued he had been prevented from filing his claim under the FEG Act within the required period as he had to await the final outcome of the Federal Circuit Court proceedings before he knew the quantum of his claim, and should not be penalised because the legal system was slow.
Mr Akinsanya argued that at the time he resigned, the company was insolvent as verified by the liquidator. Whilst he had resigned because he was feeling victimised in the workplace, there was also tension in his workplace because management was aware of their difficult financial position, indicating to staff that they may need to take a pay cut to keep the company afloat.
Mr Akinsanya argued that a meeting, verified by his colleague Mr Kot, about the financial position of the company and the subsequent move of the company into smaller premises prior to his resignation, both indicated his resignation had a causal link to the company’s insolvency.
Mr Akinsanya argued he had been advised by the liquidator to file for an advance under the FEG Act to seek execution of his favourable court ruling. He argued that the liquidator had not advised there was any other avenue open to him to seek recovery of the money and he was not considered a creditor of iDropped It.
Mr Akinsanya stressed to the Tribunal that this whole situation had taken a significant emotional toll on himself and his family. He had expended a great deal of time, energy and money on pursuing his underpayment of wages and felt the whole system was grossly unfair. His colleagues had received their outstanding wages and entitlements whilst he was left with a favourable ruling which no one seems to be able to enforce.
Fundamentally, the Respondent argued Mr Akinsanya did not meet the eligibility condition in paragraph 10(1)(c) of the FEG Act on any basis and he therefore is not eligible for an advance under the FEG Act.
The Respondent contended that on the evidence before the Tribunal, the Tribunal could not be satisfied that there was a connection between the insolvency of iDropped lt and the end of Mr Akinsanya’s employment. The Respondent argued that on Mr Akinsanya’s own evidence, he had resigned from iDropped It because of hostility in the work environment and there was no evidence that the end of his employment was "due to" the insolvency of iDropped lt.
The Respondent contended there was no dispute that Mr Akinsanya’s employment ended on 27 July 2018 and this date was consistent with the records held by the insolvency practitioner.
The Respondent contended that Mr Akinsanya had to demonstrate that the end of his employment was "due to" the insolvency of iDropped lt and this was an important aspect of s 10(1)(c) of the FEG Act, as it reflects that eligibility for the FEG scheme is only for those persons whose end of employment has a connection with the insolvency of the employer. The Respondent referred the Tribunal to the matter of Milardovic and Secretary, Department of Employment [2019] AATA 213 (Milardovic), contending the issues in contention were as Member Parker had summarised:
A key issue in this case is whether Mr Milardovic’s employment ended due to the insolvency of VS. This requires the Tribunal to determine:
(a) when Mr Milardovic’s employment with VS ended;
(b) whether VS was insolvent at the time Mr Milardovic’s employment with VS ended; and
(c) if so, whether Mr Milardovic’s employment ended due to the insolvency of VS.
The Respondent highlighted the following evidence in support of their argument:
·on Mr Akinsanya’s FEG claim, dated 28 April 2019, he states “[he] was frustrated out of the job due to some bias treatment from [his] Boss”
·on 14 May 2019, the former director of iDropped lt, Mr Chris Clark indicated to the FEG investigator that Mr Akinsanya’s resignation letter did not state his reason for resigning, a copy of this letter has not been located by the Respondent;
·on 16 May 2019, Mr Akinsanya applied for an internal review of the original decision to refuse him FEG. He submitted an undated letter in which he states “[the] company became a very hostile environment to work in months after Chris Clark assumed in position of a Director in June 2017. Not only that, he was partly responsible for the mismanagement of the funds generated into the Business which eventually led to the Company going into liquidation”;
·on 10 July 2019, in an email to the FEG investigator, Mr Akinsanya responded to the following question: In your claim, you advised that you resigned your employment in July 2018 because you were 'frustrated out of the job due to some bias treatment from my Boss". Please explain what you meant by "bias treatment" and fully explain your reasons for resigning from your employment. Mr Akinsanya responded: “I eventually handed in my resignation in July 2018 as the workplace became an extremely hostile environment to work in and I just could not bear it any longer”;
·on 14 February 2020 in a Statement in support of his application for review, Mr Akinsanya did not dispute he resigned because of a hostile environment and states:
Secondly, in addressing the point raised about the end of my employment in July 2018, please note that I joined the company since September 2015, and throughout my time with the Company, I was discharging my duties to the best of my abilities. A letter was written by Manager confirming that I have made significant contributions to the growth and expansion of the Business. However, the company became a very hostile environment to work in months after Chris Clark assumed in position of a Director. Not only that, he was partly responsible for the mismanagement of the funds generated in the Business which eventually led to the Company going into liquidation.
FEG maintains they cannot pay the outstanding amounts because I did not lose my job due to company becoming Insolvent. However, I maintain that refusal to pay the owing amount would be deemed to me as a great disservice and directly contradicts the Organisational goals and objective of Fair entitlements Guarantee.
The Respondent contends it would be open to the Tribunal to conclude that iDropped lt was insolvent when Mr Akinsanya’s employment ended on 27 July 2018. The term “insolvency” (or "insolvent") is not defined in the FEG Act. The Respondent contended it is appropriate for the Tribunal to turn to the Corporations Act 2001 (Cth) (the Corporations Act) to consider the meaning of insolvency. Section 95A of the Corporations Act provides:
A person is solvent if, and only if, the person is able to pay all the person's debts, as and when they become due and payable.
A person who is not solvent is insolvent.
The Respondent relied upon information provided by the insolvency practitioner which set out the basis upon which they determined the company to have been trading whilst insolvent from as early as 1 July 2017. The insolvency practitioner relevantly stated:
Based upon the above, the externally prepared financials disclose that the Company incurred continuous losses and maintained balance sheet deficiencies from at least 1 July 2016. The losses in the first year were attributed to a number of factors… aligned to its infancy, setup and generation of business The following year, the Company's cost of goods sold were consistent with a reduction in its general expenses providing losses of half the year prior. In the year ended 30 June 2018, the Company's sales had decreased 26.3% from the year prior ($1,443,428 to $1,063,931) and whilst general expenses were somewhat constant, the cost of goods sold had more than halved.
In the financial periods the Company traded, the liquidity ratio (quick ratio to exclude inventory held) at 30 June 2016 was 0.81, and at 30 June 2017 was 0.73, further reducing to 0.23 at 30 June 2018 and was O. 13 at the date the Company was wound up in liquidation. This clearly was displaying a serious lack of working capital and the Company's ability to meet its current debts.
In accordance with the above and along with the following, the company was insolvent or likely to become insolvent at least from 1 July 2017:
·Continuous significant trading losses;
·Balance sheet deficiencies, with liquidity ratios less than 1; Creditors paid outside trading terms; Overdue taxation liabilities.
While the Respondent contended it was open to the Tribunal to conclude that iDropped lt was insolvent on 26 July 2018, they argued this was not sufficient to establish eligibility under s 10(1)(c)(i) of the FEG Act as Mr Akinsanya must also demonstrate a causal connection between the insolvency and the end of his employment.
The Respondent contended the evidence clearly indicated that Mr Akinsanya’s employment ended on 26 July 2018 which was his last day of work, an insolvency practitioner was not appointed until 21 February 2019 and that Mr Akinsanya’s employment ended 6 months and 26 days prior to the appointment of the insolvency practitioner.
The Respondent contended the decision under review should be affirmed as Mr Akinsanya did not fulfil the strict eligibility requirements of the FEG Act, as he had resigned more than six months before the date of insolvency. The Respondent argued that the terms of s 10(1)(c)(ii) of the FEG Act are clear and confer no discretion upon the Tribunal to determine that Mr Akinsanya satisfies s 10(1)(c)(ii). Accordingly, the Respondent contends that the Applicant does not meet s 10(1)(c)(ii). However, they did acknowledge the unfortunate nature of the case where Mr Akinsanya’s ability to recover a claimed employment entitlement (accrued, but not determined, before the employer's insolvency) was impeded by iDropped lt's insolvency.
Following the hearing and receipt of Mr Kot’s statutory declaration, the Respondent submitted that the Tribunal should accord no weight to Mr Kot’s declaration as:
(a)it was not probative of the issue in dispute: there is no reference to the end of Mr Akinsanya’s employment nor to Mr Akinsanya or any detail as to how Mr Akinsanya’s attendance at this meeting is said to be connected to the submission of Mr Akinsanya’s resignation; and
(b)lacks specificity: it is purported to be from a former employee of iDropped It. There is no detail as to the role or dates of engagement of this person nor has a date for the meeting been provided.
CONSIDERATION
There is no dispute that Mr Akinsanya has a legally recoverable debt of underpayment of wages from his former employer iDropped It, the issue for the Tribunal is whether this claim of underpayment of wages can be pursued as a claim under the FEG scheme.
The primary issue therefore is whether Mr Akinsanya met the mandated eligibility condition under s 10(1)(c) of the FEG Act by satisfying any of subsections (i), (ii) or (iii) in respect of the cessation of his employment with iDropped lt. Subsection (i) applies if the end of the person's employment was due to the insolvency of the employer. Subsection (ii) applies if the employment ended less than six months before the appointment of an insolvency practitioner. Subsection (iii) applies if the end of the person's employment occurred on or after the appointment of an insolvency practitioner for the employer.
The Tribunal, as succinctly articulated by Member Parker in Milardovic, must determine:
(a)when Mr Akinsanya’s employment with iDropped lt ended;
(b)whether iDropped lt was insolvent at the time Mr Akinsanya’s employment with iDropped lt ended; and
(c)if so, whether Mr Akinsanya’s employment ended due to the insolvency of iDropped lt.
When did Mr Akinsanya’s employment with iDropped lt end?
There is no dispute between the parties that Mr Akinsanya resigned, and his last date of employment was on 27 July 2018, 6 months and 26 days prior to the appointment of the insolvency practitioner.
The Tribunal finds that Mr Akinsanya’s employment with iDropped lt ceased when he completed his notice period on 27 July 2018 following his notification of resignation on 6 July 2018.
Was iDropped lt insolvent at the time Mr Akinsanya’s employment with iDropped lt ended?
Whilst the Tribunal noted the term “insolvency” is not defined in the FEG Act, the term has been defined in other Commonwealth legislation including the Corporations Act and the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act).
Section 9 of the Corporations Act provides that “insolvent” has the meaning given by s 95A(2) of the Corporations Act. Section 95A(2) provides that a person who is not solvent is insolvent. In turn, s 95A(1) provides that:
A person is solvent if, and only if, the person is able to pay all of the person’s debts, as and when they become due and payable.
Relying upon the advice of the insolvency practitioner, the Tribunal finds that iDropped lt was insolvent in accordance with the meaning in s 95A(1) of the Corporations Act when Mr Akinsanya’s employment ended on 27 July 2018, as Dye & Co had determined iDropped lt clearly was displaying a serious lack of working capital and the Company's ability to meet its current debts.
Whether Mr Akinsanya’s employment ended due to the insolvency of iDropped lt
In assessing whether there was any link between Mr Akinsanya’s resignation and iDropped lt’s insolvency, the Tribunal considered Mr Kot’s statutory declaration confirmed Mr Akinsanya’s assertion at the hearing and in his numerous statements that he was aware of the company’s financial difficulties at the time of his resignation. However, there was no further evidentiary value in Mr Kot’s statement as it did not indicate that the insolvency was a factor in Mr Akinsanya’s resignation.
Having found iDropped lt was insolvent at the time of Mr Akinsanya’s resignation, the Tribunal could assume that the workplace pressure and harassment Mr Akinsanya was experiencing may have been linked to the company’s financial difficulties but there was no supporting evidence to sustain this conclusion. The Tribunal particularly noted the insolvency practitioner advised that no other employee resigned between 5 December 2017 and 19 December 2018.
The Tribunal did not have a copy of Mr Akinsanya’s resignation letter which may or may not have shed further light on Mr Akinsanya’s reason for resigning. The contemporaneous evidence before the Tribunal of any connection between the end of Mr Akinsanya’s employment with iDropped lt and the insolvency of iDropped lt was:
(a)Mr Akinsanya’s own consistent advice that he had resigned as the workplace had become a very hostile environment to work;
(b)The liquidator advised that Mr Akinsanya’s resignation did not appear to have any factors that impinge on the employment of A. Akinsanya to provide any direct link to his cessation with company;
(c)Mr Chris Clark advised that Mr Akinsanya handed in a letter of resignation stating no reason; and
(d)Mr Kot advised that prior to Mr Akinsanya’s registration, management had advised staff of the company’s difficult financial position.
The Tribunal did note Mr Akinsanya’s statement provided post-hearing and in response to the request for Mr Kot to be cross examined on his statement, which Mr Kot was unable to do owing to work commitments, does confirm his belief the harassment he was experiencing was directly related to the company’s financial position:
Honourable member as corroborated by Mr Michael Kot, Mr Steve Zanin held a meeting with all Staff members advising that we would need to take a pay cut if we still want to have a job. In this meeting, he further explained that the Company was experiencing financial stress and can barely pay staff salaries let alone keep up with its operational costs.
Honourable member, subsequently after this meeting, the office environment become very hostile and its aftermath were so devasting to me. I lost count of times, I cried secretly in the closet. Secretly because, I am a man Honourable member, and am supposed to be strong, and am expected to be strong for my wife and family.
Honourable member, for months I endured these hostilities, with constant reminder of an eminent pay cut playing at the back of my head which I knew I would eventually have to succumb to. As I have previously pointed out, every morning, I walk into the office with a sense of hopelessness. It was surreal and daily felt like I was walking into a sinking ship.
Honourable member, my take home pay at the time was barely enough to feed my family but I still endured and kept pushing hard. It deeply hurts knowing that my place of work was in a huge financial mess and no efforts of mine could pull it out rather I was being advised to take a pay cut.
Honourable member, eventually it got to the point where I could not bear these hostilities anymore as on several occasions Mr Chris called me into his office to rebuke me at the slightest opportunity. Honourable member, please kindly note here that I had previously highlighted these scenarios directly to FEG in a telephone conversation with Mr Peter Masterman, when I was being asked to present the reasons why I resigned. Honourable member, it became so apparent that the financial stress the company was going through was responsible for these kind of negative behaviours towards me. Honourable member, moreover, the findings presented by FEG have also shown that the company has been insolvent since 1st of July 2017.
The Tribunal finds Mr Akinsanya to be a credible and honest witness who no doubt was under extreme pressure and stress in his workplace which may have been caused by the company’s precarious financial position, however there is no corroborating evidence to support this assertion. Additionally, the Tribunal considered that if iDropped lt was in such a dire situation, other staff may have been feeling the effects of management’s stress and strain, but no other employees resigned in this period. It would appear odd to the Tribunal that only one staff member would be wearing the brunt of management’s concerns at this time.
The Tribunal finds that Mr Akinsanya has not demonstrated that the end of his employment was "due to" the insolvency of iDropped lt and therefore did not fulfil s 10(1)(c) of the FEG Act, to be eligible for the FEG scheme. The Tribunal notes the FEG scheme is only for those employees whose end of employment has a connection with the insolvency of the employer, and this was not the case for Mr Akinsanya.
The Tribunal does however note that Mr Akinsanya still has a legally recoverable debt which he can pursue with the administrators of iDropped lt. The Tribunal noted that the FEG scheme is there to assist employees whose employers have failed to keep adequate reserves to fulfil their wages and entitlement bills, not to exempt administrators from fulfilling their role to all creditors. This whole stressful process for Mr Akinsanya could have been avoided if Dye & Co had carefully considered his request for execution of his judgement from the Supreme Court in light of the FEG Act’s strict requirements and not simply advising him he had to pursue a FEG claim.
Mr Akinsanya has a legal claim for payment of his underpayment of wages and this should be pursed through the normal channels for all creditors. The Tribunal is mindful this may not eventuate as there may be insufficient funds from the winding up of iDropped lt, but nevertheless Mr Akinsanya should be a registered creditor whose interest should have been dealt with in a more professional and considered manner by the administrators.
CONCLUSION
The Tribunal has found that Mr Akinsanya’s employment with iDropped lt ended on 27 July 2018. The Tribunal has also found that iDropped lt was insolvent at that time Mr Akinsanya’s employment ended. However, the Tribunal found there was no causational link between Mr Akinsanya’s employment ending due to the insolvency of iDropped lt.
The Tribunal concludes that s 10(c)(i) of the FEG Act does not apply to Mr Akinsanya as there was no evidence before the Tribunal, which demonstrated a connection between the end of his employment and the insolvency of iDropped lt.
Nor does s 10(c)(ii) or (iii) apply, because Mr Akinsanya’s employment ended on 27 July 2018 being more than six months before the date on which the insolvency practitioners were appointed on 21 February 2019. For these reasons, the Tribunal concludes that Mr Akinsanya is not eligible for an advance as he does not meet one of the mandatory eligibility criteria under s 10(c) of the FEG Act.
DECISION
The Tribunal affirms the decision under review.
I certify that the preceding 57 (fifty-seven) paragraphs are a true copy of the reasons for the decision herein of Ms A E Burke AO, Member
...........[sgd].............................................................
Associate
Dated: 9 February 2021
Date of hearing: 12 October 2020 Date of Final Submission: 21 December 2020 Applicant: Self-Represented Advocate for the Respondent: Laura Crick Solicitors for the Respondent: Clayton Utz
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