Alam v Ecological Development & Construction Pty Ltd
[2010] FMCA 411
•11 June 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
ALAM v ECOLOGICAL DEVELOPMENT & CONSTRUCTION PTY LTD & ORS [2010] FMCA 411
INDUSTRIAL LAW – Termination – penalty proceedings – summary judgment – quantum of penalty – factors for consideration in assessing quantum of penalty.
Federal Magistrates Act 1999 (Cth), ss.77
Trade Practices Act 1974 (Cth), ss.52, 53B, 82
Workplace Relations Act 1996 (Cth), ss.235, 244, 247, 659, 661, 665, 719, 722, 723, 799
Federal Court Rules, o.35, r.8
Federal Magistrates Court Rules 2001 (Cth), rr.13.03A, 13.03B, 13.03C, 26.01
Bahonko v Sterjov [2007] FCA 1244
Barto v GPR Management Services Pty Ltd (1991) 33 FCR 389
Buckingham v KSN Engineering Pty Ltd & Anor [2008] FMCA 546
Galvin v Renito Pty Ltd [1999] FCA 1005
General Motors- Holden Pty Ltd v Bowling (1976) 12 ALR 605
Hebbard v Bell Potter Securities Ltd (2005) 216 ALR 779
Martin v Tasmanian Development & Resources (1999) 163 ALR 79
McCormick v Riverwood International (Australia) Pty Ltd [2000] FCA 32
McDonald v State of South Australia (2008) 172 IR 256
Mulcahy & Ors v Hydro-Electric Commission (1998) 85 FCR 170
Nikolich v Goldman Sachs JB Were Services Pty Ltd [2006] FCA 784
O’Neill v Medical Benefits Fund of Australia Ltd [2002] FCAFC 188
Walker v Citigroup Global Markets Australia Pty Ltd (Formally known as Salomon Smith Barney Securities Pty Ltd) (2006) 233 ALR 687
Walker v Salomon Smith Barney Securities Pty Ltd [2003] FCA 1099
Applicant: SAMIUL ALAM
First Respondent: ECOLOGICAL DEVELOPMENT & CONSTRUCTION PTY LTD ACN: 104 067 156 (IN LIQUIDATION)
Second Respondent: MAYLINK PTY LTD ACN: 003 810 151 (IN LIQUIDATION)
Third Respondent: MRS VANESSA M HENDERSON
Fourth Respondent: MR GORDON HENDERSON
File Number: SYG1485 of 2007
Judgment of: Lloyd-Jones FM
Hearing date: 13 May 2010
Delivered at: Sydney
Delivered on: 11 June 2010 REPRESENTATION
Applicant: Mr Alam appeared in person
Respondents: No appearance by any party ORDERS
(1)The Respondents pay a penalty pursuant to s.665(1)(a) of the Workplace Relations Act1996 (Cth) for contravention of s.659(2)(a) in the amount of $10,000.00 which is to be paid to the Commonwealth in accordance with schedule 1 s.357(a) within 21 days of this judgment.
(2)The Respondents pay to the Applicant pursuant to s.665(1)(c) and s.665(4) of the Workplace Relations Act1996 (Cth) an amount of $32,000.00 to be paid within 21 days of this judgment.
(3)The Respondents pay the Applicant outstanding annual leave pursuant to s.719(6) and s.235 of the Workplace Relations Act 1996 (Cth) an amount of $9,230.77 to be paid within 21 days of this judgment.
(4)Pursuant to s.82 of the Trade Practices Act 1974 (Cth), the Respondents pay the Applicant damages for the Fourth Respondent’s breach of s.52 of the Trade Practices Act an amount of $12,850.00.
(5)Pursuant to s.722 of the Workplace Relations Act 1996 (Cth) the Respondent pay interest in respect of Orders 3 and 4 from 2 March 2007 to the date of judgment at the rate of 10.5% per annum.
(6)Pursuant to s.723 of the Workplace Relations Act 1996 (Cth), the Respondent’s pay the Applicant interest on any amount not paid within 21 days of this judgment.
FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEYSYG1485 of 2007
SAMIUL ALAM Applicant
And
ECOLOGICAL DEVELOPMENT & CONSTRUCTION PTY LTD ACN 104 067 156 (IN LIQ) & ORS First Respondent
MAYLINK PTY LTD ACN 003 810 151 Second Respondent
REASONS FOR JUDGMENT
The proceedings
1.This is an Application seeking award of penalties under the Workplace Relations Act 1996 (Cth) (“WR Act”). The proceedings began with an Application filed on 10 May 2007 although the Applicant now relies upon a further amended Application filed on 29 May 2010. The Application seeks penalties for the following:
a)contravention of s.659(2)(a) of the WR Act;
b)contravention of s.665(1)(c) of the WR Act;
c)contravention of s.719(6) of the WR Act; and
d)contravention of s.52 and s.53B of the Trade Practices Act 1974 (Cth).
2.This matter has been before the Court for directions on six separate occasions. On the first directions hearing, Mr Henderson was represented by a solicitor from the Master Builders Association however, on all of the subsequent directions hearings there was no further appearance for any of the Respondents.
Background
3.In setting out the following background material I have either paraphrased or quoted directly from the affidavits of Mr Samiul Alam together with oral submissions made by Mr Alam. I have not made further direct attribution as this would make the summary unwieldy. The information is provided to assist in the understanding of the nature of the Application and not to establish any evidentiary point.
4.Mr Alam was employed by Maylink Pty Ltd and Gordon Henderson Constructions Pty Ltd (renamed as Ecological Development and Construction Pty Ltd) on 21 September 2005 as Finance Manager. The terms of his employment as Financial Manager for Gordon Henderson Constructions Pty Ltd and Maylink Pty Ltd was that for the first three months of employment he was to be remunerated (proportionally from both companies) at the rate of $50,000.00 plus superannuation and then from 21 December 2005 onwards of $70,000.00 plus superannuation).
5.In early April 2006, Mr Alam was approached by Mr Henderson who indicated that he wished Mr Alam to take over project finance, streamline information for better modelling and analysis and integrate the group businesses including Gordon Henderson Construction Pty Ltd and Maylink Pty Ltd. Mr Alam met with Mr and Mrs Henderson to confirm his expanded role and appointment to the position of Business Manager/ Chief Executive of both Ecological Construction Pty Ltd and Maylink Pty Ltd. His remuneration was extended to $135,000.00 per annum which was a base salary of $120,000.00 plus superannuation and other benefits. In addition, he was entitled to a commission of 1% of each project financed or another provision of equity in the business units.
6.During July 2006 Mr Alam arranged finance for Gordon and Vanessa Henderson investment portfolio with HSBC Bank using both business entities to generate an additional cash flow of $150,000.00 which was used substantially to pay Maylink creditors. In September 2006 Mr Alam approached Mr Henderson concerning his remuneration which was still at the rate of $70,000.00 per annum without any payment of superannuation. During that conversation Mr Henderson indicated that he would immediately pay $10,000.00 for Mr Alam’s services to Maylink but indicated that he was uncertain when the balance of the outstanding payments could be made and that it may require further refinancing.
7.In early October 2006, Mr Henderson provided Mr Alam with a revised group certificate from Gordon Henderson Constructions and advised Mr Alam to accept $10,000.00 as service for Maylink and this would be adjusted in the Maylink accounts. Mr Henderson indicated that due to the total debt owing to Gordon Henderson Construction, Gordon Henderson Construction would take over Maylink during the following year which would provide Mr Henderson with more control over Maylink and would enable him to source funds from the Maylink accounts.
8.In late October 2006, Mr Henderson instructed Mr Alam to integrate all assets and liabilities in both business entities and try to make immediate arrangement to re-finance Maylink Child Care Centres to release additional cash flow of $500,000.00 to substantiate the concurrent liabilities and the 10% of the additional cash flow would be paid to Mr Alam in settlement of outstanding salary.
9.On 21 November 2006 resolutions were passed by Gordon Henderson Construction Pty Ltd and Maylink Pty Ltd approving an employment agreement for Mr Alam with an annual salary of $135,000.00 plus 1% of each project financed effective from April 2006. On 18 December 2006 Mr Henderson provided Mr Alam with a handwritten document confirming the terms of Mr Alam’s employment. On 21 December 2006, Mr Alam completed the child care business evaluation through a panel of valuers at Bankwest. This report confirmed that there was an opportunity to release an additional cash flow of $500,000.00 with a total business value of $1,998,000.00. On 27 February 2007, all documentation and valuations were arranged for Resort 55 Development Pty Ltd (an investment of Maylink Pty Ltd) with DTZ Valuers to substantiate the financial offer by Abicus Property Investment Group arranged for Maylink and Gordon Henderson Construction.
10.On 2 March 2007 Mr Henderson advised Mr Alam that he could not continue his employment and that he should seek new employment.
Evidence
11.Mr Alam filed and served and relies on the following affidavits:
a)affidavit of Samuil Alam sworn 15 June 2007 (1st Affidavit Mr Alam);
b)affidavit of Samuil Alam sworn 11 January 2010 (2nd Affidavit Mr Alam);
c)affidavit of Samuil Alam sworn 11 January 2010 (3rd Affidavit Mr Alam);
d)affidavit of Samuil Alam sworn 19 February 2010 (4th Affidavit Mr Alam);
e)affidavit of Samuil Alam sworn 19 February 2010 (5th Affidavit Mr Alam);
f)affidavit of Samuil Alam sworn 9 March 2010 (6th Affidavit Mr Alam);
g)affidavit of Samuil Alam sworn 29 March 2010 (7th Affidavit Mr Alam); and
h)affidavit of Samuil Alam sworn 29 April 2010 (8th Affidavit Mr Alam).
12.The Fourth Respondent Mr Gordon Henderson swore and filed an affidavit dated 24 July 2007.
13.The following exhibits were filed by Mr Alam:
a)exhibit A1 – Letter of GB Fernie & Co Solicitors dated 19 September 2008;
b)exhibit A2 – Liquidator of Maylink Pty Ltd (In Liquidation) summary of receipts and payment; and
c)exhibit A3 – Liquidators list of communications with parties associated with liquidation.
Service of documents
14.A considerable amount of the affidavits relied on by Mr Alam detail the problems he experienced in attempting to serve Mr Henderson who was the principal in the two named Respondent companies. In March 2008, Mr Alam obtained default judgments against Ecological Development & Construction Pty Ltd and Mr Gordon Henderson for $29,877.00 in the Local Court. Mr Alam attempted to recover the awarded amount by way of debt collection agencies, levied by the Sherriff, garnishee order, Workplace Ombudsman and finally bankruptcy proceedings against Mr Henderson as personal guarantor. After Mr Alam initiated the bankruptcy proceedings in September 2008, Mr Henderson appeared in court and sought an order setting aside the court judgment. During those proceedings Mr Henderson indicated that he was now residing at 81A Princes Highway, Darks Forest, New South Wales 2008, however this residential address does not exist (3rd Affidavit of Mr Alam).
15.The sworn affidavit evidence of Mr Alam of 19 February 2010 indicated that Ecological Developments and Constructions Pty Ltd and Maylink Pty Ltd operated by Mr Henderson went into liquidation and the process server retained by Mr Alam was unable to personally serve Mr or Mrs Henderson (4th Affidavit of Mr Alam).
16.On 12 February 2010 Mr Alam was granted leave to file an Amended Application incorporating the two companies which had gone into administration and finally liquidation. The sworn affidavit evidence of Mr Alam in respect of all the proceedings before this Court, the Local Court and the Bankruptcy proceedings in the Federal Magistrates Court indicated that he had experienced extreme difficulty in attempting to serve the Respondents, particularly Mr Henderson (6th Affidavit of Mr Alam).
17.At a directions hearing on 29 April 2010, Mr Alam reported to the Court that the liquidators of the two companies refused to accept service of the documents without specific orders of this Court pursuant to s.471B of the Corporations Act 2001 (Cth). Consequently, I made the following order
Pursuant to s.471B of the Corporations Act 2001 the Court grants leave to the Applicant to file and serve a further amended Application naming Ecological Development and Construction Pty Ltd (In Liquidation) ACN 104067156 and Maylink Pty Ltd (In Liquidation) ACN 003810151 as Respondents.
18.I am satisfied that all the Respondent parties have been served (8th Affidavit of Mr Alam).
Mediation
19.At the directions hearing before this Court on 8 June 2007 I made the following order
3. The matter is referred to a Registrar for mediation pursuant to Part 27 of the Federal Magistrates Court Rules 2001 (Cth). Mediation to commence after 30 July 2007.
20.A mediation conference conducted by a Registrar of this Court was conducted on 17 September 2007. A deed of settlement dated 26 September 2007 between Mr Alam (Applicant) and Ecological Development and Construction Pty Ltd (the company) and Mr Gordon Henderson (the guarantor) agreed and executed by the relevant parties. The recitals to that deed were
A. The Applicant was engaged by the Company over the period from 21 September 2005 to 2 March 2007, both dates inclusive.
B. The parties have agreed without admission of liability, to settle finally and in full all claims made by the Applicant regarding unpaid remuneration and entitlements connected with the period of employment, and the termination of that employment.
C. Mr Gordon Henderson shall be signatory to this agreement in recognition of the fact he has personally agreed to be the guarantor to the commitments outlined in this deed of release.
This Deed Witnesses That
1. The Company agrees to pay an amount of $34,000 to be taxed as a bona fide redundancy, to the Applicant in three instalments consisting of the following:
· $10, 000 by 5pm on 28 September 2007
· $10,000 by 5pm on 12 October 2007
· $14,000 by 5pm on 26 November 2007
2. The Company will pay Turner Freeman Solicitors $4,000 towards the Applicant’s legal costs on or before 5pm on 26 November 2007. Turner Freeman Solicitors shall provide an invoice for the amount stated above, prior to any payment being made to Turner Freeman Solicitors.
3. The Company will provide to the Applicant a certificate of service indicating that he was engaged by the Company as Chief Financial Officer for the period described in the recitals above. Furthermore the certificate of service shall indicate that the reason for the Applicants terminations of employment was a result of a bona fide redundancy.
4. The Company will provide the Applicant with a Group Certificate for his period of employment, no later than 7 days after the execution of this deed of release.
5. Subject to paragraph 6 of this Deed, the Applicant releases the Company from all causes of action, claims, demands, debts and legal proceedings to or arising from the period that the Applicant was engaged by the Company and from the termination of that engagement.
6. This release does not extend to any legal action or rights the Applicant has in respect of compensation, other insurance cover, or damages for personal injury, illness, disease or death arising out of or in the course of the period that the Applicant was engaged as an employee of the Company.
7. The parties acknowledges that this deed operates as an absolute bar to all causes of action, claims, demands or legal proceedings of any kind brought or attempted to be brought by either party save for those matters referred to in paragraph 6.
8. The undertakings in this Deed are made for the benefit of the parties and so as to bind them and their respective heirs, executors, administrators, successors and assignees.
9. The Applicant agrees with the Company that he will not, unless compelled to do so by law, at any time hereafter, divulge to any person or body any information and details regarding the settlement of the industrial claim provided for in this Deed.
10. The parties agree individually that neither will in any way or form defame or injure the good name and or business interests of the other party.
11. The Applicant agrees to file a notice of discontinuance in the Federal Magistrates Court upon receiving all payments may by the Company pursuant to this deed of release.
12. This Deed shall be construed in accordance with and governed by the laws of the State of New South Wales.
13. Mr Gordon Henderson accepts and guarantees the payments made by the Company in clauses 1 and 2 of this deed of release.
21.The sworn unchallenged affidavit testimony of Mr Alam is that apart from the first instalment of $10,000 Mr Henderson did not comply with any of the terms of the agreement. He failed to make all subsequent payments, did not provide any group certificates and declined Mr Alam’s employment history on three consecutive occasions with prospective employers of Mr Alam.
Recovery proceedings
22.To secure the balance of payments in the deed of release, Mr Alam, who was then represented by Turner Freeman Solicitors commenced a commercial claim in the Local Court. By March 2008 Mr Alam had a default judgment against Ecological Development and Construction Pty Ltd and Mr Henderson for $29,877.00 which Mr Alam attempted to recover by:
a)debt collection agencies;
b)levied by a Sherriff;
c)garnishee order;
d)Workplace Ombudsman; and
e)bankruptcy proceedings against Mr Gordon Henderson as personal guarantor.
Debt Collection
23.Mr Alam retained the services of Brodie Services and forwarded a letter of demand dated 22 February 2008 requiring Mr Henderson to pay the amount of $29,103.02 on or before 4pm Monday February 25 2008. That correspondence clearly indicated to Mr Henderson that Mr Alam intended to pursue a default judgment on the basis of a breach of the condition of his claim from SYG 1485 of 2007 and that no grounds of defence had been filed. There was no response to this demand.
Writ for the levy of property
24.On 13 January 2009 Mr Alam obtained a writ for the levy of property in the Local Court, Downing Centre Registry, case number 111724 of 2007 against Ecological Developments and Construction Pty Ltd and Mr Gordon Henderson. The Sherriff of the Sutherland Local Court issued a notice of non – levy in the following terms:
I have not made a levy under the above mentioned writ of levy of property for the following reasons:
Execution attempted at 16 Carramar Crescent, Miranda, NSW 2228 on 9 March 2009.
Officers attended the given address at 10am at spoke with judgment debtor’s ex-wife Vanessa. Vanessa stated that judgment debtor moved out of the property 10 months ago and was currently living in the Hills area, exact address unknown. Telephone number provided was not connected when called. Writ filed pending further instructions.
Workplace Ombudsman
25.Mr Alam lodged a claim with the Workplace Ombudsman on 12 January 2009 seeking to recover unpaid entitlements from his former employer Ecological Development and Construction Pty Ltd. On 20 February 2009 the Ombudsman advised Mr Alam by letter that an investigation had been conducted by that office and found that Ecological Development & Construction Pty Ltd is under external administration and/or control of an appointed. The letter stated that as there is no longer a legal entity to pursue the debt, the debt needs to be sourced from the liquidator from the company’s assets and that RSN Bird Cameron Partners had been appointed as liquidator. Mr Alam was advised to complete a “proof of debt” and lodge it with the appointed liquidator. Further, the letter stated that he may also be eligible to receive assistance under the General Employee Entitlements and Redundancy Scheme (GEERS) and that the Workplace Ombudsman was unable to take any further action in relation to the matter.
26.Mr Alam filed a claim for assistance from GEERS on 5 May 2009. Subsequently, Mr Alam was advised that he was ineligible for GEERS assistance on the basis that Mr Alam did not meet the criteria of clause 7(b)(ii) of the GEERS operational arrangement. Clause 6(b) of the operational arrangement states that one of the exceptions in clause 7 applies that being that the claimants employment must have been terminated due to the appointment of an insolvency practitioner. As Mr Alam’s employment was terminated more than six months prior to the appointment of an insolvency practitioner, none of the exclusions in clause 7 apply to this case. As a liquidator was appointed on 26 September 2008 over 18 months after Mr Alam ceased to work for the company and no documents have been submitted to establish that the company was insolvent at the time of his employment being terminated, he remained ineligible for GEERS assistance.
Bankruptcy proceedings against Mr Gordon Henderson
27.On 26 May 2008 the Official Receiver issued a Bankruptcy Notice NN1810 at the request of Mr Samiul Alam addressed to Mr Gordon Henderson claiming a total debt of $29,877.69. An Affidavit of Service of the Bankruptcy Notice sworn by Stephen Hobbs, a licensed process server dated 26 June 2008 stated on oath:
1. On Tuesday the 24th day of June 2008 at 5:35 o’clock n the afternoon, I served Mr Gordon Henderson with an official copy of the Bankruptcy Notice signed and dated by the Official Receiver issued on the Application of Mr Samiul Alam with Judgment/Order attached, by delivering the document to Mr Gordon Henderson personally at Unit 4. 24 Yalgar Road, Kirrawee in the said State.
2. I identified the person I served as the said Mr Gordon Henderson by reason of the following statement at the time of service:-
I said: “Are you Mr Gordon Henderson, the person referred to in this Bankruptcy Notice?”
He replied: “Yes, that’s me. Thanks”
3. Annexed to this affidavit and marked with the letter “A” is a true copy of the said Bankruptcy Notice signed and dated by the Official Receiver with Judgment/Order attached.
4. I have attained the age of sixteen years.
28.On 26 September 2008 Mr Alam filed a Creditor’s Petition in this Court, SYG 2506 of 2008. The Petition contains the following details
1. The Respondent debtor woes the Applicant creditor the amount of $29,887.69 being a judgment debt founded upon a judgment of the Local Court made on 31 March 2008 (Local Court matter no.11724/07). This judgment debt includes an amount owed under a deed of settlement executed between the Applicant and Respondent in relation to proceedings in this Honourable Court (matter number SYG1485 of 2007), together with interest and certain costs as at the date of the Local Court judgment.
A Bankruptcy Notice (No. NN1810/08) was issued to the Respondent debtor on 26 May 2008 and served on the debtor on 24 June 2008. On 15 July 2008, the Respondent debtor filed an Application in this Honourable Court seeking to set aside the Bankruptcy Notice and seeking an extension of time for compliance. This was done on the basis of a Notice of Motion filed on the same date by the Respondent in the Local Court, seeking to set aside the Default Judgment. In the end, the time for compliance with the Bankruptcy Notice was extended by this Honourable Court until 16 September 2008.
On 11 September 2008, the Local Court dismissed the Respondent’s motion, with the effect that the Default Judgment still stands. On 16 September, this Honourable Court dismissed the Respondent’s Application.
The amount owing as at 26 September 2008 is $29,887.69, plus interest from the date of judgment (31 March 2008) continuing at the statutory rate. As at 26 September 2008, the interest amount is $1,465.73. This interest was not claimed in the Bankruptcy Notice.
2. The Applicant creditor does not hold security over the property of the Respondent debtor.
3. At the time when the act of bankruptcy was committed, the Respondent debtor:
(a) was personally present in Australia;
(b)was ordinarily resident in Australia;
(c) had a dwelling house or place of business in Australia;
(d) was carrying on business in Australia either personally or by an agent or manager.
4. The following act of bankruptcy was committed by the Respondent debtor within 6 months before presentation of this petition:
The Respondent debtor failed to comply on or before 16 September 2008 with the requirements of the bankruptcy notice served on him on 24 June 2008 or to satisfy the Court that he had a counter-claim, set-off or cross demand equal to or more than the sum claimed in the bankruptcy notice, being a counter-claim, set-off or cross demand that he could not have set up in the action in which the judgment referred to in the bankruptcy notice was obtained.
5. The Applicant creditor provides the following information, to the extent it is known to the Applicant creditor, for use by the Insolvency and Trustee Service Australia:
(a) any alias used by the Respondent debtor:
…………………………………………………………………………
(b) the date of birth of the Respondent debtor:
…………………………………………………………………………
(c) the business name of the Respondent debtor:
Ecological Development and Construction Pty Ltd (ACN: 104 067 156)
(d) the business address of the Respondent debtor:
Registered Office: Unit 4, 24 Yalgar Road,
Kirrawee NSW 2232
29.A number of attempts by process server to serve Mr Henderson were unsuccessful as Mr Henderson had either departed the service addresses and was unable to be found. Those proceedings continue in this Court before a separate judicial officer.
Statement of Claim in these proceedings
30.The Statement of Claim which accompanied the Form 5 Application and the Form 5A claim of unlawful termination of employment were filed on 10 May 2007. The claim made by Mr Alam is detailed as follows:
After one year and half hard work and overtime my MD Mr Gordon Henderson approved me one-month holiday from 1st Dec 2006. But to cover extra work load and finalise some paperwork to refinance Maylink Pty Ltd investment and business I had to defer my holiday to commence from 25th Dec 2006 and Mr Gordon Henderson ensure me that he will pay me as back pay of $10,000.00 (which was due in 2005 – 06 from Maylink, GHC) and G&VH and holiday pays in first week of January 2007 while I will be overseas. In my holiday period suddenly I get sick and was hospitalised. I informed my employer immediately and Mr Gordon Henderson approved my leave up to 27th February 2007. That was the first time I have been requested for sick leave, in addition I had 48 hours overtime and 13 days RDO accrual. After returning to Sydney in 2 March 2007 Mr Gordon Henderson instruct me to find another job elsewhere from Monday 5th March 2007 and he decline pay me any money owed (holiday, sick leave accruals and back pay) or any period of termination notice or in lieu of payment. After working for diversified business more than one year and half (40-48hrs a week, weekend and even in holiday period) I have not receive any clear, concise compassionate answer regarding my employment status or payment. Last 20 days I have attempted several occasions to discuss the issues with Mr Gordon Henderson. But he is busy with some other issues and unable to think or discuss my issue anymore. In a conciliation attempt dated 17 April 2007 in from of Honourable Commissioner Helen Cargill, Mr Henderson declined to make any amicable settlement. Furthermore, Mr Henderson alleged some unusual claim which needs to be proved in front of a court or in a arbitration process.
Response
31.On 31 May 2007, Oliver Judd, a solicitor in the employ of the Master Builders Association of New South Wales filed a response to the proceedings in the following terms
1. Respondent is seeking an order pursuant to have the unlawful termination proceedings dismissed.
2. The Respondent is seeking an order for costs incurred in pursuing these proceedings.
3. The Respondent is seeking an order for damage, arising from the Applicant’s breach of the Employment Contract.
4. The Respondent notes that the Applicant is claiming an amount of compensation arising from an alleged underpayment of wages.
5. The underpayment claim is denied by the Respondent.
32.As indicated above, the Masters Builders Association of New South Wales ceased to represent Mr Henderson and has received no further instruction in relation to this matter. Other than the affidavit filed by Mr Henderson on 24 July 2007, no further appearances or representations have been made on behalf of Mr Henderson. Mr Henderson has been forwarded notification of each directions hearing before this Court but there has not been any appearance.
Summary judgment
33.This summary judgment is delivered pursuant to the rr.13.03A, 13.03B and 13.03C(1)(e) of the Federal Magistrates Court Rules2001 (Cth). There was no appearance by any of the Respondents at the final hearing and in the circumstances I am satisfied that each party was aware of the hearing. On 31 May 2007 the Response filed by the Respondent Gordon Henderson provided a postal address for service of documents on the Respondents as 17/59-63 Captain Cook Drive, Caringbah New South Wales 2229. The eighth affidavit of Mr Alam filed on 29 April 2010 affirms that he sent copies of the Amended Application and two affidavits to the following Respondents and attached three Australian Post tracking reports in respect to service to:
i)Mrs Vanessa M Henderson, 16 Carramara Cres, Miranda 2228 by registered post;
ii)Mr Gordon Henderson, 16 Carramara Cres, Miranda 2228 (last known address) by registered post;
iii)David Young, Pitcher Partners, Level 22 MLC Centre, 19 Martin Place, Sydney NSW 2000, the official liquidator of Maylink Pty Ltd (in liquidation) by registered post;
iv)RSM Bird Cameron Partners, Level 1, 103-105 Northborne Avenue, Canberra ACT 2601, the official liquidator of Ecological Developments & Construction Pty Ltd (in liquidation) by normal mail; and
v)GEERS by normal post.
34.The Respondents have not sought any adjournment of the proceedings. Consequently, there are grounds to proceed with an undefended hearing pursuant to r.13.03B(2)(c)(d) for any default by the Respondents as set out in r.13.03A(2). The conduct of the Respondents in their failure to comply with the rules of the Court and their failure to defend the proceedings with due diligence warrants the matter to proceed as undefended: r.13.03A(2)(vii).
35.In all of those circumstances I have decided it is appropriate that the hearing proceed as undefended.
Contravention of s.659(2)(a)
36.Section 659(2) of the WR Act provides, relevant to this case
2) except as provided by sub-section (3) or (4), an employer must not terminate an employee’s employment for any one or more of the following reasons, or for reasons including any one or more of the following reasons;
(a) temporary absence from work because of illness or injury within the meaning of the regulations;
Section 665(1) of the WR Act provides
665(1) if the Court is satisfied that an employer has contravened s.659 in relation to the termination of employment of an employee, the Court may make one or more of the following orders:
(a) an order imposing on the employer a penalty of not more than $10,000.00.
37.In my view, in proceedings under Part 12 of the WR Act, the Applicant bears the legal onus of proving his or her case to the required civil standard. The Respondent bears the evidentiary onus of proving a negative, regarding the reason or reasons for termination of the employment. That it, in the absence of the employer proving that the reason for termination of the employment was not for a prescribed reason under s.659(2) of the WR Act, it is not necessary for the employee to prove such facts, as they are presumed in his favour. The Applicant has to prove, before the evidentiary onus shifts to the Respondent, that the Applicant was:
a)an employee; and
b)his or her employment has been terminated.
Questions then arise whether it is then sufficient for the employee to simply allege that the employment was terminated for one or more of the prescribed reasons in s.659(2) of the Act, or if something more is required.
38.In Galvin v Renito Pty Ltd [1999] FCA 1005 Ryan JR applied the reasoning of Mason J in General Motors- Holden Pty Ltd v Bowling (1976) 12 ALR 605 concerning the earlier statutory incarnation of s.659(2) at [28] His Honour stated:
At [617] Mason J referred to the onus on the employer to establish affirmatively that it was not actuated by the reason alledged in that case in the charge laid under s.5. He held that consequence was that the employee, in order to succeed, was not bound to adduce evidence that the employer was activated by that reason, a matter particularly within the knowledge of the employer. He found the employee was entitled to succeed if the evidence was consistent with the hypothesis that the employer was so activated and that hypothesis was not displaced by the employer. He said:
“to hold that, despite the sub-section, there is some requirement that the prosecutor bring evidence of this fact is to make an implication, which in my view, is unwarranted and which is at variance with the plain purpose of the provisions in throwing on to the defendant the onus of proving that which lies particularly within his own knowledge.
39.In Bahonko v Sterjov [2007] FCA 1244 per Jessup J at [95] – [100] the onus of proof under the preceding WR Act as follows:
[95] The Applicant relies upon s 170CQ of the WR Act. At the relevant time, it provided:
In any proceeding under section 170CP relating to a termination of employment in contravention of section 170CK for a reason (a proscribed reason) set out in a paragraph of subsection (2) of that section:
(a) it is not necessary for the employee to prove that the termination was for a proscribed reason; but
(b) it is a defence in the proceedings if the employer proves that the termination was for a reason or reasons that do not include a proscribed reason (other than a proscribed reason to which subsection 170CK(3) or (4) applies).
Although it is well-established that the effect of this provision is to reverse the onus of proof on the matter of reason under s 170CK(2), there is an aspect of the operation of s 170CQ of the WR Act which has been little discussed in the cases, but which is of some importance in the present matter, largely because there is no evidence as to the Applicant’s political opinion, social origin or physical or mental disability. Notwithstanding that she has not proved those matters, is the Applicant entitled to rely upon s 170CQ merely by alleging that she was dismissed because of those reasons, or one or more of them?
[96] There were two distinct groups of provisions of the WR Act which used “reverse onus” sections in circumstances where the reason for which an act was done was part of the legislative prohibition. One group was that with which this proceeding is concerned, s 170CK(2)(f). For the sake of convenience, I shall call that paragraph the anti-discrimination provision. The other group was to be found in Pt XA of the WR Act, which I shall call the anti-victimisation provisions. The latter group had its origins in s 5 of the Conciliation and Arbitration Act 1904 (Cth). That section created a prohibition, as part of the criminal law, upon employers taking specified action against their employees for the reason that the employees were union members or officers, or in other specified respects involved in union activities. Under s 5(4) of the 1904 Act,
… if all the facts and circumstances constituting the offence, other than the reason for the defendant’s action, are proved, it shall lie upon the defendant to prove that he was not actuated by the reason alleged in the charge.
Under that provision, it lay upon the prosecutor to prove the existence of the factual circumstance alleged to provide the basis of the defendant’s reasons for dismissal. For example, if it were alleged that an employee had been dismissed because of his or her union membership, it was for the prosecutor to prove that the employee was a union member; by s 5(4) it then lay upon the defendant to prove that that circumstance was not the reason why the employee had been dismissed. Examples of informations which were dismissed because the prosecution had failed to prove the existence of the circumstance said to provide the basis of the defendant’s reason may be seen in Heidt v Chrysler Australia Ltd (1976) 26 FLR 257 , 270–271 and Leontiades v F T Manfield Pty Ltd (1980) 43 FLR 193 , 198–199.
[97] Section 5 of the 1904 Act was replaced by s 334 of the Industrial Relations Act 1988 (Cth). The provision setting up a reverse onus of proof was subs (6), as follows:
In a prosecution for an offence against subsection (1), (2), (3), (4) or (5), it is not necessary for the prosecutor to prove the defendant’s reasons for the action charged nor the intent with which the defendant took the action charged, but it is a defence to the prosecution if the defendant proves that the action was not motivated (whether in whole or in part) by the reason, nor taken with the intent (whether alone or with another intent), specified in the charge.
In Lawrence v Hobart Coaches Pty Ltd (1994) 57 IR 218 , 219, Northrop J held that the legal effect of the new s 334(6) was the same as the effect of the previous s 5(4).
[98] The anti-discrimination provision was first introduced by an amendment made to the 1988 Act in 1993 (with effect from 30 March 1994). The new provision, s 170DF(1), was supported by a reverse onus section, s 170EDA(2), in the following terms:
If an Application lodged under section 170EA alleges that a termination of employment of an employee contravened subsection 170DF(1) on the ground that the termination:
(a) was for a particular reason or reasons referred to in that subsection that were stated in the Application; or
(b) was for reasons stated in the Application that included a particular reason or reasons referred to in that subsection;
the termination is taken to have contravened subsection 170DF(1) unless the employer proves, in any consent arbitration arising from the Application or in any proceedings arising on the referral of the Application to the Court, that:
(c) the employment was not terminated for the particular reason or reasons or for reasons that included the particular reason or reasons; or
(d)the particular reason was a reason, or the particular reasons were reasons, to which subsection 170DF(2) or (3) applied.
One difference between s 170EDA(2) and the pre-existing s 334(6) was that the new provision operated in a civil, whereas the other provision operated in a criminal, context. That difference does not, however, explain why the legislature chose different terminology by which to give effect to its reverse onus policy in the context of the new anti-discrimination provision.
[99] The 1988 Act was substantially amended, and renamed as the WR Act, in 1996. What was s 334(6) — reverse onus in the context of the anti-victimisation provisions — became s 298V, and what was s 170EDA(2) — reverse onus in the context of the anti-discrimination provision — became s 170CQ. In the course of these amendments, a transposition occurred. The terminology of the new s 298V followed the general terms of what had been s 170EDA(2), and the terminology of the new 170CQ followed the general terms of what had been s 334(6). That is to say, the now anti-victimisation reverse onus section looked more like the previous anti-discrimination reserve onus section; and vice-versa. The Parliamentary materials accompanying the amendments of 1996 do not explain this transposition. The circumstance that, at the same time, the anti-victimisation provisions were broadened and de-criminalised does not, of itself, provide an obvious explanation.
[100] Whatever be the reason for the legislative changes of 1996 to which I have referred, the result was that s 170CQ came to be expressed as s 334(6) had been. As held by Northrop J in Lawrence, that provision was of the same legal effect as s 5(4) of the 1904 Act. It follows that s 170CQ was likewise of that legal effect, and that the established jurisprudence, to which I have referred in para 95 above, applied to the construction and operation of s 170CQ. The jurisprudence to which I refer, of course, is that which made it part of the prosecutor’s (or Applicant’s) case to prove as an objective fact the circumstances alleged to constitute the basis of the “reason” to which the reverse onus section applied. Indeed, one of the three grounds in Lawrence itself was determined in favour of the Respondent employer for the very reason that the prosecutor had called no evidence to establish that the union in question was seeking better industrial conditions: see 57 IR at 220. The same approach, in my view, should be taken under s 170CQ.
40.In Buckingham v KSN Engineering Pty Ltd & Anor [2008] FMCA 546 Lucev FM stated at [93]:
A consideration of s.809(1) makes it immediately apparent that any Application (here the Amended Statement of Claim) must allege conduct (and more than merely a breach reciting the relevant provisions of the WR Act). The onus of proof in relation to the conduct alleged is what is reversed, as was explained in Geraldton Port Authority as follows:
“If the Applicant proves the conduct and alleges that the conduct was carried out for a prohibited reason, it is for the Respondent to prove, on the balance of probabilities, that it was not motivated by an impermissible reason: s 298V; Heidt v Chrysler Australia Ltd (1976) 26 FLR 257 at 266-271 per Northrop J. The reversal of the onus in respect of proof of the reasons for the conduct is a recognition that "the circumstances by reason of which an employer may take action against an employee are, of necessity, peculiarly with the knowledge of the employer": Heidt v Chrysler Australia Ltd at 267.”[68]
41.In this matter the Court has the sworn testimony of Mr Alam which the Respondent’s have not sought to challenge. I am clearly satisfied that Mr Alam held various positions with the two named companies of which Mr & Mrs Henderson were directors. Attached to the Statement of Claim are two Board resolutions, approving Mr Alam’s employment. Both of these resolutions are signed by both Mr & Mrs Henderson. Also filed with the Statement of Claim is a handwritten document executed by Mr Henderson setting out the remuneration to Mr Alam, set at the figure of $135,000.00 per annum. In respect of the reason for termination, the material before the Court indicates that immediately upon return from sick leave on 2 March 2007, Mr Henderson instructed Mr Alam to find a new job, effective from the next working day being 5 March 2007.
42.In the absence of any evidence to the contrary, I believe that it can be inferred that a contravention of s.665(2)(a) has occurred. I believe that this assertion can be inferred by the circumstances detailed by Mr Alam in his various affidavits, and this remains unchallenged. As the onus lies with the Respondents and no effort has been undertaken to establish the contrary, I believe the claim has been established. Consequently, I order the amount of $10,000.00 penalty pursuant to s.665(1)(a) which is to be paid to the Commonwealth in accordance with Schedule 1, s357(a). This payment should be made within 21 days of judgment.
Order pursuant to s.665(1)(c)
43.The Applicant also seeks an order pursuant to s.665(1)(c) that he be paid compensation. The Applicant has submitted that the circumstances in which the employer’s conduct took place emphasising that the conduct was undertaken in deliberate defiance and disregard of the Act requires that a penalty be awarded particularly as the consequences of the conduct were very serious for the Applicant and the employer should be deterred from conduct of this nature in the future.
44.Section 665(4) of the Act specified the amount of compensation. Section 665(4) states:
(4) In fixing an amount under paragraph (1)(c) for an employee who was not employed under award‑derived conditions immediately before the termination, the Court must not fix an amount that exceeds:
(a) the total of the amounts determined under subsection (3) if the employee were an employee covered by the subsection; or
(b) the amount of $32,000, as indexed from time to time in accordance with a formula prescribed by the regulations;
whichever is the lower amount.
45.There is no material before the Court indicating that Mr Alam was employed under an award so the amount specified in 665(4)(b) should be awarded as compensation set in the amount of $32,000.00.
Payment of annual leave
46.Section 235 of the WR Act specifies the requirement for the payment of annual leave. This section states:
Annual leave--payment rules
(1) If an employee takes annual leave during a period, the employee must be paid a rate for each hour (pro‑rated for part hours) of annual leave taken that is no less than the rate that, immediately before the period begins, is the employee's basic periodic rate of pay (expressed as an hourly rate).
(2) If the employment of an employee who has not taken an amount of accrued annual leave ends at a particular time, the employee must be paid a rate for each hour (pro‑rated for part hours) of the employee's untaken accrued annual leave that is no less than the rate that, immediately before that time, is the employee's basic periodic rate of pay (expressed as an hourly rate).
47.Penalties for contravention of the annual leave provisions are addressed in s.719(6) of the WR Act.
1) An eligible court may impose a penalty in accordance with this Division on a person if:
(a) the person is bound by an applicable provision; and
(b) the person breaches the provision.
(2) Subject to subsection (3), where:
(a) 2 or more breaches of an applicable provision are committed by the same person; and
(b) the breaches arose out of a course of conduct by the person;
the breaches shall, for the purposes of this section, be taken to constitute a single breach of the term.
(3) Subsection (2) does not apply to a breach of an applicable provision that is committed by a person after an eligible court has imposed a penalty on the person for an earlier breach of the provision.
(4) The maximum penalty that may be imposed under subsection (1) for a breach of an applicable provision is:
(a) 60 penalty units for an individual; or
(b) 300 penalty units for a body corporate.
(5) If, in a proceeding under this section in relation to an ITEA, it appears to the eligible court that a party to the ITEA has suffered loss or damage as a result of a breach of the ITEA by the other party, the court may order the other party to pay the amount of the loss or damage to the first‑mentioned party.
(6) Where, in a proceeding against an employer under this section, it appears to the eligible court that an employee of the employer has not been paid an amount that the employer was required to pay under an applicable provision (except a term of an ITEA), the court may order the employer to pay to the employee the amount of the underpayment.
(7) Where, in a proceeding against an employer under this section, it appears to the eligible court that the employer has not paid an amount to a superannuation fund that the employer was required, under an applicable provision (except a term of an ITEA), to pay on behalf of a person, the court may order the employer to make a payment to or in respect of that person for the purpose of restoring the person, as far as practicable, to the position that the person would have been in had the employer not failed to pay the amount to the superannuation fund.
(8) Without limiting the generality of subsection (7), the eligible court may order that the employer pay to the superannuation fund referred to in subsection (7), or another superannuation fund, an amount equal to the amount (in this subsection called the unpaid amount ) that the employer failed to pay together with such additional amount as, in the opinion of the court, represents the return that would have accrued in respect of the unpaid amount had it been duly paid by the employer.
(9) An order must not be made under subsection (6) or (7) in relation to so much of an underpayment as relates to any period more than 6 years before the commencement of the proceeding.
(10) A proceeding under this section in relation to a breach of an applicable provision must be commenced not later than 6 years after the commission of the breach.
48.The seventh affidavit of Mr Alam at Annexure “J” sets out in a spreadsheet the amount of annual leave owing. The amount due by Ecological Developments & Construction Pty Ltd is $5,384.62 and by Maylink Pty Ltd $3,846.15 giving a total of $9,230.77. This amount is not contested and should be paid in accordance with s.799(6).
Sick leave
49.Section 244 of the WR Act states:
244 For the purposes of this division, personal/carers leave is:
(a) paid leave (sick leave) taken by an employee because of a personal illness, or injury, of the employee;
or
(b) …
Section 247 states:
If an employee takes paid personal/carer's leave during a period, the employee must be paid a rate for each hour (pro‑rated for part hours) of paid personal/carer's leave taken that is no less than the rate that, immediately before the period begins, is the employee's basic periodic rate of pay (expressed as an hourly rate).
The underpayment is covered by s.719(6) of the Act which is extracted above.
50.The evidence is that Mr Alam became ill while overseas on annual leave in January 2001 and was admitted to hospital. Mr Alam notified Mr Henderson of this situation and sick leave was granted to Mr Alam until 27 February 2007. Although the period of sick leave is not specified in the affidavit material I believe that the period is in the vicinity of four weeks based on the knowledge that annual leave would have expired at about 25 or 26 January. Mr Alam’s last recorded payment of salary entitlement was on 19 December 2006 and again details have not been provided as to what period this covers and whether any component of this payment was salary in advance which is common in circumstances of monthly remuneration. The uncontested sworn affidavit evidence of Mr Alam is that he has not been paid for the period of sick leave.
51.I am satisfied that Mr Alam is entitled to reimbursement for sick leave however in the breach of contract section considered below Mr Alam has recovered salary entitlements until 2 March 2007 being the date of termination. This is detailed in the table of claimed entitlements set out at [62] below covered by the entry for the period 1 July 2006 – 2 March 2007. Consequently, the reimbursement for sick leave is incorporated in the salary allowance for the period covered by the unpaid salary claim.
Interest
52.Section 722 of the Act states:
Interest up to judgment
(1) In exercising its powers under subsection 719(5) or (6) or in a proceeding under section 720 or 721, the eligible court must, upon Application, unless good cause is shown to the contrary, either:
(a) order that there be included in the sum for which an order is made or judgment given, interest at such rate as the eligible court thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date on which the order is made or judgment entered; or
(b) without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which an order is made or judgment given, a lump sum instead of any such interest.
(2) Subsection (1) does not:
(a) authorise the giving of interest upon interest or of a sum instead of such interest; or
(b) apply in relation to any debt upon which interest is payable as of right whether by virtue of an agreement or otherwise; or
(c) authorise the giving of interest, or a sum instead of interest, otherwise than by consent, upon any sum for which judgment is given by consent.
53.I shall order that the Respondents pay Mr Alam interest upon the unpaid entitlements pursuant to s.722 of the WR Act. This section provides that the Court must, unless good cause is shown to the contrary, order interest to be paid. Clearly, Mr Alam should have received the payment of his annual leave at the date of termination on 2 March 2007. Despite his efforts to recover this entitlement since that date he remains unpaid. This position is further exasperated by Mr Alam’s attempts to find alternative employment which has been hindered by Mr Henderson refusing to confirm Mr Alam’s employment history with three potential employers. I fix the penalty rate at 10.5% in accordance with rule 26.01 of the Federal Magistrates Court Rules2001 (Cth) and o.35, r.8 of the Federal Court Rules. In the absence of counter argument on the part of Mr Henderson and his deliberate steps to avoid these proceedings, I am not satisfied that there is any ground to set a lower rate.
54.Section 723 of the Act states:
Interest on judgment
A debt under a judgment or order of an eligible court made under subsection 719(5) or (6) or section 720 or 721 carries interest from the date on which the judgment is entered or order made at such rate as would apply under section 52 of the Federal Court of Australia Act 1976 if the debt were a judgment debt to which that section applies.
55.I shall order that the various amounts payable will carry interest after judgment until they are paid, unless they are paid within 21 days of this judgment (cf s.723 of the WR Act, s77 of the Federal Magistrates Act 1999 (Cth) and rule 26.01 of the Federal Magistrates Court Rules 2001 (Cth).
Breach of contract of employment
56.Mr Alam alleges that his contract of employment was breached by him not receiving four weeks notice of termination of employment. In the Statement of Claim Mr Alam indicates that he was on one month’s annual leave which commenced on 25 December 2006. While overseas on leave, Mr Alam became sick and required hospitalisation. He states that he informed his employer and that Mr Gordon Henderson approved the extension of his leave until 27 February 2007. Although this is not clearly stated, it is to be assumed that his annual leave would have expired on 25 January 2007 and the period until 27 February 2007 was in fact sick leave. The 27 February 2007 was a Tuesday and Mr Alam did not return to work until the Friday 2 March 2007. Mr Alam states that he had accumulated 48 hours overtime and an accrual of 13 rostered days off. Mr Alam does not clearly state that the three days between the 27 February and 2 March were covered by this accrual however clearly he had this leave entitlement and this would have adequately covered this period of absence. On returning to work on 2 March 2007 Mr Gordon Henderson terminated Mr Alam’s employment indicating that he should find a job elsewhere from Monday 5 March 2007.
57.The fifth affidavit of Mr Alam attaches Annexures “A”, “B” and “C” which is the only formal documentation before the Court in respect of Mr Alam’s employment and is silent in respect of his employment entitlements other than salary. An employer cannot give notice of termination of employment to an employee on approved leave, or, at least, the notice cannot run concurrently with the approved leave because to do so is to deprive the employee of their right to paid leave. This principle has been established in cases concerning the interpretation of awards and employee entitlements on termination which I refer to below. Alternatively, payment in lieu of notice applies when instant or short notice of termination occurs. However, in this instance, Mr Alam claims that Mr Henderson declined to pay him holiday, sick leave and accruals and back payment for any period of termination notice or in lieu of payment.
58.Section 661 of the Act requires:
Employer to give notice of termination
(1) Subject to subsection (8), an employer must not terminate an employee's employment unless:
(a) the employee has been given the required period of notice (see subsections (2) and (3)); or
(b) the employee has been paid the required amount of compensation instead of notice (see subsections (4) and (5)); or
(c) the employee is guilty of serious misconduct, that is, misconduct of such a nature that it would be unreasonable to require the employer to continue the employment of the employee concerned during the required period of notice (see subsection (7)).
(2) The required period of notice is to be worked out as follows:
(a) first work out the period of notice using the table at the end of this subsection; and
(b) then increase the period of notice by 1 week if the employee:
(i) is over 45 years old; and
(ii) has completed at least 2 years of continuous service with the employer.
Employee's period of continuous service with the employer
Period of notice
Not more than 1 year
At least 1 week
More than 1 year but not more than 3 years
At least 2 weeks
More than 3 years but not more than 5 years
At least 3 weeks
More than 5 years
At least 4 weeks
(3) For the purposes of subsection (2), the regulations may prescribe events or other matters that must be disregarded, or must in prescribed circumstances be disregarded, in ascertaining a period of continuous service.
(4) The required amount of compensation instead of notice must equal or exceed the total of all amounts that, if the employee's employment had continued until the end of the required period of notice, the employer would have become liable to pay to the employee because of the employment continuing during that period.
(5) That total must be worked out on the basis of:
(a) the employee's ordinary hours of work (even if they are not standard hours); and
(b) the amounts ordinarily payable to the employee in respect of those hours, including (for example) allowances, loading and penalties; and
(c) any other amounts payable under the employee's contract of employment.
(6) The regulations may make provision for or in relation to amounts that are taken to be payable under a contract of employment for the purposes of paragraph (5)(c) in relation to an employee whose remuneration before the termination was determined wholly or partly on the basis of commission or piece rates.
(7) Without limiting the generality of the reference to serious misconduct in paragraph (1)(c), the regulations may identify:
(a) particular conduct; or
(b) conduct in particular circumstances;
that falls within that reference.
(8) The regulations may exclude from the operation of this section terminations of employment occurring in specified circumstances that relate to the succession, assignment or transmission of the business of the employer concerned.
59.In the absence of the contractual documents in respect of Mr Alam’s employment, the minimum notice period provided for in s.661 is at least two weeks notice. The argument advanced by Mr Alam is that in relation to the position that he held within the organisation he was entitled to four weeks notice and this remains uncontested by the Respondents. In the circumstances, Mr Henderson breached the contract of employment by failing to give four weeks notice of termination of employment and is liable for damages equivalent to four weeks remuneration for Mr Alam, subject to mitigation.
60.An employer who alleges that an employee has failed to mitigate their loss bears the onus of proof in that regard: McDonald v State of South Australia (2008) 172 IR 256 per Anderson J at [339]. Mr Alam gave evidence of his endeavours to obtain employment and they were for some time unsuccessful. It is noted that Mr Henderson has failed to provide to prospective employers, details of Mr Alam’s employment and the circumstances in respect of his termination. I am satisfied that there has been no failure by Mr Alam to mitigate his loss.
61.The question then arises as to what is the quantum of damages. Evidence was led by Mr Alam that his annual salary was $135,000.00. There was evidence that he was entitled to a bonus and a 1% equity share in each project successfully financed however there is no evidence to the value of this entitlement therefore the most that the Court can do is to award him a sum equal to four weeks salary, that sum being $9,230.77.
62.The other aspect of the claimed breach of contract of employment is in respect to the underpayment of wages. In the fifth affidavit of Mr Alam, Annexure “K”, lists these underpayments as follows:
| Period | Wage Rate PA excl super comp etc | Payable | Total Paid | Paid GHC | Paid ML | Computer exp @ 2500pa | Other entitlements health plan etc | Difference payable |
| 21/12/05-18/04/06 | 70,000.00 | 21,538.46 | 15,384.62 | 6153.84 | ||||
| 18/04/06-30/06/06 | 120,000.00 | 25,384.62 | 20,026.92 | 38,461.54 | 9,450.00 | 5,375.70 | ||
| Subtotal 05-06 | 59,423.08 | 47,911.54 | 38,461.54 | 9,450.00 | 11,511.54 | |||
| 01/07/06-02/03/07 | 120,000.00 | 83,076.92 | 40,576.92 | 30,576.92 | 10,000.00 | 2,259.62 | 1,536.54 | 44,036.54 |
| Subtotal 06-07 | 83,076.92 | 40,576.92 | 30,576.92 | 19,450.00 | 2,259.62 | 1,536.54 | 44,036.54 |
63.The third affidavit of Mr Alam indicates that a resolution passed by Gordon Henderson Constructions Pty Ltd and Maylink Pty Ltd proving Mr Alam’s employment agreement with an annual salary of $135,00.00 per annum plus 1% of each project financed effectively from April 2006. In the eighth affidavit of Mr Alam annexure K states the commissions due to Mr Alam are set out as follows:
Performance/Commission Re-finance $23,850.00
64.The combined amount of the termination payment, the underpayment of wages and the underpayment of commissions amount to $131,102.88. All of this material appears in sworn affidavit material which is unchallenged by the Respondents. It is consequently this amount that should be paid to Mr Alam as a breach of contract.
Section 52 of the Trade Practices Act
65.If conduct is to fall within s.52 of the Trade Practices Act it must be in “trade and commerce”: Walker v Salomon Smith Barney Securities Pty Ltd [2003] FCA 1099 per Kenney J at [108] where Her Honour states:
[180]The authorities support the proposition that a statement made in the course of employment negotiations, which proves to be misleading or deceptive, can fall within s 52 of the TPA: see O’Neill v Medical Benefits Fund of Australia (2002) 122 FCR 455 per Carr, Moore and Marshall JJ; Stoelwinder v Southern Health Care Network (2000) 177 ALR 501 (“Stoelwinder”), at 503 per Finkelstein J; and Patrick v Steel Mains Pty Ltd (1987) 77 ALR 133 (“Patrick”), at 136 per Wilcox J.
Her Honour then went on to the relevant authority at [180] – [185].
66.Her Honour rejected the more restrictive construction given to s.52 in Mulcahy & Ors v Hydro-Electric Commission (1998) 85 FCR 170 per Heerey J at [213] and Martin v Tasmanian Development & Resources (1999) 163 ALR 79 per Heerey J at [117] – [118]. Her Honour preferred the wider construction first adopted in Barto v GPR Management Services Pty Ltd (1991) 33 FCR 389 at [315] and McCormick v Riverwood International (Australia) Pty Ltd [2000] FCA 32 at [694] – [696]. On appeal in Walker v Citigroup Global Markets Australia Pty Ltd (Formally known as Salomon Smith Barney Securities Pty Ltd) (2006) 233 ALR 687 the view taken by Her Honour Kenney J on the width of s.52 was not challenged.
67.In O’Neill v Medical Benefits Fund of Australia Ltd [2002] FCAFC 188 the Full Court addressed similar facts. The availability of s.52 was assumed where the conduct in question consisted of representations made during the course of negotiations for new employment as to the security of employment being offered. In Barto v GPR Management Services Pty Ltd (supra) Wilcox J at [394] – [395]
Negotiations for an initial employment contract, with a person who is not presently an employee, and negotiations for a variation of that contract, with a person who is an employee, do not differ in their intrinsic character.
68.The rationale on which the distinction rests is that conduct of a kind discussed in Barto v GPR Management Services Pty Ltd (supra) was intrinsically commercial “because it was directed to the creation of a contractual relationship” (Barto at [394]). Conduct of a kind found in Hebbard v Bell Potter Securities Ltd (2005) 216 ALR 779 did not have that character because it was undertaken only for the purpose of informing the employee as to the employers intention, and their effect on the employers decision on employment was unintended and indirect (Heddard at [32]). The circumstances in this matter which are relevant to the s.52 claim are the negotiations which took place between Mr Alam and Mr Henderson in respect to the changes of the terms of employment under which Mr Alam worked and those arrangements were subsequently approved by a board resolution and provided to Mr Alam in a handwritten agreement. This issue is specifically the commission of 1% for each project financed on the provision of equity in the business units equal to the commission.
69. I am satisfied that negotiation to the changes of the terms of employment in respect to the commission constitute misleading and deceptive conduct and support a cause of action under s.52: Walker v Salomon Smith Barney Securities Pty Ltd & Anor (supra) at [180] – [185]. The representations relied upon by Mr Alam were negotiations of the component new contract and/or an offer of employment and/or variations of an existing contract of employment and the communications relied upon by Mr Alam to establish his claim under s.52 can properly be described as negotiations of that kind: McCormick v Riverwood International (Australia) Pty Ltd [2000] FCA 32 per Weinberg J at 694 – 696.
70.In order to make out a case under s.53B of the Trade Practices Act, an employee would need to establish that:
a)a representation was made;
b)viewed objectively, the representation was likely to mislead him/her as to the availability, nature, terms or conditions of, or any other matter relating to the employment proposed; and
c)he/she relied on the representation.
71.Section 53B of the TPA applies to conduct “in relation to employment that is to be, or may be, offered by a corporation. However, Walker v Salomon Smith Barney Securities Pty Ltd & Anor (supra) at [187] establishes that s.53B of the Act does not apply to conduct that takes place after the commencement of employment. Justice Kenney stated at [187] that:
[187]Section 53B prohibits a corporation from engaging in misleading and deceptive conduct in relation to an offer of employment before a contract of employment has been entered into. The misrepresentation must induce the Applicant to take up employment with the Respondent: see Callinan v Gilro-ERG Pty Ltd. The provision is limited to conduct that took place prior to the commencement of the employment: see Wright v TNT Australia Pty Ltd (1988) 15 NSWLR 679, at 691–692, per McHugh JA and 696 per Clarke JA; Dawson v Australian Consolidated Reserves Pty Ltd (1983) ATPR 40–374 per Toohey J; and Thomas v Star Maid International Pty Ltd [1999] FCA 911 at [16] per Weinberg J.
72.Clearly, representations were made to Mr Alam during his employment and concerned terms on which the employment arrangement was to change. Accordingly, I do not believe the claim under s.53B of the TPA is relevant in respect of Mr Alam’s claim.
73.In order to be compensated for any loss or damage under s.82 of the Trade Practices Act 1974 (Cth), Mr Alam needs to establish a causal connection between Mr Henderson’s conduct and the loss for which he seeks compensation. He also has to prove that he relied upon the conduct and that this reliance caused damage. This has been interpreted to mean that the loss or damage must be caused by reason of, or as a result of, the contravening conduct. Accordingly, any loss or damage that is caused by the contravening conduct can be recovered under s.82. There is no requirement that the loss or damage be assessed in any different way than under the general law. Neither is there any restriction to the common law concepts as to the nature and extent of damages recoverable. Damages under s.82 approximate to damages recovered in tort. The assessment of damage under s.82 was considered in Nikolich v Goldman Sachs JB Were Services Pty Ltd [2006] FCA 784 per Wilcox J at [298] – [307].
74.The fifth affidavit of Mr Alam sets out the circumstances of the element of commission that was to be part of Mr Alam’s enhanced role within the organisation. His sworn affidavit testimony is as follows
3. In or around early April 2006, I was approached by the Director of both the company Mr Gordon Henderson and a conversation in words to the following effect took place:
Mr Gordon Henderson: “I want you to take over the project finance streamline information for better modelling and analysis and integrate the group businesses, including Gordon Henderson Construction Pty Limited, Maylink Pty Limited, by servicing our (under the name of Gordon and Vanessa Henderson) assets”
Me: “yes I am willing to take the extended role with added responsibilities on the basis that there should be an increase in his remuneration”
4. On 6 April 2006, there was a meeting between myself, Mr Gordon Henderson and Mrs Vanessa Henderson who were at all relevant time Principles of Gordon Henderson Construction Pty Limited, Maylink Pty Limited. The purpose of the meeting was to discuss the terms of the offer made by Mr Gordon Henderson for the expanded position detailed in paragraph 3 above. The discussion ended in words to the following effect:
“you will immediately commence in the position of Business Manager/ Chief Executive of Gordon Henderson Construction and Maylink Pty Ltd and be responsible for the business entities. You will be remunerated at $135,000.00 per annum,, which includes base salary of (120,000.00) superannuation, computer expenses other benefits. In addition, you will be entitled to a commission of 1% of each project financed or the provision of equity in the business units equal to the commission.”
Me: “OK”
5. In or around July 2006, I had arranged the refinance for Investment Portfolio (Gordon and Vanessa Henderson investments) with HSBC Bank using the both the business entities, generating additional cash flow of $150,000.00, which mostly spent to pay Maylink creditors.
6. In late September 2006, I approached Mr Gordon Henderson as I was still being remunerated at the rate of $70,000.00 per annum without any payment of superannuation. At the conclusion of this discussion I can recall Mr Gordon Henderson saying words to the following effect:
“A payment of $10,000.00 can be made immediately as part of your services to Maylink, but I am uncertain of when the balance of the outstanding payment could be made and maybe it will require further refinancing.”
7. He gave me a revised group certificate from Gordon Henderson Construction instead of one from Maylink Pty Ltd. So far I can recall Mr Henderson mentioned to me that Maylink is having financial difficulties and he was unable to convince Mrs Henderson to pay the balance of my wages from Maylink account. Mr Henderson also reminded me that I am working for a family business and as a manager I have to manage and consider family emotions. Instead he paid $10,000.00 from Gordon Henderson Construction accounts and he reminded me that an adjusted will be made accordingly from Maylink account and due to the total debt owing from GHC, he will take over Maylink Pty Ltd sometime next year. Next financial year he will have more control over Maylink and he will pay me accordingly from Maylink afterwards (Appendix AA).
8. In or around late October 2006, Mr Gordon Henderson approached me and said words to the following effect
“I want you to integrate all asset and liabilities for all both business entities, and try to made immediate arrangement to refinance Maylink childcare centres to release additional cash flow of $500,000.00+ to substantiate the concurrent liabilities and that 10% of the additional cash flow will be paid to you in settlement of your outstanding salaries.”
9. Immediately after the meeting in the above paragraph, I collected all financial information required and then proceeded to seek refinancing childcare centres with an estimated additional cash flow of $500,000.00.
10. On 21 November 2006, resolutions were passed by Gordon Henderson Construction Pty Limited and Maylink Pty Limited, approving employment agreement with me and the terms of the annual salary $135,000.00 plus 1% of each project financed effective from April 2006. A true copy of the resolution passed by Gordon Henderson Construction Pty Limited is annexed to this affidavit and marked “A”. A true copy of the resolution passed by Maylink Pty Limited is annexed to this affidavit and marked “B”.
75.It remains for me to assess the damages that should be awarded to Mr Alam in relation to the cause of action that he has established, being a breach of the contractual obligations to pay him commission in respect of each project financed or the provision of equity in the business units equal to commission. The fifth affidavit of Mr Alam at Annexure “K” lists the performance/commission refinancing to be an amount of $23,850.00 of which $10,000.00 was paid from Gordon Henderson Construction accounts which is detailed in paragraph 7 of this affidavit. That leaves an amount of $13,850.00 due to Mr Alam.
I certify that the preceding seventy-five (75) paragraphs are a true copy of the reasons for judgment of Lloyd - Jones FM
Associate:
11 June 2010
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