Arends v Tread Group Pty Ltd; Mashera Pty Ltd v Arends (Civil Dispute)
[2017] ACAT 89
•1 November 2017
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
ARENDS v TREAD GROUP PTY LTD; MASHERA PTY LTD v ARENDS (Civil Dispute) [2017] ACAT 89
XD 946/2016
XD 177/2017
Catchwords: CIVIL DISPUTE – Fringe Benefits Tax on cars supplied to employees – FBT on loans supplies to employees – overlapping proceedings in the Fair Work Commission – claims for arrears of annual leave – no jurisdiction
Cases cited: Welch v Erica’s Aesthetics Pty Ltd [2017] ACAT 68
Tribunal: Senior Member A Anforth
Date of Orders: 1 November 2017
Date of Reasons for Decision: 1 November 2017
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) XD 946/2016
BETWEEN:
BERNARD ARENDS
Applicant
AND:
TREAD GROUP PTY LTD
Respondent
XD 177/2017
BETWEEN:
MASHERA PTY LTD
Applicant
AND:
BERNARD ARENDS
Respondent
TRIBUNAL: Senior Member A Anforth
DATE:1 November 2017
ORDER
The Tribunal orders that:
Matter XD 946/2016 is dismissed.
Matter XD 177/2017 is dismissed.
………………………………..
Senior Member A Anforth
REASONS FOR DECISION
Matter XD 946/2016 (Arends v Tread Group Pty Ltd) was the original application lodged in the Tribunal. Matter XD 177/2017 (Mashera Pty Ltd v Arends) arose during the course of the original application and the matters were heard together.
Matter XD 946/2016 was commenced on 30 August 2016. It was a claim for unpaid wages by Mr Arends against Tread Group for $2859.05 plus the Tribunal fee ($145) and a company search fee ($38). Tread Group operated a vehicle spray painting business under the trade name Autoco Paint Shop Pty Ltd.
Mr Arends understood that he commenced employment with Tread Group on 7 July 2009 and worked at its Autoco Phillip business. Tread Group was formerly known as Autoco Group Pty Ltd. Mr Peter Taylor was the manager of the business. Only towards the end of the hearing process did it become known that Mr Arends was in fact the employee of Mashera Pty Ltd and not Tread Group. Much of the hearing proceeded on this false premise.
Part of the terms of employment included a ‘bonus account’ for the individual employee in which the employer would quarterly deposit after tax productivity bonuses at the rate of “0.5% of all panel and paint shop labour.”
In July 2013 Mr Arends utilised the employer credit facility in his bonus account to purchase a Holden Commodore VE for his private use. He also used the bonus account to fund the running costs of the Commodore, to withdraw cash and fund other personal expenditures unrelated to the car.
Mr Arends’ employment was terminated on 16 November 2015 based on his alleged inefficiency. A minute of the meeting terminating his employment was later filed in the proceedings. Mr Arends was given the choice to resign or be dismissed. He adopted the former course of action. There followed a series of acrimonious exchanges between Mr Arends, Mr Taylor and other staff at the business.
Mr Arends returned the Commodore to the employer at the cessation of his employment and it was subsequently sold at a loss as a second hand vehicle by Pickles Auction.
Mr Arends commenced proceedings in the Fair Work Commission for unfair dismissal and a range of alleged underpayments. He told the Tribunal that these proceedings were still afoot. Mr Taylor asserted that the employment dispute in the Fair Work Commission had been withdrawn but was still the subject of dealings between their respective solicitors.
Mr Arends application had appended:
(a)minutes of a meeting on 16 November 2015 between himself, Mr Taylor and Jenny Milne in which he was asked to resign or be dismissed and given reasons for that decision;
(b)an email from Mr Taylor of 8 January 2016 thanking Mr Arends for his resignation, rejecting allegations of bullying and notifying that the payout figure on the Commodore was $22,100;
(c)a statement titled ‘Termination Agreement’ dated February 2016 that set out the calculation of the amount of $5932.65 owing on the Commodore purchase;
(d)an email from Mr Taylor of 5 February 2016 to Mr Arends offering a settlement of the Fair Work Commission dispute by the payment of $3004.95 (gross) for outstanding personal leave, holiday leave, overtime, car allowance and superannuation. This offer was not accepted by Mr Arends;
(e)a letter of demand of 17 August 2016 from Mr Arends to Mrs Sonia Taylor (accounts clerk for Tread Group) making demand for the sum of $3004.95 in alleged accrued entitlements plus interest;
(f)a letter of 23 August 2016 on the letterhead of Tread Group from Mrs Taylor denying any entitlement on Mr Arends part; and
(g)an ASIC search of 25 August 2016 showing that Tread Group Pty Ltd was a registered company at that time.
On 27 September 2016 Mr Taylor filed a response in the name of Tread Group denying Mr Arends’ claim and a counter claim. Mr Taylor alleged that Mr Arends was indebted to Tread Group in the sum of $18,543 for:
(a)the legal and counselling costs incurred for staff adversely affected by alleged sexual harassment by Mr Arends; and
(b)losses incurred on the resale of the Commodore.
On 26 October 2016 Mr Taylor filed and served particulars of the claim for $18,543 which of itself is not enlightening.
On 27 October 2016 Mr Taylor filed and served a bundle of documents that included:
(a)an email from Fair Work Ombudsman advising that the mediation had been unsuccessful but the matter may proceed in the “Small Claims Court”;
(b)a copy of Mr Arents’ application of 1 July 2013 for employer funding:
(i) to purchase the Commodore at the cost of $19,477.50;
(ii) delivery towage charges of $726;
(iii) tyres, wheel alignment and registration charges of $1,165
(iv) registration for 12 months of $1,993
(v) insurance of $954
all to be repaid from his bonus account. Each application contained Mr Arends’ signature;
(c)a post auction report from Pickles Auctions showing that the Commodore was passed in at action on 13 October 2016. It had a reserve price of $14,000;
(d)documents relating to the sexual harassment claim against Mr Arends in 2013; and
(e)a spreadsheet showing the monies credited and debited to Mr Arends’ bonus account.
The matter was listed for conference in the Tribunal on 3 November 2016. It did not settle and procedural orders were made for the filing of particulars and evidence.
On 16 December 2016 Mr Arends filed an amended application. He alleged persistent bullying by Mr Taylor. Apart from documents referred to above, Mr Arends appended:
(a)his undated letter of resignation effective 3 February 2016;
(b)an email from Mr Taylor of 19 January 2016 to Mr Arends setting out his understanding of the Commodore arrangement, its running and maintenance costs and the imposition of Fringe Benefit Tax (FBT) on the Commodore transaction;
(c)an email of 20 January 2016 advising that he did not wish to pay out and keep the Commodore, disputing the bonus account balance and the imposition of FBT on the deal.
On 11 January 2016 Mr Taylor filed a second bundle of documents that contained the documents referred to above and contained the following additional documents:
(a)a statement from Ms Milne (Payroll Manager for Tread Group) of 20 December 2016 in which she said that Mr Arends had been given copies of his bonus account whenever he asked and the she explained to him the entries including FBT;
(b)a report from Pickles Auctions advising that the Commodore had sold for $13,400 inclusive of GST with net proceeds to Tread Group of $12,179 inclusive of GST;
(c)an undated statement of Mr Taylor relating to his dealing with Mr Arends concerning the bonus account; and
(d)a statement of 5 February 2017 relating to his dealing with Mr Arends concerning the bonus account and the purchase of the Commodore.
Matter 946/2016 was listed for hearing on 10 February 2017. Mr Turner appeared for Tread Group and Mr Arends appeared in person.
The parties informed the Tribunal that there were other proceedings afoot between the parties in the Fair Work Commission that raised overlapping issues including that of the long service leave (but not annual leave). The Tribunal determined that the overlapping employment issues were best dealt with in that other forum. Tread Group abandoned its claims for the costs of consultants to counsel staff affected by Mr Arends alleged sexual harassment in the work place.
At the end of the hearing an order was made that Tread Group to pay Mr Arends $3,292 for accrued annual leave within seven days.
The outstanding issue between the parties remained that of:
(a)the balance of Mr Arends’ bonus account including the entries related to the Commodore and FBT:
(b)Mr Arends liability for the unrecovered capital cost of the Commodore.
There was not sufficient evidence before the Tribunal to determine these issues. The matter was adjourned part heard with procedural orders for the parties to file their evidence.
Towards the end of the hearing on that day Mr Turner informed the Tribunal that the registered owner of the Commodore was in fact Mashera Pty Ltd which was a separate company associated with Tread Group. Further, Mashera was in fact the employer of Mr Arends. Tread Group run the business with the staff provided by Mashera. The alleged loss arising from the uncovered capital cost of the Commodore was a lost to Mashera and not to Tread Group. For that reason the Tribunal informed the Mr Turner that it may be necessary for Mashera to bring its own claim against Mr Arends for this loss, although any belated claim by Mashera could be heard together with the present matter and evidence in one would be evidence in both. It also followed that the award in favour of Mr Arends for the annual leave should have been made against Mashera and not Tread Group.
On 17 February 2017 Taylor lodged application XD 177/2017 on behalf of Mashera. The application did not particularise the claim made on behalf of Mashera but the Tribunal takes the claim to relate to the capital loss raising from the sale of the Commodore and any remaining debit on the bonus account.
On 17 February 2017 Tread Group filed its evidence in accordance with above orders. Mr Taylor and made an informal request that the award made in Mr Arends’ favour for outstanding annual leave not be payable until the final resolution of the case and then operate as a set off against any award in favour of Tread Group or Mashera. The Tribunal set aside the order for annual leave because it was made against the wrong respondent and for it to be dealt with in the balance of any orders in favour of Mashera.
In addition to documents referred to above, Tread Group annexed:
(a)a statement from their accountant concerning the relationship between Tread Group and Mashera explaining that Mr Arends was an employee of Mashera;
(b)a spreadsheet of the FBT paid by Mashera on behalf of Mr Arends;
(c)Mashera’s FBT tax returns for Mr Arends for the years 1 April 2014-31 March 2015, 1 April 2015-31 March 2016;
(d)reports from the accountant saying that the FBT paid was by Mashera of $7,653.30 for each of the years ending March 2015 and 2016; and
(e)a spreadsheet which appears to say FBT of $5,466 was paid by Mashera for Mr Arends in the year ending March 2014.
On 17 February 2017 Mashera filed its claim in the Tribunal against Mr Arends (matter XD 177/2017) in the sum of $9931.88. Apart from documents referred to above, the application appended the following documents:
(a)spreadsheets of the bonus account;
(b)invoices for the various costs incurred on the Commodore;
(c)certificates of registration for the Commodore in the name of Mashera; and
(d)spreadsheets of FBT calculations for Mr Arends.
On 24 February 2017 Mr Arends filed his evidence in response to the procedural orders. He also filed submissions relating to the funding of the Commodore and the entries in his bonus account. In his submissions Mr Arends said:
(a)contrary to the spreadsheet provided by Tread Group, he had not commenced receiving bonuses into his bonus account until 23 September 2010 and not 30 March 2009 per the spread sheet;
(b)the bonus account and alleged work use of the car were a tax evasion tool adopted by Tread Group. The Commodore was rarely used for work purposes;
(c)he was not told of the FBT liability that would be debited to his bonus account at the time of purchase of the Commodore;
(d)the Commodore was returned on 21 January 2016 but was not resold until 22 October 2016;
(e)his bonus account was debited for 12 months in July 2015 and 12 months insurance on 1 January 2016 but the Commodore was surrendered in January 2016 with no credit given;
(f)he denied that he had ever agreed to participate in the bonus account; and
(g)his bonus account had not been credited for the December 2014 and December 2016 quarters.
Mr Arends claimed that if the car was the property of Mashera as per its registration then his bonus account should be recredited with the purchase price of the car, all associated costs, running costs, FBT taxes and the unexpired part of the registration and insurances.
On the 7 April 2017 both matters were heard together by the Tribunal. Mr Arends appeared in person and Mr Taylor appeared for Tread Group and Mashera. Mr Singh, accountant for Tread Group, gave sworn evidence. The hearing initially commenced as a process of exploring the live issues between the parties and in that context Mr Arends and Mr Taylor put various propositions to the Tribunal.
At the hearing Mr Arends said:
(a)it was Mr Taylor who initiated the deal of purchasing the car for Mr Arends’ personal use. Mr Taylor denied this;
(b)he was told that he should choose a utility as it was free of FBT but that he preferred a Commodore sedan. He did not realise that this choice would result in FBT. Mr Tayor said he had explained this to Mr Arends;
(c)he was shocked at the level of the FBT charged;
(d)he did not realise that the registration and insurance was in Mashera’s name;
(e)he did not have any issue with paying for the registration, insurance and running costs of the Commodore. He was only challenging the FBT and interest charged to his bonus account along with a prorate refund of the registration and insurance paid after the surrender of the Commodore;
(f)the Fair Work Commission matter was still extant. Mr Taylor said it was back with the solicitors and not currently before the Commission; and
(g)he did use the bonus account to withdraw cash advances, for holidays and other personal costs;
In addition to the above Mr Taylor said:
(a)Mr Arends was given the choice of paying out the residue on the Commodore loan and keeping the car but declined the offer. Mr Arends affirmed this; and
(b)Mr Arends was told of the balance of his bonus account and the debiting of FBT and interest each time he made inquiries which was about monthly.
In response to questions from the Tribunal, Mr Arends said that he did not expect to have to make good any negative balance in his bonus account at the cessation of his employment. The Tribunal asked whether he considered that any negative balance would be just a gift from the employer to him. Mr Arends said that was his expectation. The Tribunal expressed disbelief that he could have held such an expectation.
Mr Singh took the Tribunal through the bonus account entries. The Tribunal came to the conclusion set out below (in round terms) which was put to the parties:
(a)The total credits to the Account were $25,600.
(b)The withdrawals for personal expenditure and the running costs of the Commodore (but not its capital cost) was $16,800.
(c)Interest debited was $3600.
(d)The FBT debited was $9900.
(e)The capital shortfall in the sale of the Commodore was $7,300.
The Tribunal informed Mr Arend that it had no reason to doubt the figures put by Mr Singh, that the FBT was paid and interest were properly payable.
The exploratory process had taken some time and the allocated hearing time had elapsed. The Tribunal noted that evidence from the parties (other than Mr Singh) had not been taken on oath and there may be other witness to be called. The parties were offered the choice of the matter being further adjourned to hear that evidence or the Tribunal taking on board all that had been said and produced in documentary form and making a decision on the papers without further adjournment or evidence. The parties agreed to this course of action.
Notwithstanding the parties agreement immediately above, the Tribunal determined to give the parties a last opportunity to file final submissions and a timetable was fixed for that purpose. Mr Arend was told that he could take advice and make submissions on the FBT issue (and other issues).
On 13 April 2017 Tread Group filed an email from Mr Singhai (accountant). Mr Singhai appended a spreadsheet of Mr Arends’ bonus account and said that the first entry was on 30 August 2010 which was subsequently reimbursed to Mr Arends. There were no other entries until January 2011.
On 13 April 2017 Mr Arends filed his final submissions. In this submission he claimed:
(a)the sum of $11096.25 for outstanding wages ($271.13), annual leave ($3,292), fuel allowance ($150) and long service leave ($7,383.12);
(b)that nothing was owed by him to Tread Group in the bonus account and that the Tribunal should disregard the bonus account issue due to poor account keeping by Tread Group;
(c)that he had understood that the Commodore was his property purchased with a loan from Tread Group which was to be repaid by regular deductions from his bonus account. He never entered any agreement for the Commodore to be subject of any leasing arrangement and understood that the vehicle was fully owned by himself and registered in his name. He had never made any capital payments for the lease, loan or hire purchase of the Commodore;
(d)that his bonus account had wrongly been debited for six months of registration and 12 months of insurance for periods occurring after the surrender of the Commodore;
(e)that the following Commodore related sums should be re-credited to his bonus account:
(i) capital costs of purchasing the car $19,477.50;
(ii) transport from sale to delivery $726;
(iii) stamp duty $582;
(iv) hire purchase charges $1,547.15;
(v) roadworthy certificate $1,547.15
(vi) running costs over the period from purchase to surrender being, insurance $3,852.90, registration $4,218.20, services $220;
(f)that FBT was not payable on the loan and should be re-credited $9,906.45.
The Tribunal notes that in his final submission Mr Arend resiled from his concession that he was responsible for the running costs, including registration and insurance, of the vehicle.
On 27 April 2017 Mr Arends filed a spreadsheet for his bonus account.
No final submissions were received from Tread Group or Mashera.
The issues
The issue of the unfair dismissal and outstanding accrued entitlements is a matter for the Fair Work Commission. The Tribunal did entertain what was held to be a claim for annual leave and determined that issue in favour of Mr Arends in the sum of $3,300 payable by Mashera.
Subsequent to the hearing the Tribunal became aware of the decision of Presidential Member McCarthy in Welch v Erica’s Aesthetics Pty Ltd [2017] ACAT 68 in which it was held that ACAT has no jurisdiction to hear claims for wages or other terms and conditions of employment. Those are solely a matter for the Fair Work Commission. For this reason Mr Arends claim for annual leave must be dismissed.
The remaining issues are whether Mr Arends is responsible for the FBT and interest debited to his account.
Consideration of the issues
The Tribunal does not accept Mr Arend’s assertions that he was unaware:
(a)of the manner in which his bonus account operated;
(b)that the running costs of the Commodore were being debited to his bonus account;
(c)that his personal withdrawals and expenditure from his bonus account were his costs that were being debited to his bonus account;
(d)that he had no obligation to pay out any balance owing by him on his bonus account at the end of his employment;
(e)that he was entitled to further credits to his bonus account post termination of employment or that there were any outstanding credits to be made.
The Tribunal finds that Mr Arends was given the opportunity to purchase a utility with funding from the employer debited to his bonus account and that purchase would not have attracted FBT. Mr Arends did not want a utility and chose the Commodore. He was told that a sedan would attract FBT.
Mr Arends was told that the FBT and interest were being debited. He had monthly discussions with the pay clerk about it. He did not take any steps or raise any protest until his employment was terminated.
The parties made no submissions on the law pertaining to FBT beyond Mr Taylor’s and Mr Singhai’s assertion that it was payable on the Commodore arrangement and was in fact remitted to the ATO. The Tribunal has reviewed the The Taxpayer[1] at chapter 25 on FBT. For the purpose of assessing the application of FBT the Tribunal takes the following to be the case:
(a)The bonus payments were taxable salary and the amount deposited into Mr Arends’ bonus account was net of tax.
(b)Insofar as Mashera debited the whole of the capital purchase price of the Commodore to the bonus account, to be paid off by accretions to that account, the capital cost was in the nature of a loan by Mashera to Mr Arends.
(c)Ownership in the Commodore vested in Mr Arends notwithstanding that Mashera retained registration in its name as a form of security for repayment of the loan. Mr Arends had the exclusive and private use of the car.
(d)The loan was not part of any salary packaging.
(e)Neither Mashera nor Mr Arends claimed tax deductions for the running cost of the Commodore.
(f)Mr Arends had the option of retaining ownership of the car by payment of the balance of his loan but chose to allow Mashera to sell it, as his agent, as a second hand vehicle to make good their security.
(g)At the time of termination of employment Mr Arends’ bonuses totalled $25,600. His non car debits were $16,800. This means that the balance of $8800 of the bonus account was attributable to the capital cost of the car, any FBT and interest. Assuming for the moment that interest was $3,600 and that no FBT was payable, then Mr Arends has in fact paid $5,200 towards the capital cost of the Commodore.
[1] A journal produced by Tax and Super Australia
Prima facie, FBT is payable by the employer who provides a taxable fringe benefit to employees. As far as the Tribunal can see, the present transaction is not a ‘taxable fringe benefit’, it is in the nature of a loan by Mashera to Mr Arends for a car for his exclusive private use. If this is so then Mashera may have wrongly deducted the FBT and remitted it to the ATO for which it may be entitled to a credit with the ATO.
Applying the figures at paragraph 37 above, on the credit side is the $25,600 bonuses deposited. In addition there is some allowance to be made for the tardiness in the resale by Mashera and the wastage of registration and insurance post return of the car that arose through that delay. The Tribunal allows $2,000. The total credit side is $27,600.
On the debit side (without allowance for FBT) is the $16,800 for personal expenditure (including the Commodore on-road and running costs), loan interest of $3,600, and the short fall on the resale of the car on the loan balance of $7,300. This gives a debit side total of $27,700.
It can be seen that there is little between these two sums and any difference would fall within the error margin of approximations made and the computation of the interest after the FBT component is removed from the base on which the interest was calculated. For that reason the Tribunal finds that there is nothing owing by either party on the bonus account once the FBT is taken out of the equation.
………………………………..
Senior Member A Anforth
HEARING DETAILS
FILE NUMBER: | XD 946/2016, XD 177/2017 |
PARTIES, APPLICANT: | Bernard Arends (XD 946/2017) Mashera Pty Ltd (XD 177/2017) |
PARTIES, RESPONDENT: | Tread Group Pty Ltd (XD 946/2017) Bernard Arends (XD 177/2017) |
COUNSEL APPEARING, APPLICANT | N/A |
COUNSEL APPEARING, RESPONDENT | N/A |
SOLICITORS FOR APPLICANT | N/A |
SOLICITORS FOR RESPONDENT | N/A |
TRIBUNAL MEMBERS: | Senior Member A Anforth |
DATES OF HEARING: | 10 February 2017, 7 April 2017 |
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