Bauer v Pascoe
[2003] FMCA 273
•4 July 2003
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BAUER & ANOR v PASCOE | [2003] FMCA 273 |
| BANKRUPTCY – Application to review decision of trustee to reject proofs of debt – whether applicants were entitled to employee benefits – qualification of benefits – proper payment of any superannuation contributions. Bankruptcy Act 1966, ss.104(1), 109(1)(g) |
| Applicants: | KENNETH BAUER & RODNEY HALLAM |
| Respondent: | SCOTT D PASCOE AS TRUSTEE |
| File No: | BZ438 of 2002 |
| Delivered on: | 4 July 2003 |
| Delivered at: | Brisbane |
| Hearing Date: | 2 October 2002 with written submissions received 12 November 2002 and 5 December 2002 |
| Judgment of: | Baumann FM |
REPRESENTATION
| Solicitors for the Applicant: | Ian Berry Solicitor |
| Solicitors for the Respondent: | Ms K.E. Holmes of Clarke and Kann. |
ORDERS
Pursuant to s.104(1) of the Bankruptcy Act 1966, the decision of the trustee made 22 August 2002 to reject the Applicant’s claim be reversed.
The claim made by the Applicant KENNETH ARTHUR BAUER be admitted in the sum of $7611.00.
The claim made by the Applicant RODNEY JOHN HALLAM be admitted in the sum of $8622.00.
The Trustee provide to the Australian Taxation Office particulars of the payments due to the Applicants under the Superannuation Guarantee (Charge) Act 1992.
The Trustee pay 50% of the Applicant’s costs of and incidental to these proceedings as agreed or taxed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BZ438 of 2002
| KENNETH BAUER & RODNEY HALLAM |
Applicant
And
| SCOTT D PASCOE AS TRUSTEE |
Respondent
REASONS FOR JUDGMENT
LEWIS ARTHUR BAUER (“the deceased Bankrupt”) died on 20 January 2000 and a sequestration order against the estate was made on 24 January 2000. The respondent is the Trustee of the estate.
The trustee did, on 22 August 2002 reject proofs of debt lodged by the applicants as follows:-
a)Kenneth Arthur Bauer (“Bauer”) lodged 20 May 2002 claiming $25896.65 for outstanding employee entitlements; and
b)Rodney John Hallam (“Hallam”) lodged 21 May 2002 claiming $22,202.90 for outstanding employee entitlements.
Bauer and Hallam seek to review the decision of the Respondent to reject their claims, pursuant to s.104 (1) of the Bankruptcy Act 1966 (“the Act”).
The Application to Review was filed within the time limits imposed by s.104(3) of the Act.
Issue
The issues for substantive determination were:-
a)were Bauer & Hallam employees of the Bankrupt?
b)were any employee entitlements due and payable to the Applicants?
c)If so, how much was due and payable?
The Respondent neither consented to nor opposed the application. The respondent’s assisted the Court with evidence and submissions and agreed to abide the order of the Court. The Applicant’s carry the onus of proof in the application.
Employees or not?
The Bankrupt was a self employed butcher operating shops at Booval, Churchill. North Ipswich and Amberley. Bauer was the son of the Bankrupt and claims to have “started working for the deceased when I was 15 years old”. He is now 53 years of age.
Hallam was apprenticed to the Bankrupt in 1979 and ultimately qualified as a Butcher by trade.
Both Hallam & Bauer swore quite detailed Affidavit’s of their work history with the bankrupt. They were not required for cross examination. In essence:-
(a)Bauer says:-
i)He did not do an apprenticeship;
ii)He worked continuously from approximately 1965 to when the Bankrupt died in January 2000;
iii)Dad (“the Bankrupt”) managed the stores but did not do any butcher work as he was incapacitated. He also did all the paperwork;
iv)He received Group Certificates up to 1995 and although he found the 1996 Group Certificates, he never received it or group certificates for later years from the Bankrupt;
v)The Bankrupt stopped coming to the shop and paying wages “around 1997 to 1998 and in order to keep the business going both Mr Hallam and myself were paid from the takings.” (He said the Bankrupt would determine the rates of pay and the Applicants stated they were to “pay ourselves from the till.”)
vi)He found it difficult to take holidays because —
“I thought I owed it to my father to keep the business going though I knew that the business would probably come to me and thus I didn’t take holidays.”
The bankrupt did leave him the Churchill butcher shop but because of the amount of the indebtedness he did not receive any benefit under his will.
vii)His Taxation Returns have not been lodged.
viii)His proof of debt was calculated as follows:-
Long service Leave (13 Weeks) $5746.00
Annual Holidays (19 Weeks) $7782.00
Leave Loading (26 Weeks) $2351.50
Superannuation Guarantee $8193.12
Interest $1824.03Total $25896.65
ix)He collaborates the evidence of Hallam
(b)Hallam said:-
i)He completed his apprenticeship with the bankrupt and was continuously employed from approximately 1979 until the bankrupt’s death.
ii)He received Group Certificates for up to 1994 and he also has lodged no taxation Returns since 1996.
iii)He regularly took holidays up to 1998 when he said he had “2 weeks up my sleeve”.
iv)He never received long service leave or leave loading and no superannuation payments.
v)His proof of Debt was calculated as follows:-
Long service Leave (13 Weeks) $5746.00
Annual Holidays (6 Weeks) $4088.25
Leave Loading (26 Weeks) $2351.50
Superannuation Guarantee $8193.12
Interest $1824.03
Total $22,202.90
The further evidence offered to the Court on behalf of the Applicants was:-
a)Affidavit of Colin and Myrna Hallam, the parents of Rodney Hallam, who corroborate the non receipt of payments as claimed by their son.
b)Affidavit of Robin Bauer, the wife of Kenneth Bauer, who collaborates the non receipt of payments as claimed by her husband.
c)The admission and acceptance by the Executor of the will, Mr Kevin Bradley of the claims made by the Applicants.
The respondents offered evidence that:-
a)They had not been provided with sufficient substantiation from the Applicants in a timely manner and accordingly rejected the claims on the ground that “insufficient documentation to support the claim” was provided.
b)On the basis of the Applicants being employed under the Meat Industry – other than Export Award (State) as a general Butcher (Grade 9), the claim that Bauer was being paid $475 nett a week means he was receiving in excess of the award as was Hallam, for some of the part 1996 period, by receiving $420 nett a week.
c)The handwritten notes seemed to be primarily for cash payments made in 1999. No wages records were either maintained or produced by the Bankrupt or the Applicants.
I have considered all the evidence and am prepared, on the balance of probabilities, to find that the Applicants were employees of the Bankrupt.
I find that as employees they arranged to pay themselves an amount out of the till. I am not able to be satisfied as to the sums actually paid however it was, on all the evidence, at least the ongoing award wage, which in 2000, (at the time of death), was $430 a week gross.
Were any employee entitlements due to the applicants?
As a result of the supplementary submissions received, from the Respondent’s on 12 November 2002 and the Applicant’s on 5 December 2002 and based on my finding that the applicants were employed under the above award I find that:-
a)each of the applicant’s is entitled to 13 weeks of gross wages by way of long service leave, pursuant to the said award and the Industrial Conciliation and Arbitration Act 1961–1985 (Qld) which has now been superseded and repealed by Industrial Relations Act 1990 (Qld).
b)
Each of the applicants is entitled to annual leave. I accept that Hallam is, on the evidence, entitled to 6 weeks leave. In respect of Bauer, the evidence is that he either elected not to take leave in substitution for receiving an income higher than the award and/or because he expected to receive the business under the will of the father. I find he was purchasing his leave by such arrangements.
I am prepared to allow the Applicant to claim one years entitlements of leave, or 4 weeks.
c)Paragraph 17(2)(c)(iii) of the award provides for a further amount, by way of leave loading at 17.5%, to be payable. I find it was payable to the Applicants for the unpaid leave as found by me to be owing to them.
d)Paragraph 9A of the Award requires a minimum amount of occupational superannuation (commencing at 3% from 1 July 1991) to be paid into an approved fund being either M.I.E.S.F. or in Sunsuper. I am satisfied it was payable on behalf of the Applicants to an approved fund but was not paid. In my view any payment is a debt due and owing to the Commonwealth (see s.50 of the Superannuation Guarantee Charge Act 1992 (Cth)). As a result any entitlement of the Applicants arising from the operation of the Act should be payable not to the Applicants but to the Australian Taxation Office. I did not receive any detailed submissions as to the priority to be offered such a payment. I was directed to s.52 of the Superannuation Guarantee (Administration Act) 1992 which provides that —
“in the winding up of a company, any superannuation guarantee charge payable by the company is, for the purposes of payment to have priority equal to that of a debt of the company of the kind referred to in paragraph 556(1)(e) of the Corporations Law.”
(e)Section 556 (1)(e) provides for priority of payment over all other unsecured debts, for wages and superannuation contributions payable prior to winding up. Interestingly, s.109 (1)(g) of the Bankruptcy Act 1966 provides claims for long service leave, annual leave, recreation leave and sick leave have priority in payment over ordinary unsecured creditors, however no mention is made of the superannuation contributions. There seems no logical reason why such contributions, upon bankruptcy, should not have been referred to in the Superannuation Guarantee (Administration) Act or in s.109(1)(g) of the Bankruptcy Act. I would regard the Trustee’s position as analogous with the position of a company liquidator.
How much is payable?
As a result of the analysis above, and the findings I have made, I would estimate the Applicant’s gross claims against the Bankrupt estate to be as follows:-
Bauer
13 Weeks long service x $430 $5590.00
4 Weeks holiday x $430 $1720.00
Holiday Loading on $1720 $ 301.00$7611.00
Hallam
13 Weeks long service x $430 $5590.00
6 Weeks holiday x 430 $2580.00Holiday Loading on $2580 $ 452.00
$8622.00It would be appropriate for the trustee to deduct from any payments due to the Applicant’s withholding amounts that are payable to the ATO under the Taxation Administration Act 1953 (see Applied Design Development Pty Ltd (in liquidation) (2002) 20 ACLC 463).
In respect of the Applicant’s entitlements under the Superannuation Guarantee Charge Act 1992, I would direct the Trustee to invite the ATO to consider amending its proof of debt to claim the amount of the charge based on the Applicants employment deemed to be on the award rate from time to time.
Costs
It seems appropriate to me that the Trustee make a contribution from the Estate, to the Applicant’s costs. The Applicant’s have not been wholly successful in their claim and could have been more forthcoming with information in a timely manner when invited to do so in the Trustees letter of 18 June 2002. Whilst the Applicants say they have provided their accountant Mr Smallwood with further documents, no evidence from Mr Smallwood was provided either as contemplated by the Applicants (see Solicitor’s letter of 28 June 2002) or to this Court.
I will order that the trustees pay 50% of the Applicant’s costs of these proceedings as agreed or taxed.
I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of Baumann FM
Associate:
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