Cheung, Siu Chuen v Marchesi, Brendan

[1997] FCA 1560

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 3071 of 1997

BETWEEN:	SIU CHUEN CHEUNG APPLICANT
AND:	BRENDAN MARCHESI RESPONDENT

JUDGE:	MERKEL J
DATE:	8 JULY 1997
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

This is an application under s 1321 of the Corporations Law in which the applicant is seeking to challenge the rejection of his proof of debt by the respondent who is the liquidator of Goodluck Pty Ltd.  The application involves six issues.  The first is whether the employment of the applicant was terminated on 26 July 1996 rather than 7 August 1996.  The second is whether the wage the applicant was receiving at the date of his termination was $3000 per month net of tax or whether that was the gross wage.  The third is whether the applicant was entitled to a period in excess of four weeks’ notice of termination.  The fourth is whether the applicant has received his superannuation entitlement.  This issue depends upon the amount of the salary which I have referred to as the second issue.  The fifth issue is whether the company was indebted to the applicant in the sum of $22,813.53. The final issue is whether the applicant was entitled to a bonus, in addition to his salary and holiday pay entitlement of one month's salary.

There are three preliminary observations I wish to make.  The first is that it is common ground that the applicant carries the onus of satisfying me that the rejection of the proof of debt in respect of each of the issues is made out.  The second relates to the problems raised by the applicant's material. His evidence, on many of the critical issues on which he seeks to succeed, is given by assertion rather than an outline of the facts upon which he relies.  The third observation is that the applicant was not only an employee of the company in liquidation but also was a shareholder and a director of the company. As a consequence, the financial affairs of the company were somewhat more complicated than would be the case in relation to a simple employer/employee relationship.  The relevance of this matter is that the financial transactions that occurred need a more detailed explanation than has been proferred in the material. 

I turn to consider each of the six issues in the light of those observations.  The respondent has treated the 26 July 1996 as the date of the termination of the applicant's employment.  On the applicant's evidence he arrived at work on that day and was effectively locked out of the business from that point of time onwards.  He says he did not receive any formal notice of termination.  He relies on an affidavit filed in other proceedings in which one of the other proprietors of the business had indicated that the company had treated the termination of the applicant's employment as effective as from 7 August 1996.

No reason is given in any of the material for treating 7 August as the date of termination, other than the fact that it was deposed to as such. In my view the applicant has not established that the notice of termination was not effectively given on 26 July.  It seems fairly clear from the applicant's own material that from that day onwards he was effectively prevented from continuing his employment in the company.  In these circumstances it seems to me that there is a strong inference that he was aware from that date on that his employment was no longer going to continue.  The contract was not such that formal notice was a requirement for termination.

Looking at the matter as one of substance rather than form, in my view the applicant has failed to satisfy or discharge the onus on him to demonstrate that his employment continued after 26 July 1996.  The problem with the claim is that, essentially, it is one for lack of reasonable notice of termination, or in another jurisdiction a claim for wrongful dismissal, but that is not the issue arising before me on the question of when termination occurred.

The second issue relates to a claim that the wage of the applicant was $3000 per month net of tax.  The effect of this allegation is that it was the company's responsibility to pay tax and the salary that the applicant was receiving was the net amount to which he was entitled, rather than the gross salary.

Again the difficulty with this point is that the material includes no financial records that support the applicant's claim.  I am therefore not able to be satisfied on the material that the terms of employment were anything other than a payment of $3000 per month by the company to the applicant as its employee.  I am not satisfied on the material that the company undertook to pay the tax due on those wages or that the applicant treated the company as so liable.  It was open to the applicant to produce some further evidence, such as tax returns or documentation that reflected some obligation on the part of the company to pay his tax so that his salary was a net one.  However, the matter remains one of assertion without any real evidence to sustain it.  Again, I am not satisfied that the applicant has discharged the onus upon him to establish that the salary he was receiving or entitled to receive exceeded $3000 per month.

The third issue raises the question of what constitutes a reasonable period of notice of termination of employment.  There are a number of unusual features about the applicant’s employment.  Firstly, it is pointed out that there was a long term restraint clause which prevented the employee from competing with the company for many years after the termination of his employment.  Secondly, it is said that the employment started in 1991 and has continued over a long period.  Thirdly, it is said that the applicant was brought out from Hong Kong for the employment.  It was also said that although he was paid weekly his salary was computed monthly and that the weekly payments should not result in a short period of notice given the other factors. 

It is notoriously difficult in a situation such as the present to determine what would constitute reasonable notice. Regard must be had to all of the facts of the case including those to which I have been referred by counsel for the applicant.  The real problem confronting me is that I could readily accept that it may constitute reasonable notice to give the equivalent of four weeks or some period in excess of four weeks.  Normally the factors to which the applicant has pointed may lean strongly in favour of a period in excess of four weeks, but the problem in the present case is that the applicant was not a mere employee.  He was also a proprietor of the business and a director of the company.  It is hard to divorce the period of his association with the company, the potentially invalid restraint clause and the applicant’s coming out from Hong Kong to join the company, from the proprietorial role that he had in it in addition to the employee role.

Whilst on this issue, I cannot be satisfied that four weeks is necessarily the only reasonable period of termination.  In these circumstances I have come to the conclusion that the applicant has failed to discharge the onus of satisfying me that four weeks was not a reasonable period of notice of termination.

The fourth issue relates to the applicant’s superannuation entitlement.  As I have noted above, that entitlement depends upon my finding as to whether $3000 a month was a net or a gross salary.  As I have found that that was the gross salary to which the employee was entitled it appears that the claim for additional superannuation benefits based on an entitlement to a higher amount is not made out. 

The fifth issue relates to the alleged debt of $22,813.53.  The basis on which that amount is claimed to be an amount due by the company to the applicant has not been made apparent.  It seems that the best explanation that can be put forward was that as a result of an arrangement between shareholders as part of a buying out of each other's interest in the company, there was some agreement that the company be liable for making some kind of payment to each of the employees.  The form of the payment, the manner in the amount of the payment was to be calculated and how it came to be alleged to be a debt due by the company has never been explained.  Various suggestions were put forward.  One was that there was some kind of dividend and a loan back to the company.  The problem with all of these suggestions is that there is simply no evidence to support them.  They amount to no more than theories, rather than evidence, as to an indebtedness. In these circumstances it is my view that the applicant has again failed to discharge the onus of satisfying the Court that there is an indebtedness on the part of the company to him in the sum of $22,813.53.  The debt must be real, be due in law and be something more than just a result of a discussion between proprietors as to how they might like to organise the affairs of the company so as to benefit themselves.

The final issue relates to the bonus of one month's salary, which it was said was a term of the applicant's employment.  Again this matter is put forward as one of mere assertion without corroborative or supporting material to show that it was a term of employment.  I can readily accept that the applicant may have believed that he should be getting one month's bonus, and that there may have been a tradition of such bonuses being paid.  However, I am not satisfied on the evidence that a bonus was a matter of legal obligation, rather than a voluntary payment, that may be made if and when the circumstances dictate that it was appropriate.

In these circumstances, it seems to me that the applicant has failed to demonstrate to the Court that the proof of debt was wrongly rejected by the respondent.  I have confined my observations to the issues of principle on the basis that the parties have between them agreed that the resolution of these issues of principle would not require any other substantive orders. In those circumstances I would propose to dismiss the application and order that the applicant pay the respondent's costs of and incidental to the application.  In my view, this is a matter where costs should follow the event.  The applicant has sought to challenge the rejection of the proof on a number of grounds, all of which have failed.  The fact that there has been a minor adjustment to the proof upwards in the sum of some $700 is not, in my view, sufficient to justify an order that the costs not follow the event.  I will make the following orders:

(1)  The application is dismissed.
(2)  The applicant is to pay the respondent's costs of and incidental to the application.
(3)  To the extent that the respondent is unable to recover his costs from the applicant, he be indemnified in respect of such costs as costs of the liquidation.

I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel

Associate:

Dated:            8 July 1997

Counsel for the Applicant:	Mr M Flynn
Solicitor for the Applicant:	Richmond & Bennison
Counsel for the Respondent:	Mr R Squirrel
Solicitor for the Respondent:	Deacons Graham & James
Date of Hearing:	8 July 1997
Date of Judgment:	8 July 1997