Clarke v Elite Systems Pty Ltd
[2017] FCCA 488
•29 March 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| CLARKE v ELITE SYSTEMS PTY LTD & ANOR | [2017] FCCA 488 |
| Catchwords: INDUSTRIAL LAW – Application for summary judgment against one respondent amongst three – first respondent has failed defence but indicated no intention to take part in proceedings in future – second and third respondents have indicated an intention to defend proceedings – matters to be considered in applying discretion to enter summary judgment. |
| Legislation: Fair Work Act 2009, ss: 3(b); 44; 90; 117; 539; 545(1); 545(2); 550(1); 550(2) Federal Circuit Court Rules 2001, r: 13.03A(2); 13.03B(2); 13.03(2)(c) |
| Applicant: | MICHAEL CLARKE |
| First Respondent: | ELITE SYSTEMS PTY LTD |
| Second Respondent: | LEA ADAMS |
| Third Respondent: | ALAN ASTLE |
| File Number: | ADG 380 of 2015 |
| Judgment of: | Judge Brown |
| Hearing date: | 1 November 2016 |
| Date of Last Submission: | 1 November 2016 |
| Delivered at: | Adelaide |
| Delivered on: | 29 March 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr B Duggan |
| Solicitors for the Applicant: | DW Fox Tucker Lawyers |
| Counsel for the First Respondent: | No appearance |
| Solicitors for the First Respondent: | No appearance |
| Counsel for the Second & Third Respondents: | Mr Krips |
| Solicitors for the Second & Third Respondents: | EMA Legal |
ORDERS
The application for summary judgment is dismissed against the first respondent.
The applicant file and serve all affidavit evidence he proposes to rely on at trial on or before close of Registry filing on 14 March 2018.
The second and third respondents file and serve all affidavit evidence they propose to rely on at trial on or before close of Registry filing on 28 March 2018.
Further consideration of the matter is adjourned to 29 November 2017 at 9:30am for directions.
The matter be fixed for final hearing before Judge Brown on 2, 3 & 4 May 2018 at 10:00am NOTING 3 days allowed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 380 of 2015
| MICHAEL CLARKE |
Applicant
And
| ELITE SYSTEMS PTY LTD |
First Respondent
And
| LEA ADAMS |
Second Respondent
And
| ALAN ASTLE |
Third Respondent
REASONS FOR JUDGMENT
Introduction
These proceedings arise in the context of the court’s jurisdiction under the Fair Work Act 2009 (Cth)[1], particularly in the context of how the court is directed to deal with contraventions of civil remedy provisions, arising under the Act.
[1] Hereinafter referred to as “the FWA” or “the Act”
The applicant in the proceedings is Michael Clarke. In early November of 2012, he entered into a contract of employment with the first respondent, Elite Systems Pty Ltd (hereinafter referred to as “Elite”).
He was employed to be Elite’s sales manager, on a salary of $70,000.00 per annum. Pursuant to the contract, Mr Clarke was also to be provided with a company car. The contract of employment was said to be subject to two months’ notice. Elite installs scaffolding, particularly in the context of providing seating for large scale outdoor events and other forms of entertainment.
Significantly, in addition to his salary, Mr Clarke contends that the contract indicated that he was entitled to further payment, pursuant to a bonus scheme, which allowed him to receive a specified percentage of the company’s gross profits. This was to be calculated by means of Mr Clarke submitting a spreadsheet, of his sales, to the company’s accountant, by the 15th of each month.
It is Mr Clarke’s position that, between January 2013 and June 2015, he accrued bonuses totalling $129,205.79, as a result of sales achieved by him on Elite’s behalf. Mr Clarke claims that he has not received this sum and therefore Elite is in breach of its contract of employment with him.
Mr Clarke tendered his resignation to Elite by means of a letter dated 31 August 2015. In this letter, he demanded reimbursement of the sum of $129,205.79 in respect of bonus payments due to him, together with payment of a further sum of $1,000,000.00. Mr Clarke claimed that this later sum was also due to him as it represented shares in Elite, which he claimed it had been agreed between him and Elite would be allocated to him. Rather than the shares, Mr Clarke seeks the payment of what he contends is the monetary value of the shares.
It is Mr Clarke’s position that Elite paid him only one months’ salary, on his resignation, rather than the two months to which he was entitled. under his contract of employment with the company.
On 9 October 2015, Mr Clarke commenced proceedings, in this court, against Elite, alleging Elite had breached a number of civil remedy provisions of the FWA. These include a failure to pay him in lieu of notice [section 117 FWA]; and a failure to pay him annual leave [section 90 FWA].
These are both core provisions[2] of all employment relationships, which are subject to the National Employment Standards. It is asserted that Elite is a national systems employer. As such, Mr Clarke asserts that he is entitled to bring proceedings against Elite for breaching these provisions pursuant to section 539 of the Act.
[2] See FWA at section 44
If it is established that a respondent has breached a provision of the National Employment Standards or the term of an applicable modern award, such an employer is subject to a penalty of up to sixty penalty units pursuant to section 539.
In addition, pursuant to section 545(1) of the Act, the court is authorised to make any other order, which it considers appropriate, if satisfied that a civil remedy provision, arising under the Act, has been breached. Pursuant to section 545(2) the court is authorised to also make an order awarding compensation for the loss of any person, who has suffered because of such a contravention.
On 6 July 2016, Mr Clarke was given leave to amend his initiating application to join Lea Adams and Alan Astle as respondents to the proceedings. They were each, at material times, directors of Elite. As such, it is Mr Clarke’s position that both Mr Adams and Mr Astle, as directors of Elite, were involved in the contravention of civil remedy provisions alleged against Elite.
In this context section 550(1) of the Act is relevant. It reads as follows:
“1) A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.”
The concept of involvement is defined by section 550(2) of the Act. It read as follows:
“(2) A person is involved in a contravention of a civil remedy provision if, and only if, the person:
(a)has aided, abetted, counselled or procured the contravention; or
(b)has induced the contravention, whether by threats or promises or otherwise; or
(c)has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
(d)has conspired with others to effect the contravention.”
Elite has filed a response and a defence to the claims made against it. This response was prepared by a firm of solicitors in Melbourne. No affidavit evidence was filed in support of the responding documents. Elite denies that there was any binding obligation, upon it, to transfer any shares to Mr Clarke. Elite further asserts that the period of notice was reduced from two month’s to one month in September of 2015.
In any event, even if this is not the case, Elite asserts that Mr Clark’s conduct justified his immediate termination without notice. In this context, it is alleged that Mr Clarke made travel arrangements for himself, which were not authorised.
In respect of the bonuses, to which Mr Clarke asserts he was entitled, it is Elite’s position that these were to be paid at its absolute discretion and, in lieu of such payments, it provided other benefits to Mr Clarke, including the use of a motor vehicle; payment of his rent at a property in Woodville South; and the payment of flights to London.
On 20 May 2016, the solicitors who had previously acted for Elite withdrew from the proceedings. Thereafter, Elite has failed to appear to defend the proceedings. In these circumstances, on 6 July 2016, the following order was made:
“If the respondents do not appear on the adjourned date, either in person or via legal counsel, directions will be made to fix the matter for summary hearing and directions will be made for the filing of affidavits for the said hearing without further reference to the respondents.”
The proceedings were then adjourned until 24 August 2016. On this date, none of the respondents appeared and the case was listed for a summary judgment hearing on 1 November 2016. On 23 August 2016 Mr Adams and Mr Astle sent a joint email to Mr Duggan, who is Mr Clarke’s solicitor, indicating that they intended to defend the matter but this was very difficult as one was overseas and one was in hospital fighting cancer.
Against this background, on 7 October 2016, solicitors acting for Mr Adams and Mr Astle filed a defence to Mr Clarke’s amended statement of claim. Mr Adams conceded that he had been a director of Elite since 29 January 2015, whilst Mr Astle conceded that he had been a director of the company since 17 December 2013. They each individually deny any basis for being liable for any actions of Elite.
Mr Duggan undertook a company search, in respect of Elite, on 14 July 2016. This search indicated that a receiver/manager had been appointed in respect of Elite. The receiver/manager is Mr Simon Cathro of Worrells, a firm of solvency and forensic accountants, based in Sydney. Mr Cathro has indicated to Mr Duggan that he does not intend to become involved in the current proceedings, asserting that, in his view, Mr Clarke’s claim is a matter for the directors of the company.
Mr Duggan has requested Elite’s former solicitors to provide him with copies of documents relating to the bonus scheme and the share transfer scheme, which Mr Clarke has asserted applied to his employment at Elite. He has received no response. He has made the same request of Mr Adams and Mr Astle and again received no formal response.
On 1 November 2016, Mr Duggan sought that judgment in the sum of $129,205.79 be entered in favour of his client against Elite. This being the sum, as calculated by Mr Clarke, of what is owed to him, pursuant to the bonus scheme, by Elite. As foreshadowed, there was no appearance by Elite to oppose this application.
On the same date, Mr Kripps, solicitor for Mr Adams and Mr Astle appeared. He is instructed to defend the proceedings on behalf of the two directors concerned. It is his position that it is premature for judgment to be entered against Elite alone, whilst other aspects of the same cause of action continue to trial.
On the other hand, it is Mr Duggan’s position that the court is able to enter judgment, pursuant to the relevant court rules, in the liquidated amount specified by Mr Clarke. The judgment can then be submitted to the receiver/manager of Elite as an unsecured demand for payment. These reasons for judgment are directed towards the resolution of this issue.
The applicable legal provisions
Rule 13.03A(2) of the Federal Circuit Court Rules 2001 sets out the circumstances in which a respondent is taken to be in default. It includes the following:
·the respondent has not satisfied the applicant’s claim;
·has not complied with an order in the proceedings;
·has not produced a document;
·had not defended the proceedings with due diligence.
Elite has not appeared at court on three occasions. It has indicated, through its receiver/manager that it does not intend to take any further action in the matter. Accordingly I accept that it is to be considered in default. A more difficult question is what should happen next. It being the case that the court is not obliged to enter judgment in such circumstances. Rather it has a discretion so to do. As with all discretions, it must be exercised judicially.
The powers of the court, when a respondent is found to be in default, are set out in Rule 13.03B(2) as follows:
“(2) If a respondent is in default, the Court may:
(a)order that a step in the proceeding be taken within the time limited in the order; or
(b)if the claim against the respondent is for a debt or liquidated damages—grant leave to the applicant to enter judgment against the respondent for:
(i) the debt or liquidated damages; and
(ii) if appropriate—costs; or
(c)if the proceeding was commenced by an application supported by a statement of claim or the Court has ordered that the proceeding continue on pleadings—give judgment against the respondent for the relief that:
(i) the applicant appears entitled to on the statement of claim; and
(ii) the Court is satisfied it has power to grant; or
(d)give judgment or make any other order against the respondent; or
(e)make an order mentioned in paragraph (b), (c) or (d) to take effect if the respondent does not take a step ordered by the Court in the proceeding in the time limited in the order.”
It is Mr Duggan’s submission that his client’s claim falls within the purview of the rule, on the basis that it is either a claim for a debt or liquidated damages; or arises from the statement of claim filed, which has not been diligently defended by Elite.
The first issue is whether Mr Clarke’s claim is for a debt or liquidated damages. I am not convinced that it is. The grounding for Mr Clarke’s cause of action is his allegation that Elite has contravened various provisions of the FWA, which render it liable to sanction. These provisions relate to statutorily based protections for employees who fall within defined parameters. In this case, the protections arise in respect of such matters as the provision of wage slips and payment in lieu of notice. As a corollary of this jurisdiction, if any such breaches are established, the court has authority to make additional orders compensating any individual who has been prejudicially affected by such contraventions.
Mr Clarke’s entitlement to bring proceedings in this court is not one primarily based on the alleged breach of the contract of employment between him and Elite, specifically as it relates to the payment of bonuses due to him or the transfer of shares to him. Rather it relies on the jurisdiction of the court conferred on it by the Fair Work Act.
In my view, any entitlement, which Mr Clarke may have to compensation, is ancillary to the court’s jurisdiction to maintain prescribed workplace standards. The objects of the Fair Work Act are set out in section 3 of the Act. Amongst these is the following:
“ensuring a guaranteed safety net of fair, relevant and enforceable minimum wages and conditions through the National Employment Standards, modern awards and national minimum wage orders;” [FWA section 3(b)]
In pursuing his application for summary judgment, against Elite, Mr Clarke does not seek the imposition of any penalties arising directly from his allegations of contraventions arising under the Act. Rather he seeks the payment of what he characterises as a claim for a liquidated amount calculated by reference to the commissions alleged to be due to him, as a consequence of the contract between him and the company.
A claim is liquidated if a formula or scale fixes its amount without recourse to assessment or opinion. In his affidavit material, Mr Clarke has provided a letter to him, from Mr Adams, dated 3 November 2012, which is purported to be the contract of employment between him and Elite. The letter, under the heading Bonus Scheme reads as follows:
“Year 1
$0-$1M
Gross profit over 40%
5%
Gross Profit 25%-40%
3%
$1M +
Gross profit over 40%
8%
Gross Profit 25%-40%
3%
Year 2
$0-$2M
Gross profit over 40%
5%
Gross Profit 25%-40%
3%
$2M +
Gross profit over 40%
8%
Gross Profit 25%-40%
3%
Year 3
$0-$4M
Gross profit over 40%
5%
Gross Profit 25%-40%
3%
$4M +
Gross profit over 40%
8%
Gross Profit 25%-40%
3%
You are responsible for providing a spreadsheet of your sales and margin report by the 15th of each month and your figures will be checked and bonuses will be paid monthly and 2 months in arrears to ensure payment is received by the customer before the bonus is paid to you. You will not be paid bonus on bad debts.”[3]
[3] See Affidavit of Mr Clarke filed 27 October 2016 at Annexure MC 2
Further, in his affidavit, Mr Clarke deposes as follows in respect of the provision of the spreadsheets referred to in the portion of the letter above:
“A term of the written employment contract between Elite Systems and myself was that it was my responsibility for providing a spreadsheet of sales and margin report by the 15th of each month. In practice, the preparation of the documentation to determine my entitlement to a performance based payment under the bonus scheme was a collaborative effort between Elite Systems and myself. Elite Systems accountant (initially Fiona Marling and later Herman Wessels) would forward a spreadsheet which contained infon11ation as to my sales and the margin regarding those sales. I would review the spreadsheet before it was finalised by way of agreement with Elite Systems accountant (initially Fiona Marling and later Hennan Wessels). The finalised spreadsheet contained information as to the amount of sales, the margin and the amount of the performance based payment to be paid for the month under the bonus scheme.
I received an email from Elite Systems accountant Herman Wessels which attached the consolidated information as to the amount of sales, the margin and the amount of the performance based payment to be paid under the bonus scheme for my employment at Elite Systems in the form of spreadsheets dated 28 August 2015. The consolidated information contained in the spreadsheets was based on historical information as to the amount of sales, the margin and the amount of the performance based payment to be paid under the bonus scheme that had previously been agreed with Elite Systems accountant (initially Fiona Marling and later Herman Wessels) periodically during the course of my employment at Elite Systems. Herman Wessels had also updated the information contained in the spreadsheets such that it contained more recent information as to the amount of sales, the margin and the amount of the performance based payment to be paid under the bonus scheme to be agreed. I recall confirming with Herman Wessels that the consolidated information, including the more recent information, contained in the spreadsheets was accurate. The total amount of the performance based payment due to be paid to me as per this consolidated information contained in the spreadsheets for my employment at Elite Systems was $129,205.79. Elite Systems have not paid me my performance based payment due of $129,205.79 or any amount at all under the bonus scheme. A true and correct copy of Hem1an Wessels email to me which attached the consolidated information as to the amount of sales, the margin and the amount of the performance based payment to be paid under the bonus scheme for my employment at Elite Systems is attached to this Affidavit as ‘Annexure MC-3’.”[4]
[4] Ibid at paragraphs 14 & 15
In my view, in these circumstances, the claim for bonuses cannot be considered a claim for a liquidated amount as its calculation cannot be made independently of the assertion of Mr Clarke that the sum is a correct one by reference to the spreadsheets concerned. Rather the sum so calculated relies on the interpretation provided by Mr Clarke himself. The court is not in a position to make the same calculation independently by reference to source documents.
The next issue is whether Mr Clarke is entitled to judgment, against Elite, on the basis of the amended statement of claim filed on his behalf, bearing in mind the discretionary nature of the remedy and the fact that, in its defence to the claim, Elite has pleaded that any bonuses to be paid to Mr Clarke were to be at the complete discretion of Elite.
Rule 13.03B(2)(c) contemplates that judgment may be given against a respondent for relief to which the applicant appears entitled “on the statement of claim” and the court is satisfied it has “power to grant”. In all the circumstances of this case, I am not persuaded that I have power to grant the relief claimed, in the amended statement of claim, against Elite, merely because Elite has failed to appear in court.
I reach this conclusion because an explanation has been provided as to why Elite has elected not to appear – essentially, it is in receivership and the receiver considers the issue of bonuses to be a matter for the directors of the company rather than for him. Issue has also been joined as to the nature of the bonus system – Elite, in its defence, claims it was discretionary in nature. Finally, the authority of the court to grant the relief sought by Mr Clarke is ancillary to the court’s power to find that Elite has breached civil remedy provisions arising under the FWA. Mr Clarke is not pursing that aspect of his claim.
In all these circumstances, I do not propose to exercise the discretion, arising under rule 13.03B(2), in Mr Clarke’s favour. Rather, in my view, it is appropriate to fix the entire action, including against Mr Adams and Mr Astle for final hearing. At this stage, the court will be in a better position to make findings of fact, in respect of all the issues joined in the amended statement of claim, to which both Elite and its directors have taken issue.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding forty-one (41) paragraphs are a true copy of the reasons for judgment of Judge Brown
Date: 29 March 2017
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