Clifford v S & N Civil Constructions Pty Ltd

[2013] FWC 235

[2013] FWC 235

The attached document replaces the document previously issued with the above code on 16 January 2013.

To correct a typographical error, the final sentence of paragraph [33] is deleted and replaced with the following:

“That is, it appears unusual that a court may not supervise an administrative tribunal in respect of voluntary administration and (particularly) a compulsory winding up, but may in relation to a voluntary winding up or liquidation, given the issues around the surety of the assets for the creditors that arise.”

Laura Fitzpatrick

Associate to Senior Deputy President Richards

Dated 23 January 2013

[2013] FWC 235

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394 - Application for unfair dismissal remedy

Mr David Clifford
v
S & N Civil Constructions Pty Ltd
(U2012/8397)

SENIOR DEPUTY PRESIDENT RICHARDS BRISBANE, 16 JANUARY 2013

Summary: whether application under s.394 precluded by Corporations Act - ss. 471B, 440D and 500 of the Corporations Act - differences between various provisions - definition of court - restriction on arbitral power under s.500 but not s.471B or s.440D - whether claim lays against Administrator or Creditors’ Trust\trustee.

[1] On 24 May 2012 Mr David Clifford (“the Applicant”) lodged an application under s.394 of the Fair Work Act 2009 (“the Act”) seeking an unfair dismissal remedy in respect of the alleged action by S&N Constructions in terminating his employment.

[2] The application was allocated to me on 20 December 2012 for hearing of the jurisdictional arguments.

[3] The relevant facts in this matter are set out immediately below.

[4] S&N Constructions entered into voluntary administration on 11 April 2012.

[5] The Administrators that were subsequently appointed were Ferrier Hodgson.

[6] On 8 May 2012 the Administrator advised the Applicant that his employment had been terminated effective from that date.

[7] The Applicant lodged his unfair dismissal against S&N Constructions on 24 May 2012. S&N Constructions remained under Administration at this time.

[8] S&N Constructions entered into a Deed of Company Arrangement (DOCA) on 4 July 2012.

[9] The DOCA was completed on 3 September 2012, whereupon control of S&N Constructions was handed to its new directors, who had purchased the business.

[10] The Applicant has made a claim against the S&N Civil Constructions and S&N Civil Constructions Creditors Trust (“the Trust”) for payment of all alleged outstanding accruals including severance payments, incentive payments, completion bonuses, superannuation, annual leave, payment in lieu of notice et cetera. That claim against the Trust remains subject to adjudication by the trustee and appears as though it will be paid in April 2013 following an equity instalment.

[11] The Trust is a separate legal entity to that of S&N Constructions and functions to hold particular assets for the benefit of pre-appointment creditors who have become beneficiaries of the Trust.

[12] There are three jurisdictional objections to the unfair dismissal application by the new directors.

[13] The new directors contend firstly that because the Applicant lodged his application under s.394 of the Act against S&N Constructions after it went into administration on 11 April 2012 and before the DOCA was completed, section 440D of the Corporations Act 2001 (“the Corporations Act”) means the proceedings were invalidly instituted, and that the application must be dismissed as a consequence.

[14] The second objection in the alternative was that the Applicant’s claim lay against the Administrator as it was the Administrator who terminated the Applicant's employment. I make the observation at this point that the Administrator appears to have dismissed a very large number of employees (perhaps numbering between 200 and 250) at the time the Applicant’s employment was terminated, as part of the administration process.

[15] The third objection was that in the alternative to the above objections, the claim was as a contingent creditor whose claims fall within the terms of the Deed of Company Arrangement.

The first jurisdictional objection

[16] The new directors claim that section 440D of the Corporations Act provides for a statutory stay on such claims as made by the Applicant until such time as the leave of the court is obtained.

[17] Section 440D of the Corporations Act provides as follows:

440D Stay of proceedings

(1) During the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, except:

(a) with the administrator’s written consent; or

(b) with the leave of the Court and in accordance with such terms (if any) as the Court imposes.

(2) Subsection (1) does not apply to:

(a) a criminal proceeding; or

(b) a prescribed proceeding.

[18] The new directors’ argument in this regard is premised on the assumption that a proceeding within Fair Work Australia or the Fair Work Commission is a proceeding in a court for the purposes of section 440D of the Corporations Act.

[19] Section 471B of the Corporations Act provides as follows:

471B Stay of proceedings and suspension of enforcement process

While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with:

(a) a proceeding in a court against the company or in relation to property of the company; or

(b) enforcement process in relation to such property;

except with the leave of the Court and in accordance with such terms (if any) as the Court imposes.

[20] For purposes of comparison, s.500 of the Corporations Act also serves to provide a statutory bar. Section 500 of the Corporations Act provides as follows:

500 Execution and civil proceedings

(1) Any attachment, sequestration, distress or execution put in force against the property of the company after the passing of the resolution for voluntary winding up is void.

(2) After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.

(3) The Court may require any contributory, trustee, receiver, banker, agent, officer or employee of the company to pay, deliver, convey, surrender or transfer forthwith or within such time as the Court directs to the liquidator any money, property of the company or books in his, her or its hands to which the company is prima facie entitled.

[21] Section 500 of the Corporations Act provides a complete bar to the commencement of any action or other civil proceedings proceeding in respect of a Company which has entered into voluntary winding up.

[22] Both ss.471B and 500 of the Corporations Act relate to circumstances in which a Company is being wound up.

[23] The difference between the provisions is that s.500 of the Corporations Act applies when a Company is being wound up voluntarily, and s.471 of the Corporations Act applies when a Company is being wound up involuntarily, by a court initiated application or otherwise.

[24] Section 440D of the Corporations Act, by contrast, deals with the circumstances in which a Company has moved into administration voluntarily, which provides for a more gradual process of considering the prospects of the business before moving to any future resolution of the Company's affairs through a DOCA or the handing back of the business to the original Director(s). Of course, a DOCA may result in the Company being wound up, in which case s.500 of the Corporations Act would have effect from the date the DOCA was executed or took effect.

[25] But does s.440D of the Corporations Act represent a bar to proceedings against a company after such time as it moves in voluntary administration?

[26] In the current circumstances, section 440D of the Corporations Act appears to be a relevant provision. This is because S&N Constructions have moved into voluntary administration.

[27] Section 440D of the Corporations Act generally proscribes a proceeding in a court against the Company proceeding other than with the Administrators’ consent or with the leave of the court.

[28] However, section 440D of the Corporations Act - seemingly - does not represent a bar to the Applicant lodging his application under s.394 of the Act. The reason for this is as follows.

[29] A Full Bench of the Australian Industrial Relations Commission (as it then was) has determined (in the decision in Smith and Ors v Trollope Silverwood and Beck Pty Ltd. (Re:Smith)) 1 that the reference to a court in section 471B of the Corporations Act does not include a reference to what was then the Australian Industrial Relations Commission.

[30] While the Full Bench of the AIRC in Re: Smith was concerned with circumstances relating to s.471B of the Corporations Act (which concerns a compulsory winding up), it nonetheless made findings in respect of whether or not a proceeding in a court was akin to a proceeding in an administrative tribunal, such as the Australian Industrial Relations Commission, as it then was.

[31] The Full Bench determined that the Australian Industrial Relations Commission was not a court, and therefore s.471B of the Corporations Act did not present a bar to a proceeding being commenced in that Commission:

[20] If the legislature had intended to make proceedings in the Commission subject to the leave requirement it could have done so by express provision. An example of such a provision may be found in s.5 of the Suitors' Fund Act 1951 (NSW) which defines court in these words:"includes such tribunals or other bodies as are prescribed." 2

[32] It appears to follow that a similarly worded provision in respect of s.440D of the Corporations Act (which concerns a company in voluntary administration) would not exclude the jurisdiction the Fair Work Commission. But I do make one observation in passing, however.

[33] The Full Bench in Re: Smith also provided a number of absolute reasons why the court cannot supervise the arbitral powers of the (then) Australian Industrial Relations Commission (which explain why the Corporations Act limits the conditional prohibition to proceedings in relation to courts and not tribunals). But it is not readily apparent, at least, how these various reasons can be equally applied to the operation of s.500 of the Corporations Act (which provides for a complete bar in respect of tribunal’s arbitral jurisdiction (and more) absent the court’s leave (for purposes of a voluntary winding up of a company’s affairs). That is, it appears unusual that a court may not supervise an administrative tribunal in respect of voluntary administration and (particularly) a compulsory winding up, but may in relation to a voluntary winding up or liquidation, given the issues around the surety of the assets for the creditors that arise.

[34] Those observations made in passing, I am nonetheless required at this time to apply the authority of the Full Bench in Re: Smith. Consequently, I must dismiss the initial jurisdictional objection raised against the application so far as it concerns section 440D of the Corporations Act, and do so.

The second jurisdictional objection

[35] As mentioned above, the Respondent submitted in the alternative that since the Administrator terminated the employees the Administrator should be the appropriate Respondent to the Applicant’s application under s.394 of the Act.

[36] Section 437A of the Corporations Act provides as follows:

437A Role of administrator

(1)  While a company is under administration, the administrator:

(a)  has control of the company’s business, property and affairs; and

(b)  may carry on that business and manage that property and those affairs; and

(c)  may terminate or dispose of all or part of that business, and may dispose of any of that property; and

(d)  may perform any function, and exercise any power, that the company or any of its officers could perform or exercise if the company were not under administration.

(2)  Nothing in subsection (1) limits the generality of anything else in it.

[37] In effect, when the Company is under administration the Administrator exercises all the powers of the business as if the Company were not under administration.

[38] Section 437D of the Corporations Act provides as follows:

437D Only administrator can deal with company’s property

(1)  This section applies where:

(a) a company under administration purports to enter into; or

(b) a person purports to enter into, on behalf of a company under administration;

a transaction or dealing affecting property of the company.

(2)  The transaction or dealing is void unless:

(a)  the administrator entered into it on the company’s behalf; or

(b)  the administrator consented to it in writing before it was entered into; or

(c)  it was entered into under an order of the Court.

(3)  Subsection (2) does not apply to a payment made:

(a)  by an Australian ADI out of an account kept by the company with the ADI; and

(b)  in good faith and in the ordinary course of the ADI’s banking business; and

(c)  after the administration began and on or before the day on which:

(i)  the administrator gives to the ADI (under subsection 450A(3) or otherwise) written notice of the appointment that began the administration; or

(ii)  the administrator complies with paragraph 450A(1)(b) in relation to that appointment;

whichever happens first.

(4)  Subsection (2) has effect subject to an order that the Court makes after the purported transaction or dealing.

(5)  If, because of subsection (2), the transaction or dealing is void, or would be void apart from subsection (4), an officer or employee of the company who:

(a)  purported to enter into the transaction or dealing on the company’s behalf; or

(b)  was in any other way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the transaction or dealing;

contravenes this subsection.

[39] It appears to me that the Administrator is not legally or functionally distinguishable entity from the company, but at all times is to be taken as the company’s agent for the purposes of the administration.

[40] Consequently, the Administrator cannot be the Respondent to the current application in his or her own right. I therefore dismissed the second objection raised by the new directors.

The third jurisdictional objection

[41] The new directors submit that the Applicant is a contingent creditor and therefore his claims fall within the terms of the DOCA. I take this to mean that the claim may be against the S&N Civil Constructions and S&N Civil Constructions Creditors Trust, or the Trustee thereof. I disagree. The application concerned the Company at all times as the relevant legal entity, and cannot lay against the DOCA in some manner, or against the Trust or Trustee that arose from the actions taken in relation the company’s arrangements.

CONCLUSION

[42] All three jurisdictional objections raised by the new directors have been dismissed.

[43] The application is therefore referred to reallocation for arbitration.

[44] I make mention only by way of conclusion that I have had some discussions with the parties as to the circumstances of an application in which unfairness is alleged in the context of a redundancy instigated during a period of administration following a declaration of insolvency by the Directors (or Director in the current case). Steps have been taken to explain that the reason for selection for redundancy is not a matter that is relevant to whether or not there was a valid reason for a dismissal. 3

[45] The Applicant has undertaken to turn his mind to the implications of these matters on his application and to seek any advice he may require.

SENIOR DEPUTY PRESIDENT

Appearances:

Mr D. Clifford, Applicant

Mr K. Bowyer, for the Respondent

Hearing details:

2013.

9 January.

Brisbane, by telephone.

 1   AIRC, 17 November 2003, PR940508.

 2   Re: Smith, AIRC, 17 November 2003, PR940508.

 3   UES (Int'l) Pty Ltd v Leevan Harvey[2012] FWAFB 5241, at [26]-[29].

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