Costigan v Dobont Pty Ltd

[2014] FWC 3947

[2014] FWC 3947

DECISION

Fair Work Act 2009
s.394—Unfair dismissal
Suzana Costigan
v
Dobont Pty Ltd
(U2013/16036)
John Costigan
v
Dobont Pty Ltd
(U2013/16037)
COMMISSIONER MCKENNA	SYDNEY, 26 JUNE 2014
Applications for relief from unfair dismissal.

[1] Suzana Costigan and John Costigan, who are spouses, have lodged applications pursuant to s.394 of the Fair Work Act 2009 (“the Act”) each alleging they were unfairly dismissed by Dobont Pty Ltd (“Dobont”) on 4 November 2013 and seeking remedies of compensation.

[2] The applicants submit that in each application the Commission should find in favour of the claims on the following bases: (a) there was no valid reason for dismissal based on conduct or capacity; (b) neither reason for the dismissal nor an opportunity to respond was provided by Dobont; (c) Dobont had access to external human resources management expertise; (c) the humiliation suffered within the community, with past clients and workplace and industry colleagues; and (d) personal effects had not been returned.

[3] By way of short background, Mr Costigan was formerly an employee and sole director of Dobont, and the licensee of the real estate agency that traded under franchise arrangements as LJ Hooker Katoomba. Dobont objects to Mr Costigan’s application, submitting he was not an employee of Dobont on 4 November 2013, being the date Mr Costigan contends he was unfairly dismissed. Dobont contends Mr Costigan was a director of Dobont and was paid a director’s fee; and that the terms of any employment contract proposed to be made with Mr Costigan were only under negotiation at the time Mr Costigan was removed as a director. At this time, Dobont contended, Mr Costigan’s employment had not been confirmed and (as is common ground) no formal employment contract had been made.

[4] There is no dispute Mrs Costigan was employed by Dobont as a senior property

manager on the date she was dismissed on 4 November 2013. Dobont contends Mrs Costigan
[2014] FWC 3947

engaged in serious misconduct following prior warning and that her dismissal was consistent
with the Small Business Fair Dismissal Code (“the Code”).

[5] The applications essentially proceeded in tandem, with evidence and submissions by and on their own behalf from Mr Costigan and Mrs Costigan respectively. Dobont’s evidence and submissions were received from its current sole director, Stephen Simonds and from Pierre Wakim, who is a director of a company which has a substantial shareholding in Dobont.

Mr Costigan

[6] From at least 2013, if not earlier, Dobont was encountering significant financial difficulties. In consequence of those difficulties, the Australian Taxation Office, for example, was twice “poised” to wind-up the company; Dobont had unpaid GST, superannuation guarantee charges and unpaid pay as you go withholding tax. From around August 2013, Dobont, through Mr Costigan as its then sole director, began arrangements designed, in effect, to attempt to save the business. Among other matters, there was evidence of the appointment by Mr Costigan of a voluntary administrator and the signing by (among other signatories) Mr Costigan and Mrs Costigan of a deed of company arrangement (being an instrument under Div 10 of the Corporations Act 2001).

[7] Much of the evidence adduced by the parties concerned matters in relation to the corporate arrangements effected with the new financiers/corporate shareholders, a certain loan of $25,000, and the competing contentions about the effect of various arrangements (not all of which were employment-related or employment-specific). The evidence of Mr Wakim, particularly, detailed such matters. Parts of the evidence also concerned a contract of employment Mr Costigan was seeking to negotiate for himself with the new financiers and a draft heads of agreement involving the Costigans and the new financiers.

[8] Section 396 of the Act requires that four matters be decided before considering the merits of the applications:

“396 Initial matters to be considered before merits

The FWC must decide the following matters relating to an application for an order under Division 4 before considering the merits of the application:

(a) whether the application was made within the period required in

subsection 394(2);

(b) whether the person was protected from unfair dismissal;

(c) whether the dismissal was consistent with the Small Business Fair

Dismissal Code;

(d) whether the dismissal was a case of genuine redundancy.”

[9] Dobont contended Mr Costigan’s employment with Dobont implicitly or inherently ceased at the time he voluntarily appointed an administrator on 13 August 2013, whereas Mr Costigan contends that on or about 3 August 2013, Mr Simonds (representing the

[2014] FWC 3947

shareholders) said in a meeting that Mr Costigan would be continuing in his employment with Dobont in the capacity as a sales person on a full-time basis. Mr Costigan did not receive any wages or commissions as an employee of Dobont from 10 August 2013.

[10] In the period thereafter, Mr Costigan sought to negotiate a contract of employment with Dobont on terms and conditions he proposed be entered into, but no such contract was ever made between Mr Costigan and Dobont. On 17 September 2013, however, with the inception of a deed of company arrangement (which did not refer to employment of Mr Costigan), Dobont retained the services of Mr Costigan as an interim director of the company. That is, by resolution dated 3 October 2013, matters were determined as follows:

“RESOLVED that Dobont Pty Ltd retain the services of John Costigan as an interim

director of the company for a fee of $1,000 per week to be paid from inception of the

deed of company arrangement dated 17th September 2013.

Further RESOLVED that all decision in respect of payments and expenses incurred

by the business are to be authorised by the members.”

[11] Dobont contends Mr Costigan was not an employee in the time relevant to this application, but that he was paid a weekly director’s fee of $1,000 for his services as an interim director in accordance with the resolution dated 3 October 2013. Dobont further contends Mr Costigan was not dismissed on 4 November 2013, but was removed from his role as an interim director by the members of the company on 1 November 2013 - with the removal confirmed to Mr Costigan in a letter dated 4 November 2013 which relevantly read:

“Please be advised that as at Friday 1st November 2013 at a meeting of the members

of the company you were removed as both director and secretary of the company
Dobont Pty Ltd.

All company assets are to remain with the company or be handed back to the company immediately. This includes your mobile phone and keys to the office of [address].

Please note that you are not to transaction on any bank account in the name of the company either trading account or trust account. You are expressly on notice that you are not to cause any detriment to the assets of the company and that any records that have been obtained as a consequence of your directorship remain records of the business.

The licensee in charge of the business is to be changed immediately as nominated by the members.

Please note that all contact from hereon in respect of the business and your former

position as a director is be made to - [contact person and details]”

[12] I am not satisfied Mr Costigan was an employee of Dobont on 4 November 2014. The evidence leads me to conclude Mr Costigan was, on the date he contends he was dismissed from his employment with Dobont, a person who had been receiving a directorship-related emolument rather than having an employment relationship. Mr Costigan’s last payslip as an employee of Dobont for the pay period ended 9 August 2013 was in evidence. It seems likely Mr Costigan’s employment with Dobont ceased on or about the date the administration [2014] FWC 3947

commenced, although the date and the precise mechanism by which the employment relationship then terminated are unclear in circumstances where Mr Costigan was, to around that time, the “owner” of his own business, i.e., he was sole director, the senior employee and the licensee of the real estate agency. Although Mr Costigan apparently performed certain sales and licensing-related work for Dobont in the period to 4 November 2013, I have not been satisfied Mr Costigan was, to the date he contends he was unfairly dismissed, then performing such work in the capacity of an employee of Dobont. For example, only days before Mr Costigan asserts he was dismissed from employment (and at a time when he was being paid $1,000 a week as an interim director), Mr Costigan wrote to Mr Simonds in the following terms seeking to formalise a separate employment agreement with Dobont:

“It’s interesting to see how diligently you are following up the results of my sales efforts, however you are not so diligent in formalising the agreement on which my sales are based.

I will let you know how settlements are going as soon as we have the employment agreement and the heads of agreement formalised.

By the way, [named individual] threatened yesterday to withdraw all [named group] business by the end of the month, he thinks that not having an agreement in place for my efforts at this late stage is ridiculous, subsequently he can’t see how any arrangement with him could ever be reached.

Please respond as a matter of urgency.”

[13] Matters related to a contract of employment Mr Costigan was seeking to negotiate for himself as well as a heads of agreement concerning both the Costigans were factors that led, directly and indirectly, to a disintegration of the initially-promising relationship between each of the Costigans and the new financiers of Dobont. For example, in one email Mr Costigan wrote to Mr Simonds as follows:

“I now believe that you are dragging things out, therefore I advise that all trust funds

will be withheld from transfer into the general account until an employment agreement

for myself and heads of agreement for both Suzie and myself are finalised.

It is a shame that I have been forced into a position to play hard ball.

Please respond ASAP.”

To similar effect, Mr Costigan also wrote to Mr Simonds:

“Further to communications below and the fact that the day is almost over, I am left

feeling very concerned that I have still not received my employment agreement or the
heads of the agreement for both Suzie and myself.

As previously advised I will not be transferring funds from the trust account into the general trading accounts until the aforementioned employment agreement and heads of agreement have been agreed upon and formalised

[2014] FWC 3947

In light of your expressions of reliance that funds must be transferred from the trust account to the general trading account by the end of this month, I trust that the draft agreements will be provided to me by no later than 12:00 noon tomorrow in order to allow sufficient time for negotiation, legal review and signed agreement prior to the end of the month.

I look forward to your urgent undivided attention to this critical matter.”

[14] I have noted the matters advanced by or on Mr Costigan’s behalf which appeared to be to the effect that if he was not an employee in the relevant time concluding on 4 November 2013 then the real estate agency would have been operating outside regulatory or licensing requirements. If that is the case, any issues concerning potential irregularities are a matter for the appropriate NSW regulatory authority, and not for this Commission. Any such potential irregularities that may result if Mr Costigan was not an employee of Dobont over the relevant period to 4 November 2013 do not mean Mr Costigan, in consequence, must have been an employee of Dobont - as it again appears effectively was contended in his case. Similarly, if there were issues about matters concerning Mr Costigan’s role and responsibilities as a director or interim director, such matters may be, as noted and repeated in the proceedings, appropriately canvassed in a forum other than the Commission.

[15] As to matters pertinent to the application in matter number U2013/16037, I am not satisfied Mr Costigan was an employee of Dobont on 4 November 2013, the date he contends he was unfairly dismissed. I consider Dobont’s jurisdictional objection to Mr Costigan’s application has substance and conclude Mr Costigan’s application fails for want of jurisdiction.

Mrs Costigan

[16] Mrs Costigan’s application was made within time and it did not involve any issues concerning genuine redundancy. Mrs Costigan had an employment relationship with Dobont dating from February 2004. I should note that in a new employment contract dated 8 August 2013 and co-signed by Mrs Costigan, she agreed to a probationary period of six months and a notice period of one week’s notice or payment in lieu of notice during the probationary period. The employment contract between Mrs Costigan and Dobont was subsequently registered with the Real Estate Employers’ Federation and Real Estate Association of NSW. Dobont does not appear to rely on Mrs Costigan’s agreed probationary period status under the employment contract in support of its decision to dismiss. There does not appear to be any issue that Mrs Costigan was not a person protected from unfair dismissal, most likely because of her length of service notwithstanding the perhaps atypical probationary period under the most recent contract of employment. Rather, Dobont relies on the conduct of Mrs Costigan and the Code in relation to the dismissal, to which I now turn.

[17] I accept the submissions for Dobont that certain actions by Mrs Costigan constituted serious misconduct following prior warning. The evidence strongly supported the submissions for Dobont in that regard. While it is unnecessary to fully describe the detail of the unfortunate evidence in this regard, Mrs Costigan’s conduct had, root and branch, the advancement of the aims of her spouse or herself (or both herself and her spouse) - with disregard for the interests of the other employees of Dobont and the viability of the business itself. As Dobont put matters in its submissions: “The willingness of [Mr Costigan] to

withhold funds in a trust account without being released for payment of wages and creditors,

[2014] FWC 3947

and the complicit actions of [Mrs Costigan] was such that the company could have ended up

in liquidation.”

[18] As I noted earlier, Mr Costigan was formerly the sole director and an employee of Dobont, and the licensee of the real estate agency. Unfortunately, the real estate business did not prosper under Mr Costigan’s stewardship - with one result being the arrangements that came into place from around August 2013. Perhaps even more unfortunately, one of Mr Costigan’s responses to the financial exigencies at the time Dobont was under his personal control to around the period the administration started was dereliction in meeting obligations concerning other employees of Dobont. For example, Dobont failed, among other matters, to meet obligations such as superannuation payments. The failure of Dobont to meet its lawful obligations in this and other respects occurred at a time when Dobont was under Mr Costigan’s control and when Mrs Costigan apparently had, among other duties in her employment with Dobont, at least some administrative responsibilities in such respects. This type of cavalier attitude as to obligations involving payments to other employees of Dobont was to re-emerge as a matter directly related to the deterioration of the relationship with the new financiers of the company. That is, and the evidence in this regard was fairly plain, Mr Costigan used financial means available to him to jeopardise payments to other employees of Dobont for the purpose of trying to leverage negotiations or otherwise put pressure on the new financiers of the company to agree to the terms and conditions of an employment contract he was seeking to obtain for himself and a heads of agreement concerning both himself and Mrs Costigan. As I have noted earlier in this decision, Mr Costigan wrote in an email to Mr Simonds: “It is a shame that I have been forced into a position to play hard ball.” Accepting as I do the descriptor used by Dobont, Mr Costigan’s and Mrs Costigan’s “complicit actions” jeopardised payments to other employees and creditors, with the result that the viability of the business was put at risk. This behaviour was, put at its lowest, unacceptable. Further, I also accept, Mr Costigan and Mrs Costigan aligned themselves in this complicity.

[19] In this respect, one of Mrs Costigan’s key functions was to administer the transfer of trust account money to landlords and the management income to Dobont’s general account as payment of monthly management income so that wages, rent and the like could be paid. In late September 2013, Mrs Costigan failed to effect such transfers for reasons involving Mr Costigan; she was warned at that time by Mr Wakim she risked being dismissed. She was effectively warned again in early October 2013, in connection with a discussion about trust and confidence. Mrs Costigan, for her part, sought to explain in her evidence before this Commission that she did not make payments to employees, and/or implied or threatened not to do so, for reasons squarely related to Mr Costigan’s wishes concerning his own employment contract. In the proceedings, Mrs Costigan’s case sought to explain or justify matters on the basis she could not make the payments without proper authority from Mr Costigan (for example, the lack of authorisation from Mr Costigan to Mrs Costigan was used in relation to Mrs Costigan’s conduct and the contention she was unfairly dismissed). As to matters related to the trust money, Mr Costigan deposed, for example:

“8. My obligation as Director as specified in the Deed of Company Arrangement was to

ensure that the Employee entitlements to staff where [sic] paid in full, which included ensuring that my own entitlements as a key employee to the company where [sic] paid in full, therefore, it was in effect the Respondents [sic] that where [sic] jeopardising the Company by way of finalising the terms of my employment and disallowing payment of my own employment entitlements.

[2014] FWC 3947

9. The Respondents [sic] actions of interfering with my obligation to ensure that employee entitlements to staff where [sic] paid in full by disallowing payment to myself as an employee, forced me to threaten withholding funds in trust until the Respondents allowed me to carry out my Director obligations.

10. Forced into an impossible situation by the Respondents [sic] I released funds held in the companies [sic] trust account to the company general account before any consequences could be felt by the company, with the result that I could not comply with my Director obligation to ensure payment of my own employee entitlements, however, my actions did benefit all of the other employees within the company by

ensuring payment to them.”

[20] In the proceedings, Mr Costigan and Mrs Costigan each attempted to, as it were, bolster each other’s case - albeit in a way I considered unpersuasive. Considered as a whole, their evidence was, in my assessment, generally self-serving and disingenuous. It was also characterised by clear recollection of matters which they each seemed to perceive as assisting their cases, compared to and contrasted with unsatisfactorily poor or no recollection when matters were put which did not assist their cases.

[21] The evidence discloses Mr Costigan and Mrs Costigan were acting or effectively acting in concert in behaviour from around the relevant period of August to November 2013 which had at its heart self-interest (and no other interest). While the Costigans were, of course, entitled to advance negotiations to further their own personal or family financial interests by legitimate means with the new financiers of the business, the approach adopted was not properly or reasonably available behaviour; their conduct was such that it presented serious and immediate jeopardy concerning payments to all employees of Dobont and the very on-going viability of the company itself.

[22] Mr Simonds and Mr Wakim, who each gave evidence as well as making submissions for Dobont, presented as individuals who attempted to act with propriety. They gave their evidence and presented their submissions with a sense of conviction I considered persuasive and with a type of, for the want of a better description, moral indignation about the conduct of the Costigans - an indignation which, given what emerged in the evidence and submissions, may be accepted as being quite understandable. They had started with expectation of an ongoing, productive and constructive relationship with the Costigans, only to find their trust and confidence in Mr Costigan and Mrs Costigan diminishing - gradually at first, and then rapidly. The ultimate conduct of the Costigans - who I accept were relevantly acting in concert to obtain leverage in relation to obtaining an employment contract for Mr Costigan and/or a heads of agreement - involved Mr Costigan and Mrs Costigan undermining the company in serious ways for their own purposes. Dobont had grounds to summarily dismiss Mrs Costigan (albeit she received a payment in lieu of notice), because she failed to and otherwise she threatened or strongly implied she would not facilitate payment of wages to employees for reasons associated with her husband’s negotiations concerning an employment contract he was then seeking to negotiate with Dobont or in relation to the heads of agreement, or both.

[23] As Dobont is a small business, a relevant consideration is whether the termination of Mrs Costigan’s employment was consistent with the Code. The evidence discloses the conduct that led to Mrs Costigan’s termination of employment was considered to be a serious [2014] FWC 3947

and multifaceted course of conduct. Consistently with the approach endorsed in Hepner v

Fine Food Solutionz Pty Ltd [2013] FWCFB 2060, I have considered the aspect of the Code

regarding summary dismissal and conclude Dobont’s representatives believed on reasonable grounds that Mrs Costigan’s conduct was sufficiently serious to justify summary dismissal - involving an assessment of the reasonableness of the grounds for their belief; she had, otherwise and in any event, received prior warning and was dismissed with a payment in lieu of notice. The termination of employment of Mrs Costigan was consistent with the Code and therefore not an unfair dismissal. It is unnecessary to consider other elements of an unfair dismissal: Pinawin T/A RoseVi.Hair.Face.Body v Domingo [2012] FWAFB 1359.

[24] Dobont raised other issues going to proper management matters, leasing of a home through Dobont, interaction with other staff and the like, but it is unnecessary for the purposes of determining the unfair dismissal applications for me to comment in this decision on the evidence in this regard.

[25] I should add, for completeness, that if my conclusion as to jurisdiction concerning Mr Costigan’s application is wrong and there was some form of a subsisting employment relationship with Dobont to 4 November 2013 (i.e. pending agreement on the terms of any employment contract) and he was summarily dismissed by Dobont that day, the evidence as to Mr Costigan’s conduct would otherwise lead me to conclude any such summary dismissal was consistent with the Code. Mr Costigan’s conduct in concert with Mrs Costigan (together with the evidence of matters more specific to his own personal conduct in, for example, refusing to/or otherwise placing conditions upon the basis on which he would provide sales information when reasonably requested to provide such information) would have provided grounds for summary dismissal if such conduct were engaged in by him in any capacity as an employee.

[26] One of the principles informing the unfair dismissals jurisdiction is a “fair go all round”, something that would not be afforded to Dobont if (putting aside the jurisdictional failure of Mr Costigan’s application) either or both these applicants were to be granted any relief with respect to the claims made in these applications alleging unfair dismissal.

Conclusion

[27]      Each application for an unfair dismissal remedy is dismissed.

[28] Orders will issue in conjunction with this decision dismissing the application by Mrs Costigan in U2013/16036 and Mr Costigan in U2013/16037.

COMMISSIONER

[2014] FWC 3947

Appearances:

S. Costigan and J. Costigan, applicants.

S. Simonds and P. Wakim for the respondent.

Hearing details:

2014.
Sydney:

May, 12.

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