Dormer v Relocation Laws Pty Ltd
[2019] ACTMC 33
•11 October 2019
MAGISTRATES COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Dormer v Relocation Laws Pty Ltd |
Citation: | [2019] ACTMC 33 |
Hearing date(s): Last submissions: | 19-22 March 2019, 13 August 2019 1 October 2019 |
DecisionDate: | 11 October 2019 |
Before: | Acting Chief Magistrate Theakston |
Decision: | See [43]. |
Catchwords: | EMPLOYMENT LAW – The contract of service and rights, duties and liabilities between employer and employee – Breach of Contract DAMAGES – Measure and Remoteness of Damages in Actions for Breach of Contract |
Legislation Cited: | Fair Work Act 2009 (Cth) s 557C, pt 2-2 |
Cases Cited: | Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145 Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034; 152 ALD 209 Fair Work Ombudsman v Han Investments Pty Ltd [2017] FCA 623 |
Parties: | Blair Dormer (Plaintiff) Relocation Laws Pty Ltd (Respondent) |
Representation: | Counsel Mr P Herrald (Plaintiff) Mr R Markham (Respondent) |
| Solicitors Jack Herrald Solicitors (Plaintiff) Adero Law (Respondent) | |
File Number(s): | CS 218 of 2017 |
ACTING CHIEF MAGISTRATE THEAKSTON:
Introduction
The Australian Public Service often use contractors to assist it with moving staff between office locations. This is a dispute between such a contractor operating in Canberra and a former employee of that contractor.
Mr Dormer, the former employee and plaintiff, seeks payment of his entitlements for annual leave from Relocation Laws Pty Ltd, the contractor and defendant. Relocation Laws Pty Ltd seeks damages from Mr Dormer for breach of his contract of employment in relation to the requirements of exclusivity, duties and disclosure of information.
I will initially describe relevant facts that were not in issue. I will then go on to address the following issues that remain in contention:
(a)Who bears the burden of proof in relation to the provision or otherwise of leave entitlements?
(b)What were Mr Dormer’s annual leave entitlements?
(c)Was the leave enjoyed by Mr Dormer taken as time in lieu or as annual leave?
(d)Are there annual leave entitlements remaining unpaid?
(e)Was there an implied release?
(f)Was there a breach of contract?
(g)Did the breach cause Relocation Laws to suffer a loss?
(h)Was the loss too remote and could Relocations Laws have mitigated that loss?
Facts not in issue
The following facts were either conceded or not challenged and I make findings accordingly:
(a)Relocation Laws is incorporated. From 5 December 2011 to 26 May 2017, Relocation Laws employed Mr Dormer on a full-time basis. Mr Dormer’s duties involved arranging removals on behalf of clients by sub-contractors.
(b)Towards the end of his employment, Mr Dormer was paid $6,300 gross per calendar month, along with a car allowance of $667.00.
(c)Mr Dormer’s employment was pursuant to a written employment contract. The contract contained the following relevant provisions (errors included and unmarked):
REMUNERATION
…
Your base salary includes all other standard employee entitlements such as 4 weeks annual leave, public holidays, 5 days / 10 days sick leave and long service leave. Your base salary will be remunerated to you monthly and tax will be deducted as per your relevant tax scale.
Tax will be deducted as per your relevant tax scale. Annual leave is accrued on a pro-rata basis up to a maximum of 2 (two) years. Leave not taken within the accrued period will be forfeited. It is your responsibility to ensure that your annual leave entitlements are in fact taken. Advance leave payment is not allowed.
Hours worked on relocation projects after 5pm on a Friday, all day Saturday and Sunday will be remunerated to you in days in lieu and can be taken as per agreement with your supervisor.
HOURS OF DUTY
You must always be available as directed by your Director. It is a mandatory requirement of the relocation industry that working hours include working after hours, weekdays and working at weekends. Hours are flexible within reason. Normal office hours are 8.30am to 5.00pm.
EXCLUSIVITY
As such you will work exclusively for Relocation Laws and will not undertake any work, which is the same or similar to the work undertaken by Relocation Laws, with any other company.
Time in LIEU
Time in lieu will be provided for all out of hours work completed. You will be required to keep a timesheet for additional hours worked. Please keep a detailed record of all over time and provide a monthly timesheet to your supervisor to ensure time in lieu is taken when convenient to both parties.
…
DUTIES
You will be expected to serve the Company in the position to which you have been appointed or in such other position or with such other duties as may from time to time by assigned to you by the Company.
…
DISCLOSURE OF INFORMATION;
…
You must keep secret during and after your employment all information you obtain about the business and affairs of the Company, its clients or customers. Any documents or written material provided by the Company or used in connection with the Company’s business is the Company’s property and must not be removed, passed on, copied or disclosed to third parties except with the Company’s authority.
…
(d)On 19 April 2017, a Department of Defence employee emailed Mr Dormer at his Relocations Laws email address and invited him to meet in relation to a refurbishment project. That project involved work that could be done by Relocation Laws. Mr Dormer did not inform Ms Laws about the proposed project.
(e)On 21 April 2017, Mr Dormer arranged for the incorporation of a company Dormer Projects Pty Ltd, for the purpose of using the name to trade in project work.
(f)On 28 April 2017, Mr Dormer sent Ms Laws an email providing notice that he would be ceasing his employment with Relocation Laws. That same day, Ms Laws responded by email directing Mr Dormer not to inform any clients yet of his leaving.
(g)Mr Dormer met with the Defence employee, discussed the project, advised her he was leaving Relocation Laws and setting up his own relocation business. Mr Dormer provided her with his new email address for Dormer Projects.
(h)Emails were exchanged between Mr Dormer and the Defence employee about the project, using the Dormer Projects email address. Other emails were sent between Mr Dormer, using his Dormer Projects email account and Defence employees discussing what information he needs to provide to be set up on the Defence payment system. Mr Dormer was told that the project needed to be paid from funds allocated that financial year, and therefore transactions processed by 12 June 2017.
(i)On 18 May 2017, Mr Dormer provided payment information in relation to Dormer Projects to the Department of Defence.
(j)On 26 May 2017, Mr Dormer ceased employment with Relocation Laws. He was paid $6,431.07 gross in lieu of annual leave.
(k)On 29 May 2017, and in the absence of any quote being provided by Dormer Projects, a Department of Defence purchase order was raised allocating $300,000 for the project and identifying Dormer Projects as the vendor.
(l)On 5 June 2017, an email was inadvertently sent by the Defence employee to Mr Dormer at his Relocation Laws email address. That email was seen by Ms Laws.
(m)Proceedings were commenced by Relocation Laws against Mr Dormer and Dormer Projects in the ACT Supreme Court seeking that Mr Dormer and Dormer Projects be restrained from breaching the terms of Mr Dormer’s employment contract. Mr Dormer informed the Department of Defence about those proceedings.
(n)On 14 June 2017, the Department of Defence sent an email to Mr Dormer indicating that the project would not proceed.
(o)On 15 June 2017, Ms Laws obtained an injunction in the ACT Supreme Court restraining Mr Dormer and Dormer Projects from performing any relocation services for a range of entities, including the Department of Defence, until 26 November 2017.
Who bears the burden of proof in relation to the provision or otherwise of leave entitlements?
A plaintiff ordinarily carries the burden of proving its case. In this case that would include proving the facts required to establish that the leave entitlements had accrued and had not been paid. Mr Dormer did not point to any authority that suggested otherwise. He made a reference to Fair Work Ombudsman v Han Investments Pty Ltd [2017] FCA 623 at [115], in which Barker J observed that the failure to maintain employment records was significant and impacted upon the regulatory scheme designed to ensure the payment of entitlements. However, that observation was made in the context of a sentencing proceeding and the assessment of the objective seriousness of a contravention. It did not go on to suggest there was any reversal of the onus of proof.
Relocation Laws made reference to Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034; 152 ALD 209 at [231], where Katzmann J made the following observation in the context of a claim of underpayment of statutory and award entitlements:
The requirement to prove each element of each contravention cannot be waived or modified simply because the employer has failed to keep proper records. If it were, the liability of an employer who failed to keep proper records would effectively be indefinite or confined only by the willingness of the Ombudsman to limit the number of allegations.
It was also brought to my attention that in September 2017, there was an amendment to the Fair Work Act 2009 (Cth) by the insertion of s 557C. That provision does impose a positive burden on an employer to disprove an allegation, where there was a failure of the employer to keep the mandated records. However, there is nothing within that amending legislation to suggest that the new provision, which would fundamentally alter a key feature of a trial, would operate retrospectively.
In the circumstances I will proceed on the basis that Mr Dormer has the burden of proving his case in relation to the non-payment of annual leave.
What were Mr Dormer’s annual leave entitlements?
Relocation Laws conceded that the National Employment System arrangements within the Fair Work Act 2009 (Cth) applied between the parties, and that there were no arrangements to cash out Mr Dormer’s annual leave. Section 87 of that Act provides that there be at least 4 weeks of paid annual leave.
I note out of completeness, that the employment agreement included the words ‘Your base salary includes all other standard employee entitlements such as 4 weeks annual leave …’. While at first blush, it may be perceived that those words do some work in modifying either the salary or the annual leave entitlement, a closer consideration leads to an inescapable conclusion that the annual leave and other entitlements remain available. This is because it is difficult to see how the salary or the leave entitlement could be adjusted in a meaningful way by the operation of that expression.
The agreement also includes the term ‘Annual leave is accrued on a pro-rata basis up to a maximum of [two] years. Leave not taken within the accrued period will be forfeited. It is your responsibility to ensure that your annual leave entitlements are in fact taken.’ Part 2-2 of the Fair Work Act 2009 (Cth) does not provide for the forfeiture of leave, but instead appears to contemplate leave balances being managed by leave being taken as agreed between employers and employees or it being cashed out. In such circumstances I am not persuaded that the employment agreement has an effect to forfeit annual leave.
Mr Dormer worked at Relocation Laws from 5 December 2011 to 26 May 2017. That equates to five years and 173 days (or approximately 5.47 years). With annual leave accruing at the rate of 20 days each year, Mr Dormer accumulated 109 days of annual leave. I note however, that Mr Dormer only claims he accrued 108.4 days of leave. This amount was ultimately conceded by Relocation Laws.
Was the leave enjoyed by Mr Dormer taken as time in lieu or as annual leave?
Some time was taken up during the hearing attempting to determine precisely how much leave was taken by Mr Dormer during the period he worked at Relocation Laws. Relocation Laws claimed to have not maintained any records of annual leave taken by Mr Dormer. Additionally, Ms Laws had no recollection of a conversation with Mr Dormer about him taking annual leave, per se, but did recall conversations about him taking leave more generally. However, Mr Dormer’s pay slips do contain a record of the accumulation of his annual leave, without any record of it being used.
Relocation Laws attempted to speculate how much time Mr Dormer took on annual leave by reference to electronic diaries used by the staff of Relocation Laws.
Relocation Laws speculated that Mr Dormer took almost 100 days annual leave during his time in their employ. Mr Dormer conceded that he took almost 50 days leave during that time, but insisted it was leave in lieu as provided within his employment contract and as agreed with Ms Laws on behalf of Relocation Laws.
The employment agreement, at two separate provisions, provides for leave in lieu to be taken to compensate for work performed outside of normal work hours. The two provisions are not necessarily consistent. However it is clear that the arrangement was contemplated by the agreement. Further, Ms Laws conceded that in her evidence.
On 26 May 2017,the final day of his employment, Mr Dormer responded by email to a letter from Ms Laws, which suggested that he was due only 4 weeks’ pay in lieu of annual leave. His email included the following question and comment, ‘Can you advise the formulation for this calculation please? I have had leave using a combination of time in lieu and annual leave but have never had 4 full weeks leave in a year meaning that my outstanding leave would need to be at least 8 weeks?’.
At hearing Mr Dormer was challenged about his claim that he did not take any annual leave and accepted that he had sent the above email. He explained that he had since sat down and considered the figures. While he no longer had access to his electronic diary on his work computer, where he kept records of leave, and was initially uncertain about the form of the leave he had taken, he now had the understanding that he never needed to dip into his annual leave because of the time in lieu he had accumulated.
Also in evidence was email correspondence from July 2012 between Mr Dormer and his then supervisor at Relocation Laws. At that stage, Mr Dormer had been working with the company for approximately seven months. That correspondence evidences the accumulation of leave in lieu of a significant amount. When extrapolated across five plus years and when considering the quantum of leave claimed by Relocation Laws, that evidence makes Mr Dormer’s claim very plausible that any leave he did take did not dip into his annual leave.
I place little weight on any concession or assessment contained within Mr Dormer’s email of 26 May 2017. The tone of that email was conciliatory and the content clearly indicates that Mr Dormer was attempting to negotiate additional pay in lieu of leave while avoiding conflict with Ms Laws. It is characterised by understatement. I accept the assessment made by Mr Dormer in court in relation to whether or not he needed to dip into his annual leave. He was clearly in the best position to assess that. I note that Ms Laws did not attempt to record or manage Mr Dormer’s leave and was therefore unable to assist the court in relation to the quantity or form of leave taken by Mr Dormer.
For the above reasons, I accept the evidence of Mr Dormer that any leave he did take did not dip into his annual leave. It is therefore not necessary for me to make a finding about precisely how much leave Mr Dormer enjoyed while working for Relocation Laws.
Are there annual leave entitlements remaining unpaid?
Mr Dormer accumulated 108.4 days of annual leave and received payment in lieu for 20 days upon his separation from Relocation Laws. He is therefore entitled to be paid for the remaining 88.4 days of annual leave. Using the calendar monthly salary of $6,300.00 and car allowance of $667.00, I calculate a daily rate of pay of $321.55. Therefore 88.4 days of annual leave is equivalent to $28,425.00. Pre-judgment interest on that amount from 26 May 2017 would be $3,695.66.
Was there an implied release?
Mr Dormer submitted that the orders in the related Supreme Court proceedings amounted to an implied release of liability for the breach of contract. That claim did not appear within the pleadings. Further there is no evidence before this court as to what was the cause of action in the Supreme Court. A copy of the Supreme Court orders of 15 June 2017 were put before this court, and they imposed only restraints upon Mr Dormer and Dormer Projects, along with the costs of the proceedings.
I am therefore unable to find there was a release, implied or otherwise, by Relocation Laws in relation to Mr Dormer’s breach of his contractual obligations arising from Supreme Court proceedings.
Was there a breach of contract?
The above facts clearly demonstrate that, during Mr Dormer’s employment with Relocation Laws, he was to work exclusively for Relocation Laws and was certainly not to divert potential work from Relocation Laws to anyone else, including his own personal business.
Mr Dormer’s conduct in progressing the Defence refurbishment project for his own purposes, and not informing Ms Laws about its existence, clearly amounted to a breach of the employment agreement. This is so even if the Defence employee initially contacted Mr Dormer due to her relationship and previous dealings with him. It would have been consistent with Mr Dormer’s contractual obligations, for him to progress the project on behalf of Relocation Laws and inform Ms Laws about the project. Ms Laws would then have been able to manage the relationship with Defence, even if Mr Dormer still separated from the company shortly thereafter.
Accordingly, I find that Mr Dormer breached his employment agreement with Relocation Laws.
Did the breach cause Relocation Laws to suffer a loss?
Mr Dormer submitted that there was no resultant loss to Relocation Laws because the purchase order in favour of Dormer Projects was ultimately cancelled, there is no evidence that links anything done by Mr Dormer to that cancellation, and that neither Mr Dormer nor Dormer Projects ultimately profited from the breach. With respect, those submissions are misconceived. They focus on Mr Dormer’s position, rather than on any loss suffered by Relocation Laws. It simply does not matter that Mr Dormer did not ultimately enjoy a benefit from the project or why the purchase order was cancelled.
The email of 14 June 2017 advising that the project would not proceed made reference to approvals not having been obtained. However, a mid-level officer of the Department of Defence gave evidence, which I accept, that the decision was partially his, and was due to the Supreme Court proceedings and a desire to distance the Commonwealth from the same.
It is apparent that had Mr Dormer not breached his obligations and Relocation Laws received the purchase order for the project, it would have enjoyed the opportunity to make a profit.
The purchase order was in the amount of $300,000. It did not follow a quotation by Mr Dormer. While the refurbishment was later completed by another provider, that provider also completed additional work, and it was not possible to determine from that arrangement a price for the project initially raised with Mr Dormer.
The best evidence about how the $300,000 figure was arrived at, came from a Defence employee who, while not personally having experience in refurbishment work to that extent, recalled an estimate within Defence that the project would cost around $250,000. That estimate appears to have been made based upon Defence’s experience with other fitouts over previous years. Another Defence employee explained that she was directed to raise a blanket amount to ensure that there were enough funds to cover the project, in the amount of $300,000.
An invoice dated 9 June 2017 by Dormer Projects in the amount of $295,175.10 was in evidence. However, it is unclear on what basis that invoice was prepared and in any event it appears it may have been prepared before any work was done on the relocation project. I will accordingly afford little weight to it for the purpose of assessing the scale of the refurbishment project.
In those circumstances, I find that the project provided an opportunity for Relocation Laws to provide services totalling $250,000.
The accountant for Relocation Laws provided evidence that the typical profit for the company was 22.22% of the gross contract price. I accept that evidence. Applying that factor to the $250,000 yields an expected profit of $55,550.00. Relocation Laws volunteered that Mr Dormer’s salary for the month of the project should be deducted from that profit. That would reduce the profit by $6,967.00 to $48,583.00. I accept the submission that as Relocation Laws was the only company offered that project that loss had 100% certainty.
I should pause at this point to address a submission made by Mr Dormer that in his absence Relocation Laws did not have the capacity to manage the project. While the evidence was that Mr Dormer was the only employee of the company in the Territory at that time, there was other evidence that the company had provided services at locations distant from the location of company staff. In those circumstances, there is no real basis to discount the certainty that Relocation Laws could have taken advantage of the opportunity to complete the project.
The company accountant also provided evidence about the difference in revenue from Defence sourced contracts before and after 26 May 2017. Relocation Laws submitted that there was a difference of $113,206.00 in Defence sourced revenue between the 12 months before and after that date. The accountant also noted that net income from Defence sources had been growing from 2015 until it abruptly stopped after 27 May 2017. However, those figures relate to a relatively short period of time and do not represent a reliable trend or established goodwill.
There was no evidence that staff of Relocation Laws, other than Mr Dormer, had any significant relationship with Defence employees. It was open on the evidence that the mere departure of Mr Dormer from Relocation Laws may have, of itself, lead to a loss of opportunities for Relocation Laws. Further, there was evidence that there was a restructure of sorts within the Department of Defence that moved the relocation work to another team. In those circumstances, it is difficult to reach a conclusion, on the balance of probabilities, that the decline in Defence work was substantially attributable to Mr Dormer’s breach of his contractual obligations.
Accordingly, I find it has not been established that there was ongoing loss suffered by Relocation Laws.
Was the loss too remote and could Relocations Laws have mitigated that loss?
In my view the loss experienced by Relocation Laws arose in the usual course of things and was also such as may reasonably be supposed to have been in the contemplation of both Relocation Laws and Mr Dormer when the contract was formed, as a probable result of a breach of the relevant provisions: Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145 at [151]. This is because a loss of profits is a patently obvious consequence of an employee diverting profit-earning opportunities away from an employer. Accordingly, the loss was not too remote.
There was no evidence to suggest that Relocation Laws failed to appropriately mitigate that loss.
Accordingly, I find that Relocation Laws suffered a loss of $48,583.00. Pre-judgment interest on that amount from the Defence transactional deadline of 12 June 2017 would be $6,195.66.
Orders
For the above reasons and while applying a set-off between the parties I make the following orders:
1. Judgment be entered for Relocation Laws Pty Ltd in the amount of $22,658.00
2. There be no orders as to costs.
3. Orders 1 and 2 do not take effect until 14 days after the date of these orders, and not at all if a party before the end of that 14 days contacts my associate in writing requesting to be heard in relation to the questions of the form of the judgment or costs.
| I certify that the preceding forty-three [43] numbered paragraphs are a true copy of the Reasons for Judgement of his Honour Acting Chief Magistrate Theakston Associate: Lauren Dreyar Date: 11 October 2019 |
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