Foster v Parbery;Foster v Elliott

[2009] NSWSC 1304

CITATION:	Foster v Parbery;Foster v Elliott [2009] NSWSC 1304
HEARING DATE(S):	14 & 15 September 2009
JUDGMENT DATE :	30 November 2009
JURISDICTION:	Equity
JUDGMENT OF:	White J
DECISION:	Direct counsel for the parties to bring in short minutes of order in accordance with reasons.
CATCHWORDS:	CORPORATIONS – proofs of debt – appeals from rejection of proofs of debt – former employee sought to prove in liquidation of two companies who each rejected proofs of debt made by him for employment entitlements – each company submitted that the other was the employer at the relevant times – identification of plaintiff’s employer – transmission of business - determination of liability for superannuation contributions, redundancy pay, annual leave and accrued rostered days off – no entitlement to claim for untaken sick leave – appeals allowed - INDUSTRIAL LAW - New South Wales – identification of employer – transfer of employment requires consent of employee – plaintiff employed by new employer once he became aware of new employer and continued to work for new employer
LEGISLATION CITED:	Corporations Act 2001 (Cth)
CATEGORY:	Principal judgment
CASES CITED:	Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014 Damevski v Guidice [2003] FCAFC 252; (2003) 133 FCR 438 Textile Footwear and Clothing Union of Australia v Bellechic Pty Ltd [1998] FCA 1465 Australian Insurance Employees Union v WP Insurance Services Pty Ltd (1982) 1 IR 212 Australian Rail Tram & Bus Industry Union v Torrens Transit Services Pty Ltd [2000] FCA 1683; (2000) 105 FCR 88 Minister for Employment and Workplace Relations v Gribbles Radiology Pty Ltd [2005] HCA 9; (2005) 222 CLR 194
PARTIES:	2450/08 Plaintiff: Glenn Foster 1st Defendant: Stephen James Parbery 2nd Defendant:Transala Constructions Pty Ltd (in liquidation) 5589/08 Plaintiff: Glenn Foster 1st Defendant: Robert Elliott 2nd Defendant:Transala Constructions Pty Ltd (in liquidation)
FILE NUMBER(S):	SC 2450/08; 5589/08
COUNSEL:	Plaintiff: E Finnane Defendants: D Robertson
SOLICITORS:	Plaintiff: McCabe Terrill Lawyers Mr Parbery: Henry Davis York Mr Elliott: Middletons Lawyers

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

WHITE J

Monday, 30 November 2009

2450/08 Glenn Foster v Stephen James Parbery & Anor
5589/08 Glenn Foster v Robert Elliott & Anor

JUDGMENT

1 HIS HONOUR: These are appeals from the rejection of proofs of debt lodged by the plaintiff with the liquidators of Transala Contractors Pty Ltd (In Liquidation) (“Contractors”) and Transala Pty Ltd (“Transala”). On 17 December 2007 the plaintiff lodged a proof of debt with Mr Stephen Parbery, the liquidator of Contractors, claiming to be entitled to prove in the liquidation of that company in the amount of $27,274.63 for “super, entitlements and redundancy”. The plaintiff claimed to be entitled to those amounts as a former employee of Contractors. Mr Parbery rejected the proof on grounds that included that the plaintiff was not an employee of Contractors. In rejecting the proof, Mr Parbery asserted that the plaintiff had remained an employee of Transala.

2 On 18 September 2008 the plaintiff lodged a proof of debt in the same amount with Mr Robert Elliott, the liquidator of Transala. On 27 October 2008 that proof of debt was rejected on the ground that from 1 July 2002 the plaintiff’s employer was Contractors.

3 It is common ground that the plaintiff was employed by Transala up to 30 June 2002. The issues are:

a) whether the plaintiff was employed by Contractors after 1 July 2002, and if so, from what date;

b) whether the plaintiff is entitled to any payment on account of redundancy pay or sick leave; and

c) dependant upon the findings as to who was the plaintiff’s employer, and from what date, the quantum of the plaintiff’s entitlement to prove for unpaid superannuation contributions and annual leave.

4 The plaintiff did not contend that he was entitled to prove for the whole amount claimed in the proofs of debt. He contended that he was entitled to prove in the liquidation of one or both companies in the sum of $26,695.81. This was made up of the following components:

a) superannuation contributions not paid by his employer to a superannuation fund for the period from 11 October 1999 to 1 November 2004: $15,804.20;

b) redundancy payments claimed to be due under clause 16 of the Building and Construction Industry (State) Award : $5,748.64;

c) unpaid annual leave: $4,598.55;

d) unpaid rostered days off: $162.63;

e) unused sick leave: $381.79.

5 Prior to 30 June 2002, Transala carried on business as an excavation subcontractor in the building and construction industry. It owned or leased excavators and dump trucks and other earthmoving equipment. The plaintiff was employed as an operator of such equipment. As at 30 June 2002 the sole director and shareholder of Transala was Mr Tony Russell.

6 Mr Russell deposed that at about 30 June 2002, on the advice of Transala’s accountant, its business was restructured so that it ceased to provide excavation services at building sites. Instead its business was confined to hiring out its equipment to Contractors. Contractors was incorporated in July 2001. Until 12 November 2002 Mr Russell’s daughter was the sole director of Contractors, but Mr Russell was employed as its manager and was responsible for the day-to-day running of the business. He deposed that he and his daughter jointly made decisions concerning its business. Mr Russell deposed that from about 30 June 2002 Contractors provided excavation services at building sites. He deposed that at about 30 June 2002 all of the employees of Transala were “transferred from their employment with Transala to Contractors”. He said that this was done by his sending a letter on a letterhead of Contractors to each of Transala’s employees which enclosed a new Australian Taxation Office employment declaration form and stated words to the effect:

“ Transala is being closed down and you will now be employed by Transala Contractors Pty Limited. Your employee entitlements will be transferred to and paid by Contractors. It will otherwise be business as usual. Please fill in the ATO employee declaration form and return it to us as soon as possible as we need to update our records. ”

7 No such letter has been produced. Mr Russell said that he had been unable to locate a copy of it but believed it may have formed part of the books and records of one of the companies that was provided to their respective liquidators. No such document has been produced by either liquidator.

8 The plaintiff has no recollection of receiving such a letter. He deposed that in about October 2002 he noticed that his payslips were being issued by Contractors, not Transala. He deposed that as his payslips and group certificates were being issued by Contractors, he regarded it as his employer.

9 Counsel for Mr Parbery and Contractors submitted that I should reject Mr Russell’s evidence that a letter to the effect to which he deposed was sent.

10 Contemporaneous documents for the period from 1 July 2002 are conflicting. At the end of the financial year ended 30 June 2003, Transala issued a PAYG payment summary for the plaintiff recording that it had made payments before tax of $14,955 for the period from 1 July 2002 to 30 September 2002. A PAYG payment summary issued by Contractors records that in the 12 months from 1 July 2002 to 30 June 2003 it paid the plaintiff $37,697 before tax. It is clear from other evidence that these sums combined were the plaintiff’s wages for that financial year.

11 Mr Russell said that the PAYG payment summary issued by Transala was a clerical mistake, and the document should have been issued by Contractors. Payroll advices were issued by Contractors to Mr Foster from July 2002. The first such document produced is for the week from 8 July 2002. Those documents corroborate Mr Russell’s evidence that from 1 July 2002 former employees of Transala were paid by Contractors and were issued with payslips from Contractors recording their entitlements which had accrued prior to 1 July 2002.

12 There is further corroboration of Mr Russell’s evidence in a report to creditors of Transala dated 10 October 2002. On 24 September 2002 Mr Elliott and Mr Albarran were appointed as administrators of Transala pursuant to s 436A of the Corporations Act 2001 (Cth). On 10 October 2002 Mr Albarran reported:

“ The company [viz. Transala] previously traded as Civil Contractors and Plant Hire and was primarily involved in the building and construction industry and in particular the excavation side of the industry. Prior to 30 ^th June 2002 the company contracted out its large Caterpillar excavators and dump trucks to building and excavation sites throughout New South Wales.
The company provided all the services associated with the running, maintaining and transportation of its equipment. As the company’s dump trucks are of a somewhat rare nature in the Australian market, it also provided its own specialised operators and bore all the costs associated with operating such machinery.
The company ceased to trade as Civil Contractors around 30 ^th June 2002 and the business of the company is now solely the hiring out its earthmoving equipment. In respect of hiring the equipment, the company has an agreement with a related company, Transala Contracting Pty Limited, [scil. Transala Contractors Pty Ltd] and mainly hires its equipment to this company.
At the time of my appointment, discussions were held between myself and the Director, Mr. Tony Russell, regarding the present financial position of the company. The Director informed me that the company had fallen behind in the payment of GST and Withholding Tax deductions made from employees wages. After considering the financial position of the company, the Director appointed Robert Elliott and I [sic] as Voluntary Administrators.
...
Since the date of my appointment, I have been trading the business of the company, through a services agreement between the company, Transala Contractors Pty Limited and Robert Elliott and myself as Administrators. The agreement allows the company to maintain control and possession of its leased equipment, whilst utilising the employees of Transala Contracting Pty Limited to carry out the work. This agreement was required because as of 1 ^st July 2002, Transala Contracting Pty Ltd took over the employment of all employees of the company.
In effect, Transala Contracting Pty Ltd has the contracts with third parties and contracts the company to carry out work. The company invoices Transala Contracting Pty Ltd for work completed and Transala Contracting Pty Ltd invoices the company for use of its employees.
This agreement has allowed me to continue trading the business as well as maintain possession of the company’s leased equipment.
...
Employee Entitlements
I have been advised that all employees used by the company are employed by Transala Contracting Pty Ltd. This is part of the reason why the agreement referred to under Item 4 above was put in place. I have been advised that Transala Contracting Pty Ltd took over the employment of the company’s employees on 30 ^th June 2002. At that time, Transala Contracting Pty Ltd took over any entitlements owing to the employees of Transala Contracting Pty Ltd. Although I have been advised by the Director of this change of employment of the employees, I have not seen an agreement in relation to the transfer of the employees to Transala Contracting Pty Ltd. ”

The references to Transala Contracting Pty Ltd should have been to Transala Contractors Pty Ltd. The error was a typographical mistake.

13 Mr Elliott deposed that on the basis of the investigations he and Mr Albarran undertook when they were appointed as administrators, he was satisfied that Transala at that time did not have any employees and that the people who had been employed by Transala as at 30 June 2002 were thereafter employed and paid by Contractors. In this respect he relied upon the payslip issued by Contractors to the plaintiff. No employee made any request of the administrators of Transala for the payment of wages or other entitlements, and no payments of wages or other entitlements were made by the administrators to any employees.

14 The fact that the administrators were satisfied at the time of their appointment that Transala had no employees, and the fact that no-one claimed to be an employee of Transala, are matters of significant weight. How the parties conducted themselves in 2002 is a more reliable guide to discerning legal relationships which existed in 2002 than the fallible memories of Mr Foster and the plaintiff.

15 The Services Agreement to which Mr Albarran referred in his report to creditors was undated. I infer it was entered into at about the time of the appointment of the administrators, that is, at about 24 September 2002. I infer this because Mr Albarran stated in his report to creditors that since the date of his appointment he had been trading the business of the company through the Services Agreement. In that agreement Transala is described as the “Company” and Contractors is called the “Manager”. After reciting the appointment of the administrators the agreement recites:

“ B. The Manager has employed skilled and competent staff capable of assisting the Company in the conduct of its Business.
C. Pursuant to the powers granted to them under the Corporations Act 2001 , the Administrators approve the engagement of the Manager by the Company to provide the Services on the terms and conditions of this Agreement. ”

16 “Business” was defined to mean “business of provision and operation for third party customers of heavy machinery and earth moving equipment.” The Services Agreement is only consistent with Transala at that time being the company that was still conducting the business of providing and operating heavy machinery and earthmoving equipment for third parties. The agreement provided that for payment of a Services Fee, Contractors would provide the “Services” (as defined) to Transala.

17 “Services” was defined as including but not being limited to “the provision of the services set out in Schedule 1 of this Agreement.” Schedule 1 described the Services as “The provision of the following personnel to fully carry on all aspects of the Business as and when required by the Company”. There was then provision for Contractors to be paid a daily service fee of $45 per hour for each of ten operators employed by Contractors and for the payment of a monthly service fee for specified items of equipment. It can be implied from Schedule 1 that Contractors was to provide the service of the operation of the heavy machinery and earthmoving equipment.

18 Mr Russell deposed that whilst the Services Agreement was signed by all parties, its terms were never performed. Mr Elliott said that it was. The position is obscure. It is impossible to reconcile the terms of the Services Agreement with the description of the agreement in the report to creditors. Whilst it appears from the Services Agreement that the business of providing excavation services to third parties was a business of Transala, who retained Contractors to perform the services for it, the report to creditors stated that Contractors had the contracts with third parties, suggesting that Contractors was the party carrying on the business. The report also stated that Contractors contracted for Transala to carry out the work. The Services Agreement provides the opposite. Nor would that be consistent with the employees being employees of Contractors.

19 The one thing that is clear from both the Services Agreement and the report to creditors is that the employees engaged in the business were considered to be employees of Contractors. They were so described in both the Services Agreement and the report to creditors.

20 Transala proposed a deed of company arrangement, which the administrators recommended to creditors. The proposal was that Transala and Contractors would pay the administrators $1,847,354. Of this sum, $1,197,354 would be paid from funds received from the refinancing of the company’s assets and would be applied to extinguish the debt owed to creditors with security over the excavation equipment. $200,000 would be paid by 31 January 2003 and $450,000 would be paid by monthly instalments from 24 December 2002 to 28 February 2005 out of future profits and in consideration for the purchase of Transala’s business by Contractors. Contractors would confirm that it had taken over any employee entitlements outstanding at the appointment of the administrators. Mr Russell and Contractors would not claim under the deed of company arrangement for any amounts owing to them.

21 A deed of company arrangement was entered into on 21 November 2002. It was expressed to be made between the deed administrators, Transala, and Mr Russell. Contractors also executed the deed and undertook obligations under it. Recital G provided:

“ The Company [viz. Transala] has agreed to sell its business to Transala Contractors Pty Limited ABN 21 097 572 999 (‘Transala Contractors’) and Transala Contractors has agreed to take over the business of the Company and liabilities for Employee Entitlements for Current Employees. ”

22 The deed of company arrangement included the following provisions:

“ 5.1 The Company agrees to sell its business to Transala Contractors and Transala Contractors agrees to take over the business. The terms of the sale must be substantially in accordance with the Business Asset Sale Agreement annexed as annexure ‘A’ to this Deed.
...
5.4 Transala Contractors must as a term of the Business Asset Sale Agreement bear all liability for Employee Entitlements for Current Employees up to the Appointment Date and (subject to completion of the Business Asset Sale Agreement from the Appointment Date and continuing). ”

23 By clause 4 Transala agreed to pay $1,847,354 to the deed administrators. Whilst the deed provided for $1,247,354 to be paid within four weeks of the deed, it did not provide a timetable for the payment of the balance of that sum. The claims of creditors were only extinguished upon Transala making all payments to the deed administrators.

24 The Business Asset Sale Agreement was entered into at the same time as the deed of company arrangement. It recited that Transala was the owner of the “Business Assets” meaning “the following assets and undertaking of [Transala] namely a) the Equipment and b) the Goodwill.” It recited that Contractors wished to buy the Business Assets from Transala. Completion of the sale and purchase was to be the later of 28 February 2005, or such other date as might be agreed in writing between the parties. Clause 2 provided:

“ 2.1 Sale and Purchase
The Vendor as beneficial owner sells to the Purchaser, and the Purchaser buys from the Vendor, the Business Assets for the Purchase Price on the terms and conditions of this agreement.
2.2 Title, Property and Risk
The title to property in and risk of the Business Assets:
2.2.1 prior to Completion, remains solely with the Vendor; and
2.2.2 passes to the Purchaser on and from Completion. ”
2.3 GST
In this Clause ‘GST’ refers to goods and services tax under A New Tax System (Goods and Services Tax) Act 1999 ( ‘GST Act ’) and the terms used have the meanings as defined in the GST Act.
2.3.1 The Vendor and the Purchaser agrees that the sale of business in this agreement is the supply of a going concern.
2.3.2 The Purchaser represents and warrants that it is registered or is required to be registered under the GST Act.

2.3.3 The Vendor agrees that it will carry on the conduct of the business as a going concern until Completion.
2.3.4 The parties entered into this agreement on the basis that the supply is GST-free and the consideration is exclusive of GST. ”

25 Counsel for Mr Parbery and Contractors submitted that the parties intended that Transala would carry on the business as a going concern until completion, and it was consistent with this that the employees would remain Transala’s employees until completion.

26 However, it was clear from the report to creditors that the source of funds for Contractors to pay the purchase price of the business was to come from future profits of the business.

27 The purchase price for the business was $600,000. It was payable by instalments of $75,000 by 24 December 2002, $75,000 by 31 January 2003, and 24 equal monthly instalments of $18,750 from 28 February 2003. Ownership of the “Business Assets”, (that is, Equipment and Goodwill), did not pass until completion (Clause 3.2).

28 Clause 4 provided:

“ 4. EMPLOYEES
4.1 Termination of Employment
The Vendor must at least 7 Business Days before the Completion Date give notice terminating the employment of Current Employees on and from Completion.
4.2 Offer of Employment
The Purchaser shall before the Completion Date offer each Current Employee employment in the Business with the Purchaser from and conditional on Completion.
4.3 Terminating Employees
If an employee does not accept the offer of employment in the Business of the Purchaser, the Purchaser will be liable for the Employee Entitlements in respect to such Current Employees.
4.4 Continuing Employees
The Purchaser is solely responsible for the Current Employees and on the Completion Date the Purchaser is liable in respect to the Employee Entitlements due to the Current Employees, whether accrued before or after the Appointment Date.
4.5 Director
The Director agrees and acknowledges that he has released the Vendor from all Claims in relation to his Director’s Entitlements up to and including the Completion Date and the Vendor will have no liability in that regard. ”

29 “Current Employee” meant any employee of Transala as at 24 September 2002 having a claim for employee entitlements against Transala, excluding Mr Russell. Counsel for Mr Parbery and Contractors submitted that clause 4 demonstrated that the transfer of employees from Transala to Contractors was intended to occur only as at the Completion Date. Counsel submitted that, pending completion, the payment by Contractors of wages to employees of the business was undertaken on behalf of Transala which remained the employer.

30 On 15 June 2004 an application was filed by the Deputy Commissioner of Taxation for the winding-up of Contractors. Contractors was wound up by order of the court on 28 October 2004.

31 On 17 November 2004, Messrs Elliott and Albarran were appointed liquidators of Transala by virtue of a creditor’s voluntary winding-up. On 17 November 2004 they gave notice to Contractors that Contractors had failed to pay an instalment of $18,750 due on 31 October 2004. On 25 November 2004 they gave notice of termination of the Business Asset Sale Agreement. It can be inferred that Contractors paid the instalments of the purchase price due from 24 December 2002 to 30 September 2004. As those moneys were to be paid from the profits of the business of providing and operating heavy machinery and earthmoving equipment, I conclude that notwithstanding the terms of the Business Asset Sale Agreement, that business was conducted by Contractors and not by Transala.

32 On 29 October 2004 Mr Colin Sargent, from the office of PPB Chartered Accountants, told Mr Russell that Mr Parbery had been appointed liquidator of Contractors. He said to Mr Russell words to the effect:

“ I also need you to tell all of the employees that the company is in liquidation and that their employment will be terminated immediately. ”

33 Mr Russell did so. He told them that:

“ Transala Contractors has gone into liquidation and your employment will end. ”

34 The business of Transala and Contractors was carried on under the name of Antquip. Following the termination of the Business Asset Sale Agreement, the liquidators of Transala took possession of the equipment. The equipment was sold at valuation and used by a company called Mortlake Hire. That company was also managed by Mr Russell. The equipment was used by Mortlake Hire very shortly after the liquidation of Contractors in 2004. The employees who had been employed in the Antquip business were subsequently employed by Mortlake Hire. They used the equipment that Mortlake Hire had obtained.

Identity of Plaintiff’s Employers from 1 July 2002

35 I do not accept Mr Russell’s evidence referred to at para [6] above that at about 30 June 2002 he sent a letter to Transala’s employees advising that they would be employed by Contractors. No copy of such a letter has been produced. That would not itself be a sufficient reason for rejecting Mr Russell’s evidence as the records of the companies are apparently in some disarray. However, it appears from Mr Albarran’s report to creditors of Transala that the administrators were not provided with any “agreement in relation to the transfer of the employees to Transala Contracting Pty Ltd”. Had such a letter been sent in July 2002, a copy should have been available to be provided to the administrators of Transala in September.

36 It is clear from the report to creditors and the Services Agreement that Mr Russell and the administrators understood that from 1 July 2002 Transala’s employees had become employees of Contractors. But a transfer of employment requires not only the consent of the old and new employer, but also the consent of the employee (Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014 at 1018). The fact that Mr Russell, on behalf of both Transala and Contractors, intended to transfer the employees’ employer as from 1 July 2002 does not mean that Transala ceased to be the employer from that date. There was no change in the way instructions were given to the plaintiff as to the work he was to carry out or as to the way in which he was to carry out that work. At all relevant times the instructions were given by Mr Russell and by the site manager. The fact that from about 1 July 2002 wages were paid by Contractors, and the fact that group certificates were issued by Contractors is not necessarily inconsistent with Transala remaining the employer (Damevski v Guidice [2003] FCAFC 252; (2003) 133 FCR 438 at 457 [91]; Textile Footwear and Clothing Union of Australia v Bellechic Pty Ltd [1998] FCA 1465; Australian Insurance Employees Union v WP Insurance Services Pty Ltd (1982) 1 IR 212 at 216).

37 The plaintiff did not notice any change in the identity of his employer until October 2002. From July 2002 the business in which he was working was carried on by Contractors. Mr Russell, on behalf of both Contractors and Transala, treated the plaintiff as an employee of Contractors. The plaintiff was paid by Contractors and from October 2002 believed that Contractors, and not Transala, was his employer. In that belief, he continued to work for Contractors. By his conduct he assented to the novation of his contract of employment such that Contractors became his new employer. I am not satisfied that he gave that assent prior to October 2002. I conclude that from 1 October 2002 the plaintiff was employed by Contractors. This is consistent with the PAYG payment summaries issued for the year ended 30 June 2003 by Transala and by Contractors.

38 I do not consider that this conclusion is affected by the terms of the Business Asset Sale Agreement. The Services Agreement had provided for the employees to be employed by Contractors. Moreover, the provision in the Business Asset Sale Agreement that Transala would carry on the business as a going concern until completion was inconsistent with the true arrangement. The plaintiff was not a party to the agreement. The true arrangement described in the report to creditors was that Contractors carried on the business and used the revenues it derived from the business to pay the instalments of the purchase price up to 30 September 2004.

Unremitted Superannuation Contributions

39 It follows that the plaintiff is entitled to prove in the liquidation of Transala for unremitted superannuation contributions up to 30 September 2002, and to prove in the liquidation of Contractors for unremitted superannuation contributions from 1 October 2002 (Corporations Act, s 556(1)(e)). There was no dispute that the quantum of the unremitted superannuation contributions was correctly calculated by Mr Russell. It will be necessary to calculate separately the amounts owing for the periods from 11 October 1999 to 30 September 2002 and from 1 October 2002 to 11 November 2004.

Redundancy

40 Under clause 16 of the Building and Construction Industry (State) Award a redundant employee was entitled to receive redundancy/severance payments of eight weeks’ pay if the employee had been in continuous service with his or her employer for four years or more. The plaintiff claimed eight weeks’ redundancy pay totalling $5,748.64. Of course, the plaintiff was employed by Contractors for two years and one month. He was employed by Transala for just under three years. Clause 16.9 of the Award provides:

“ Transmission of Business -
(i) Where a business is, before or after the date of this award, transmitted from an employer (in this subclause called ‘the transmittor’) to another employer (in this subclause called ‘the transmittee’) and an employee who at the time of such transmission was an employee of the transmittor in that business becomes an employee of the transmittee:
(a) the continuity of the employment of the employee shall be deemed not to have been broken by reason of such transmission; and
(b) the period of employment which the employee has had with the transmittor or any prior transmittor shall be deemed to be services of the employee with the transmittee.
(ii) In this subclause ‘business’ includes trade, process, business or occupation and includes part of any such business and ‘transmission’ includes transfer, conveyance, assignment or succession whether by agreement or by operation of law and ‘transmitted’ has a corresponding meaning. ”

41 The plaintiff and Transala contend that the business, or part of the business, of Transala was transmitted to Contractors and the plaintiff became an employee of Contractors. Hence they submit that the continuity of his employment was deemed not to have been broken and his period of employment with Transala is deemed to be service with Contractors.

42 Contractors both denied that it had become the plaintiff’s employer and submitted that, in any event, Transala’s business was not transmitted to it. It relied upon the terms of the Business Assets Sale Agreement under which title to the Business Assets was only to pass to Contractors on completion, and Transala agreed to carry on the business as a going concern until completion. Counsel for Contractors submitted that even if the plaintiff’s employment were transferred to Contractors, neither the whole nor part of Transala’s business was transferred. Counsel submitted that if the plaintiff’s employment were transferred, that was merely “an administrative transfer of employees preparatory to the transmission of the whole of the business of Transala pursuant to the BASA [Business Assets Sale Agreement]”. Counsel accepted that the engagement and provision of employees may constitute a part of a business (Australian Rail Tram & Bus Industry Union v Torrens Transit Services Pty Ltd [2000] FCA 1683; (2000) 105 FCR 88 at 107 [83]), but submitted that the employment of heavy machinery operators such as the plaintiff was not a distinct part of the business of Transala.

43 Transala’s business was the provision and operation for third party customers of heavy machinery and earthmoving equipment. It contracted out its large excavators and dump trucks to building and excavation sites. The assets of that business comprised or included the benefit of its contracts with the persons in the building and construction industry to whom it supplied services, the goodwill in connection with that business, the ownership of the excavators and dump trucks, the benefit of its contracts of employment, and its established connection with employees trained in the operation of the equipment. To ascertain whether that business or part of it was transmitted to Contractors it is necessary to identify whether any, and if so, what part of that business which Transala once had was subsequently enjoyed by Contractors (Minister for Employment and Workplace Relations v Gribbles Radiology Pty Ltd [2005] HCA 9; (2005) 222 CLR 194 at [44] 213).

44 Neither liquidator produced any financial statements for either Transala or Contractors from 1 July 2002 to demonstrate what revenue each company received and what expenses each incurred after 1 July 2002. However, the purpose of the deed of company arrangement was that Contractors should pay the consideration for the purchase of Transala’s business out of future profits. Although the Business Assets Sale Agreement provided for the ownership of the business to be transferred to Contractors only as at completion and provided that completion should not occur until the last payment was made, I conclude that Contractors was given possession of the heavy machinery and earthmoving equipment, took over the benefit of any existing contracts and succeeded to the goodwill of Transala. It also took over the employment of Transala’s employees. Accordingly, even though the purchase was not completed because the last instalments of the purchase price were not paid, the business of Transala was nonetheless “transmitted” to Contractors. It succeeded to that business.

45 It follows that Contractors was liable for the redundancy payment due to the plaintiff unless there was a subsequent transmission of the same business to a new employer.

46 Counsel for Contractors submitted that if there was a transmission of the business or part of the business of Transala to Contractors, then there was subsequently a further transmission of that business to Mortlake Hire.

47 The liquidator of Contractors set out his grounds for disallowance of the plaintiff’s proof of debt as required by reg 5.6.54(1)(a) of the Corporations Regulations 2001 (Cth). The liquidator did not identify as a ground for rejecting the proof that the business was transferred to a new employer who became liable for the redundancy payment. No such ground could be identified from the affidavit read by the liquidator of Contractors. This ground was advanced after some short cross-examination of the plaintiff, Mr Russell and Mr Elliott established the matters set out at para [36].

48 After Contractors defaulted, Transala re-took possession of the equipment and sold it. There is no evidence of the liquidator of Contractors attempting to realise the benefit of any existing contracts on foot, or otherwise realising the value of any goodwill of the business.

49 I do not consider that it is open to Contractors to dispute the plaintiff’s entitlement to the redundancy payment on the ground that liability for those payments had passed to whatever company or individual carried on business under the name of Mortlake Hire. No such issue was identified prior to the commencement of the hearing. There would be further facts relevant to that issue which the plaintiff would have been entitled to investigate. For instance, he would be entitled to investigate whether either liquidator entered into a contract with Mortlake Hire for the sale of any tangible or intangible assets of the business.

50 I infer that Transala sold the heavy machinery and earthmoving equipment to Mortlake Hire. I do not infer that Mortlake Hire acquired its right to that equipment by any assignment from Contractors. The evidence is silent as to whether there was any transfer of goodwill from Contractors to Mortlake Hire, or any assignment of any other intangible rights. There is no evidence as to whether Mortlake Hire used the business name formerly used by Contractors.

51 Accordingly, even if it were open to the liquidator of Contractors to rely upon this ground, I am not satisfied that the ground has been made good.

52 For these reasons the plaintiff is entitled to prove in the liquidation of Contractors in the sum of $5,748.64 for redundancy payments.

Unpaid Annual Leave

53 The plaintiff’s claim for unpaid annual leave of $4,598.55 is for 243.181 hours accumulating at 2.923 hours of annual leave each week. As at 29 September 2002 the plaintiff had an accrued annual leave entitlement of 164.72 hours. Accrued leave at termination of his employment was 243.181 hours.

54 Contractors submitted that the plaintiff is only entitled to claim the difference from Contractors. Transala submitted that the plaintiff should be taken to have used his oldest annual leave entitlements first and that Contractors paid the plaintiff his annual leave entitlements which had over the course of the plaintiff’s employment with Contractors, accrued at the time of transfer of his employment. Accordingly, Transala submitted that the plaintiff’s annual leave entitlement at the termination of his employment was an obligation of Contractors.

55 Clause 5.4 of the deed of company arrangement provided that as a term of the Business Assets Sale Agreement, Contractors was to bear all liability for Employee Entitlements for Current Employees up to the date of appointment of the administrators. No such term was included in the Business Assets Sale Agreement. Nonetheless, at the time, both Transala and Contractors intended that Contractors would take over any entitlements owed to employees. In their report to creditors the administrators said that they had been advised that when Contractors took over the employment of Transala’s employees on 30 June 2002, it also took over any entitlements then owing to the employees. The payslips issued by Contractors to employees recorded their accrued entitlements. Had they not done so the employees would no doubt then have made a claim on Transala.

56 As it was agreed that Contractors would take over the employee’s entitlements, and as Contractors recognised in the payslips issued to the plaintiff that he had accrued annual leave entitlements maintainable against Contractors, I accept the submission for Transala that entitlements to annual leave which were used up during the period of the plaintiff’s employment with Contractors should be applied to the oldest entitlements first. On that basis, all of the outstanding annual leave entitlements at the termination of the plaintiff’s employment with Contractors related to entitlements which accrued during the period of his employment with Contractors. Accordingly, he is entitled to prove for this sum in the liquidation of Contractors and not in the liquidation of Transala.

Rostered Days Off

57 Clause 33.2.6(c) of the Award provides that an employee may elect, with the consent of the employer, to accrue rostered days off for the purpose of creating a bank to be drawn upon at a mutually agreed time between the employer and the employee. At the termination of his employment, the plaintiff had accrued 8.6 hours towards rostered days off. No submission was made for Contractors that he should not be entitled to make a claim in respect of those accrued hours calculated at the hourly rate at which he was paid standard wages. Counsel for the plaintiff accepted that the award contained no provision relating to an entitlement to be paid money in lieu of hours accumulated towards rostered days off. Counsel submitted that termination of the plaintiff’s employment was a breach, and that the plaintiff was entitled to damages to put him in the same position as if contracts had been performed and he had been entitled to take the time and be paid his usual wages for it. I think this is correct. The plaintiff is entitled to prove for the sum of $162.63 in the liquidation of Contractors under this head.

Unused Sick leave

58 The plaintiff had accrued 20.19 hours’ sick leave. The Award contains no provision for the plaintiff to be paid moneys in lieu of untaken sick leave. Nor is the analysis applicable to payment for rostered days off available in the case of unused sick leave. Had the plaintiff remained employed by Contractors he would only have been entitled to take sick leave (and to be paid whilst he was away) if he were sick, or was providing care and support for dependents who were sick (clauses 33.1 and 33.2). Counsel for the plaintiff submitted that the plaintiff was entitled to damages for the loss of his accrued sick leave. On taking up new employment the plaintiff would start with no sick leave credited to his name and would thus be liable to suffer a loss if he were sick and was not paid. However, there was no evidence that the plaintiff suffered such a loss. The claim for sick leave was rightly rejected.

Conclusion

59 The plaintiff is entitled to prove in the liquidation of Transala and Contractors for unremitted superannuation contributions calculated on the basis that his employment with Transala continued until 30 September 2002 and his employment with Contractors commenced on 1 October 2002. He is entitled to prove in the liquidation of Contractors for the amounts claimed in respect of redundancy pay, annual leave and accrued rostered days off. He is not entitled to prove for untaken sick leave. The appeals from the rejection of proofs of debt in both companies will be allowed. I direct counsel for the parties to bring in short minutes of order in accordance with these reasons. I will hear the parties on costs. Prima facie the plaintiff is entitled to his costs against the defendants in both proceedings.

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