Ierodiaconou v Catch.Com.Au Pty Ltd

[2019] FCCA 3099

FEDERAL CIRCUIT COURT OF AUSTRALIA

IERODIACONOU v CATCH.COM.AU PTY LTD [2019] FCCA 3099

Catchwords:
INDUSTRIAL LAW – SMALL CLAIMS – consideration of bonus terms in employment contract – whether sales include contracted sales or invoiced sales – application granted in part.

Legislation:

Fair Work Act 2009 (Cth), ss.12, 542, 548.

Applicant: GEORGE IERODIACONOU

Respondent: CATCH.COM.AU PTY LTD

File Number: MLG 1638 of 2019

Judgment of: Judge Mercuri

Hearing date: 14 October 2019

Date of Last Submission: 14 October 2019

Delivered at: Melbourne

Delivered on: 1 November 2019

REPRESENTATION

Advocate for the applicant: In person

Solicitors for the applicant: None

Advocate for the respondent: Mr Cornes

Solicitors for the respondent: None

ORDERS

1. Within 21 days, the respondent pay to the applicant the sum of $3,000.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 1638 of 2019

GEORGE IERODIACONOU

Applicant

And

CATCH.COM.AU PTY LTD

Respondent

REASONS FOR JUDGMENT

Introduction and claims

1. This application came before the court in its small claims jurisdiction under the Fair Work Act 2009 (Cth) (“the FW Act”).

2. The applicant claims he is entitled to, and has not been paid, a bonus under his contract of employment of $18,626. 

Background

1. The applicant was employed by the respondent, an online e-commerce company, as a managing editor of thehome.com.au commencing on 30 July 2018. 

2. The applicant’s initial contract of employment provided for an annual salary of $82,125 inclusive of superannuation and a bonus (“the June 2018 contract”).  Clause 4.3.1 of the June 2018 contract relevantly provided:

   You are eligible to take part in the Catch Bonus Program.  The Company may pay you an annual bonus after the successful completion of probation.  This bonus is paid to you based on achievement of agreed KPI’s.  You will be provided with an individual pack annually that will outline the KPIs specific to you and your role.  Failure to meet the KPIs set by the Company will mean you are ineligible for your Bonus.  Your bonus structure will be as follows:

   -   $10,000 per annum when the website reaches $100,000 in sales

   -   An additional $10,000 per annum when the website reaches $200,000 in sales

   -   5% commission on every dollar of additional sales made above $200,000 in annual sales

   -   $5,000 per annum for KPIs set for website traffic and user growth.[1]

   [1] Annexure GI5a of the applicant’s application filed 27 May 2019.

3. The applicant gave evidence that when he was initially employed, he was told his role was to re-launch a website to take on some of the biggest players in Australia’s home and property market.[2]  He said he was told he would be able to recruit a team to assist him with this task.[3]  

   [2] Page 9 of the applicant’s application filed 27 May 2019 under the heading ‘statement of claim’.

   [3] Page 9 of the applicant’s application filed 27 May 2019 under the heading ‘statement of claim’.

4. Ultimately however, he said that these promises were not met.  The applicant gave evidence that his hard work paid off and when he left his role, he had achieved his set KPIs.[4]

   [4] Page 9 of the applicant’s application filed 27 May 2019 under the heading ‘statement of claim’.

5. It is common ground that in November 2018, some four months after he had started in the role, the respondent sought to vary the terms of his employment and, on the applicant’s case, his duties and reporting lines.  The applicant gave evidence that he understood the employer had the right to change his duties (as per clause 2.5 of his employment contract) but he felt the role he was being offered was well below his level of seniority and experience.[5] 

   [5] Transcript pages 5 to 6.

6. The contract variation provided to the applicant in November 2018 retained his role as the managing editor and his remuneration package, but provided for changes to his bonus structure (“the November 2018 contract”).  The proposed bonus structure was:

   a)$10,000 per annum when the website reaches $250,000 in sales;

   b)An additional $10,000 per annum when the website reaches $350,000 in sales; and

   c)An additional $5,000 per annum if for the periods of 1 April to 30 June thehome.com.au gets 100,000 unique visitors and the database is at 40,000 users.[6]

   [6] Annexure GI5 of the applicant’s application filed 27 May 2019.

The email chain

1. The applicant produced an email chain between himself and the respondent’s CEO, Mr Nati Harpaz, in which Mr Harpaz set out the changes to the bonus structure on 13 November 2018.[7]

   [7] Annexure GI7 of the applicant’s application filed 27 May 2019.

2. On 15 November 2018, the applicant emailed a counter proposal in which he requested that the ‘sales and bonus structure… remain as originally agreed but we move the deadline forward to June 30 2019.’[8]

   [8] Annexure GI7 of the applicant’s application filed 27 May 2019.

3. Mr Harpaz replied on the same day as follows:

   If we keep you on the same target you are unlikely to get bonus this year because it is unlikely you will achieve 100K in sales on Remember that the bonus was agreed to sell on that website and not to marketplace on Catch.  So if you want to keep the original target I am happy with that but only sales you make that goes on will count.[9]

   [9] Annexure GI7 of the applicant’s application filed 27 May 2019.

4. On 16 November 2018 the applicant responded to Mr Harpaz in the following terms:

   OK sir.

   Let’s do this:

   1.     200K and 300K, but target to be achieved by June 30 2019 …

   2.      Website KPIs as agreed.

   …[10]

   [10] Annexure GI7 of the applicant’s application filed 27 May 2019.

5. A short time later that morning, Mr Harpaz replied saying, ‘No worries mate!!! I know you will do well you are a champ!’[11]

   [11] Annexure GI7 of the applicant’s application filed 27 May 2019.

6. The applicant responded a few minutes later saying, ‘Thanks Nati. I won’t let you down.  Send to HR and I’ll sign today.’[12]

   [12] Annexure GI7 of the applicant’s application filed 27 May 2019.

7. Notwithstanding this email chain, it appears common ground that the applicant did not sign the November 2018 contract, although he continued in his employment. 

8. In cross examination, it was put to the applicant that:

   a)the email trail referred to above followed the provision to the applicant of an amended contract with changes to the KPIs for the purpose of the bonus scheme; and

   b)the email trail evidenced a counter offer by the applicant of new KPIs and an acceptance of that offer by Mr Harpaz.

9. The respondent submitted that the email trail culminated in a variation to the June 2018 contract reflecting these changes to the KPIs.

10. The applicant maintained that whilst these discussions and emails occurred, he did not ever sign a new contract and therefore the June 2018 contract continued to apply to his employment.

Website traffic and user growth component

1. The applicant gave evidence that although the June 2018 contract was silent on KPIs for website traffic and user growth, once the website was up and running, KPIs were set of 100,000 visitors and 40,000 subscribers.  His evidence was this occurred some eight weeks after he commenced employment.

2. In relation to the website KPIs, the applicant conceded that at the time of his redundancy, the website had some 75,000 visitors and that this was below the KPI of 100,000 visitors.  However, he argued this ought to have been extrapolated out to June 2019 by which time, it could reasonably be expected that the KPI would have been met.  Similarly, the applicant conceded that as at March 2019, the website had 30,000 subscribers, again below the KPI of 40,000.

3. The applicant sought the sum of $5,000 for the attainment of these KPIs as part of his application.

4. I accept the applicant’s evidence as to the KPIs set for website traffic and user growth.  However, on his own evidence, these KPIs were not met at the date of the termination of his employment.  Neither the June 2018 contract nor the November 2018 contract provided for a bonus to be paid on a pro rata basis if the employee’s employment came to an end prior to the KPIs being met.  Indeed, clause 4.3.1 does not specify that an employee had to be employed at the end of a specified period when bonuses are calculated.  It simply states that a bonus is to be paid when certain KPIs are met.

5. For these reasons, I am not satisfied that the applicant is entitled to a bonus of $5,000 for the website traffic and user growth component of the bonus scheme.  This part of the applicant’s application fails.

6. In any event, on 12 March 2019, the applicant sent a further email to various managers at the respondent including Mr Harpaz in which he said, among other things:

   …

   I am confident that after we overcome this hurdle I can go on with my role as managing editor of thehome.com.au, come to an agreement with the company about another role or we can terminate the existing contract and my employment with the company.

   As per my contract signed with catch, the role I signed for is for managing editor of thehome.com.au…

   Day to day my job was to: build a website, source and create new content, repackage old content with shopping links back to catch.com.au, build a readership, maintain social media accounts, build website traffic, a database of email subscribers and bring in $200K in sales.

   So far approx. $85,000 in product sales from links from thehome.com.au have been generated for catch and I have sold approx. $161K in articles and banner adverts…

   On November 13 I was asked to sign a new contract, which meant I changed who I reported to and sales now were to be $250,000 and $350,000.  I did not sign this but reported to my new manager…

   Last week I was then asked to add sales coordination and administration to my existing duties.  I have carried out all work when asked of me without objection up until now.  The workload is unfair, unrealistic and not inline (sic) with what a managing editor/publisher normally does, which I have worked professionally as for many years.

   As you can see with my contract, my KPI’s for the bonus system do not distinguish between sales on catch.com.au or thehome.com.au.  It says the ‘website’.  The contract also does not distinguish between product sales or media sales. 

   As per my contract, I have reached my sales KPI’s which qualify for my bonus and my main focus is to now achieve my website KPI’s for traffic and database.

   Let me know which of the three options in paragraph 1 you would like to go with and I will come up with an action plan to move forward on that option.[13]

   [13] Annexure GI3 of the applicant’s application filed 27 May 2019.

7. Shortly after this email was received, the applicant was advised that his position would be made redundant.[14]  The applicant then sent an email on 20 March 2019 in which he said:

   I respect your decision to terminate my existing contract and employment with the company.  As per my contract, the decision to make my position redundant prevents me from achieving my website KPIs. As discussed with Tim, sales KPI’s have been achieved as per contract.

   At the current rate thehome.com.au is growing, you would assume website KPI’s would also be achieved by June 30.[15]

   [14] Annexure GI2a of the applicant’s application filed 27 May 2019.

   [15] Annexure GI2a of the applicant’s application filed 27 May 2019.

8. The respondent replied the following day in the following terms:

   From our perspective your invoiced sales total comes to $91,900, with forecast sales or cancelled promotions we haven’t received funds for, totalling $53,200.  This totals $145,100 year to date.  Based on our records, this means that your KPI’s, as per your Employment Contract, in particular clause 4.3.1 have not been met at this point in time.

   In addition, we won’t be taking into account any assumed future earnings as your role is redundant meaning potential earnings are not relevant.

   Therefore, the bonus payment will be as discussed, being $7,000.[16]

   [16] Annexure GI2a of the applicant’s application filed 27 May 2019.

9. The reference to ‘invoiced sales’ is a reference to sales for which an invoice has been issued as opposed to the sale provided for in the contract initially entered into with a customer.  Ms French’s evidence was that a sale was only counted once it had been invoiced to the client.  Conversely, the applicant’s position was that once he had entered into a contract with a client that is a ‘sale’ and should be counted for the purpose of calculating his bonus entitlement.

10. Ms French gave evidence that:

    a)clients are able to cancel events prior to them featuring on the website;

    b)in those circumstances, they are either not invoiced for those cancelled events or where they have been invoiced, the amount referable to the cancelled event is reimbursed to the client;

    c)on the basis of the information available to her from the respondent’s records, the applicant achieved invoiced sales of $93,100 and therefore did not achieve the requisite amount to entitle him to receive a bonus.

11. The applicant claims that he made $161,100 in total sales plus product sales of $87,431 which totals $252,531.

Issues

1. The issues which arise for determination in this matter are:

   a)What are the terms of the bonus scheme which apply to the applicant’s employment?

   b)For the purpose of the bonus scheme, do ‘sales’ consist of contracted sales or invoiced sales?

Small claims jurisdiction

1. This claim is brought in the court’s small claims jurisdiction pursuant to section 548 of the FW Act.  Small claims proceedings can only be dealt with if:

   a)an applicant indicates they wish to have their matter dealt with as a small claim; and

   b)importantly, the claim relates to an amount referred to in section 548(1A) of the FW Act that an employer was required to pay to or on behalf of an employee:

   i)under the FW Act or a fair work instrument;

   ii)because of a safety net contractual entitlement; or

   iii)because of an entitlement of the employee arising under section 542(1) of the FW Act.

2. Section 542(1) of the FW Act relevantly provides:

   For the purposes of this Part, a safety net contractual entitlement of a national system employer or a national system employee, as in force for time to time, also has effect as an entitlement of the employer or employee under this Act.

3. A “safety net contractual entitlement” is defined in section 12 of the

   
   

   FW Act to mean:

   An entitlement under a contract between an employee and an employer that relates to any of the subject matters described in:

   (a)Subsection 61(2) (which deals with the National Employment Standards); or

   (b)Subsection 139(1) (which deals with modern awards).

4. Section 139(1) of the FW Act identifies the following subject matters:

   a)minimum wages … and

   i)…

   ii)incentive-based payments, … and bonuses;

   …

5. Therefore, a bonus payment, in the nature of the bonus sought by the applicant, is an amount which falls within section 548(1A) of the FW Act and can be the subject of small claims proceedings. I am satisfied that the court has the requisite jurisdiction to deal with this claim.

6. I now turn to consider the issues raised by the applicant’s claim.

Contract terms

1. It is common ground that the applicant’s June 2018 contract provided for a bonus of $10,000 to be payable where ‘the website reaches $100,000 in sales’ and a further $10,000 for sales over $200,000 plus 5% for each dollar of additional sales over $200,000 in annual sales.[17]

   [17] Annexure GI5a of the applicant’s application filed 27 May 2019.

2. The email from Mr Harpaz dated 15 November 2018 as extracted above suggests that his understanding of the bonus provision in the June 2018 contract only applied in respect of sales on the website.  Mr Harpaz did not give evidence in these proceedings. 

3. Whilst it is correct that the November 2018 contract was never signed, I am satisfied and find the effect of the email communications between the applicant and Mr Harpaz was such that the June 2018 contract was varied to include the updated KPIs as contained in the email from the applicant to Mr Harpaz on 16 November 2018.  When read in its entirety, it is clear that the change was not only to increase the amount of sales required to achieve a bonus but also to allow the applicant to include sales on the Catch website in his total. 

4. The email exchange between the applicant and Mr Harpaz constitutes an offer and acceptance to vary the bonus scheme contained in the June 2018 contract. 

5. On the basis of the totality of the evidence, I find that although no new contract of employment was signed following the email chain between the applicant and Mr Harpaz, the June 2018 contract was varied to include the KPIs outlined in the correspondence.  That email chain constituted an offer to change the KPIs in the June 2018 contract, which was accepted by the respondent by Mr Harpaz’s email of the same date.

6. The effect of this was that the June 2018 contract was varied such that the applicant was entitled to a bonus on achievement of the following:

   a)$10,000 per annum when the website reaches $200,000 in sales;

   b)An additional $10,000 per annum when the website reaches $300,000 in sales; and

   c)An additional $5,000 for 100,000 unique visitors and 40,000 users.

What constitutes a sale?

1. There is no dispute about the quantum of product sales.  The respondent accepted the figure put forward by the applicant in relation to product sales.  The issue in dispute is how the media sales are to be calculated. 

2. The applicant asserted that he entered into contracts to sell media products to the value of $200,000 and therefore qualifies for a bonus on the basis of these sales, together with the agreed product sales of $87,431.

3. The applicant gave the following evidence in the course of cross examination about this issue:

   …what happens when you negotiate a sale for advertising is there’s a lot of toing and froing on price.  And generally, if a client buys six or more of whatever, they get a discount.  So that’s all negotiated and signed off on the contract… what (the respondent is) saying, is that only actual sales are counted.  So that if a client books six or more ads but only runs two, they’re not charged for the rest of those.  …that …undermines the entire integrity of that contract of sale.[18]

   [18] Transcript page 18 at lines 5 to 12.

4. The applicant went on to say:

   … if a client’s contract isn’t enforced and if they’ve signed and negotiated certain prices for advertising … and if they can cancel at any time, it just means that our jobs are impossible… it’s impossible to achieve a sales target and to… do your work effectively.[19]

   [19] Transcript page 19 at lines 3 to 6.

5. Ms French is the respondent’s marketing manager and was given leave to file a statement in these proceedings.[20] Ms French deposed that ‘sales KPIs… are counted based on actual invoiced amounts, as Clients are able to cancel events prior to them featuring on the website.’[21]

   [20] This statement was entitled ‘affidavit’ but was not in the proper form and does not form part of the court file.

   [21] Page 1 of the statement of Ms French dated 7 October 2019.

6. Ms French also gave evidence that the respondent’s records indicate that a total of $93,100 in media sales were billed for sales achieved by the applicant and this figure relates to sales across both the catch.com.au and thehome.com.au websites for the duration of his employment.  The applicant states that he generated media sales of $165,100.

7. Ms French attached a spreadsheet to her statement in which she set out the applicant’s alleged sales and the respondent’s recorded invoiced sales.  In the course of cross examination, Ms French conceded that there were signed contracts for each of the amounts claimed by the applicant.  She stated however:

   But a sale isn’t a sale in… this department until it’s invoiced.  … So while someone might commit to 10 promotions, that invoice is never sold until that first promotion has launched and then we invoice after the fact.  So the column that you see from Zoho is what is actually… invoiced out.  The other column is a forecast of interest in committing to promotions but they haven’t actually… become a launch promotion on the… site.[22]

   [22] Transcript page 22 at lines 22 to 29.

1. Ms French also stated that bonuses for all employees in her team were calculated on this basis; namely, when the sale is invoiced, not when the contract is signed.

2. As stated above, it was conceded that the applicant has generated product sales of $87,431.  The issue is the quantum of media sales made by the applicant and further, what KPI applied at the time of the applicant’s redundancy.

3. In interpreting a contract terms ought to be given their ordinary meaning.  The term ‘sale’ is defined in the Macquarie dictionary to mean, relevantly:

   -the act of selling.

   …

   -transfer of property for money or credit.

4. Similarly, the term ‘sell’ is defined as:

   -to give up or make over for a consideration; dispose of to a purchaser for a price.

5. The question here is, at what point has there been a sale?  When one reads clause 4.3 of the June 2018 contract in context, it says that there is an entitlement to a bonus when ‘the website reaches (a certain number) of sales’. 

6. Generally speaking where a person enters into a contract of sale for a product or service, there is a sale.  The contract, if enforceable requires the provider/seller to provide the goods or services and the purchaser to pay for those goods or services.  The ordinary meaning of sale would not be limited to circumstances where the purchase price has been paid in full.  In this case, the respondent did not produce a copy of the contracts entered into for the sale of its media products. 

7. It concedes that an enforceable contract has been entered into.  It goes on to say however, that in certain circumstances, because it’s taking a long term perspective, it might not seek to enforce that contract is a buyer is not happy with the service or product provided.  If it was the respondent’s intention to limit bonus payment to invoiced sales, then it ought to have made this clear in its contracts.  I find that the term sale, in the applicant’s contract refers to a contracted sale not an invoiced sale.

8. In those circumstances, the applicant has achieved a combined total of $252,531 in media and product sales and is therefore entitled to a bonus of $10,000.  For the reasons set out above, the applicant is not entitled to a bonus payment in respect of the website traffic.

9. It is common ground that on termination, the applicant received a payment of $7,000. Although the respondent denied the applicant had met the KPIs to warrant a bonus, it wrote in an email to the applicant dated 21 March 2019, “Therefore the bonus payment will be as discussed, being $7,000…”[23]

   [23] Annexure GI2a of the applicant’s application filed 27 May 2019.

Conclusion

1. I therefore order that the respondent pay to the applicant the sum of $3,000, being the difference between the $10,000 bonus to which the applicant was entitled and the $7,000 he received on termination.

I certify that the preceding fifty-nine (59) paragraphs are a true copy of the reasons for judgment of Judge Mercuri

Associate: 

Date:              1 November 2019