James Andrew John Nixon v Ord Minnett Limited

[1996] IRCA 16

DECISION NO:   16/96

CATCHWORDS

INDUSTRIAL LAW - complaint of UNLAWFUL TERMINATION -JURISDICTION - whether employee precluded from bringing application for UNLAWFUL TERMINATION  because of the amount of his WAGES - meaning of ‘relevant wages’ - whether income generated by commissions constituted ‘relevant wages’

Industrial Relations Act 1988, ss 170CD(1)(b), 170EA

Ardino v Count Financial Group Pty Limited (1994) 1 IRCR 221
Brown v Listaglen Pty Limited (1994) 1 IRCR 440
Commissioner of Payroll Tax (Vic) v Reserve Bank of Australia [1987] VR 241
Mutual Acceptance Co Ltd v Federal Commissioner of Taxation (1944) 69 CLR 389

JAMES ANDREW JOHN NIXON v ORD MINNETT LIMITED
VI 1625 of 1995

Before:  PARKINSON JR
Place:  MELBOURNE
Date:  6 FEBRUARY 1996

IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY

VI 1625 of 1995

B E T W E E N:

James Andrew John NIXON
Applicant

A N D

ORD MINNETT LIMITED
ACN 002 733 048
Respondent

MINUTES OF ORDERS

6 February 1996  PARKINSON JR

THE COURT ORDERS THAT:

1. The  respondent’s notice of motion filed 11 October 1995 is dismissed.

1. The matter be placed in the list of cases ready to be fixed for hearing.

NOTE:  Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court            Rules

IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY

VI 1625 of 1995

B E T W E E N:

James Andrew John NIXON
Applicant

A N D

ORD MINNETT LIMITED
ACN 002 733 048
Respondent

REASONS FOR DECISION

6 February 1996  PARKINSON JR
This is my decision in relation to a preliminary jurisdiction matter in this proceeding, raised by the respondent’s motion on notice dated 14 September 1995.  The motion was listed for hearing on 27 November 1995.  Both the respondent and applicant filed affidavit material and that material was relied upon at the hearing together with additional evidence being called by both parties. Written submissions were subsequently filed, by the respondent on 4 December 1995 and by the applicant on 11 December 1995. 

It was common ground between the parties that the applicant was employed by the respondent and had earned $182,533.27 gross, in the 11 month period of employment, which was from 1 March 1994 to 6 February 1995. The respondent submitted that as a consequence of the amount earned, the applicant was precluded by s170CD (1)(b) from bringing an application pursuant to s170EA of the Act.

The respondent submitted that the applicant received his earnings in their entirety as "wages" in the sense contemplated by the section. The applicant submitted that the terms of his employment provided for a base wage of $40,000.00 and that any additional amounts were in the nature of commission and not wages in the sense contemplated by s170CD.

It is appropriate to set out some of the factual background to the employment and the contractual arrangements between the parties.

The applicant was engaged by the respondent as a private client adviser.  At the time of engagement the parties reached agreement as to the structure of the remuneration payable. A substantial proportion of the applicant’s earnings were payable as a percentage of brokerage and commission on transactions generated by the applicant. The applicant worked out of the respondent’s Melbourne office in association with another client adviser Mr Wright, the latter having been responsible for introducing the applicant to the respondent. The applicant and Mr Wright initially had a private arrangement that they would pool all commission or brokerage earnings and distribute that pool between them on a 60/40 basis, the applicant receiving 40 per cent. This arrangement, whilst in the knowledge of the respondent and endorsed by it, nevertheless was a private arrangement between the applicant and Mr Wright, as part of the manner in which they proposed to operate what the applicant in evidence described as their business team in Melbourne. This arrangement continued for some time until Mr Wright took up another position with the respondent. 

It is apparent from the employment agreement that the applicant was guaranteed in his first six months of employment a right to drawings of up to $40,000.00, and whilst this sum was to be deducted from any earnings in excess of that amount, it was not repayable by him in the event that he did not achieve earnings above that amount in that period. Whilst this arrangement was expressed as operating for the first six months of the engagement, it is clear from the evidence that the arrangement as to drawings of up to the sum of $40,000.00 continued to apply to the applicant during the employment, and applied, albeit in varying amounts, to all private client advisers engaged by the respondent on an ongoing basis. There is insufficient evidence to support the suggestion that there was repayment by any employee of the amount of drawings where their commission earnings did not reach the level of drawings. 

The evidence was that the applicant was in receipt, by way of direct bank credit, of a monthly payment of $3,333.00 from which PAYE taxation was deducted. The applicant received a computer generated pay slip identifying him by employee number, and setting out the monthly amount and the deductions.

A different arrangement operated for the payment of commissions or brokerage.  These payments were made quarterly by the respondent.  The amounts generated were recorded against each adviser’s name, relevant deductions were made including the respondent’s percentage, being an amount equivalent to the drawings discussed above. The arrangement between the applicant and Mr Wright then came into operation and the balance was made payable to the applicant by cheque, less PAYE deduction. A quarterly breakdown of these earnings was provided to the applicant (Exhibit R4). There were additional obligations upon the applicant in respect of contributions to the salary of another employee and for promotional activities. 

The entire arrangement in relation to the employment is not a usual one where an employee is paid a base salary or wage, with the level of the commission having been set at a particular percentage having regard to expenses such as on-costs and support staff costs incurred by an employer. The reverse was true in this case, where the respondent deducted on-costs such as the applicant’s wage of $40,000.00, the superannuation contributions it made on behalf of the applicant, and proportions of promotional expenses and support staff wages from the commission payments to be received by the applicant.  This method of administering payment of commission does not, however, alter the reality that the applicant’s earnings included a base wage or salary of $40,000.00, with the substantial proportion of his income being generated by reference to the amount of business he wrote. This arrangement for remuneration, as is evident from the material tendered in the proceedings, can be of great benefit or great disadvantage to an employee. Exhibit A2 reveals the substantial variation in amount of earnings generated by employees. In the applicant’s case, in respect of the period in question, it involved a significant and substantial income being generated to him by way of commission. 

Having regard to the  above, I accept the applicant’s submission that he was in receipt of a base wage or salary of $40,000.00. Whilst the amount of $40,000.00 is described as drawings in the letter of offer of engagement (Exhibit R3) and in the Quarterly Commission Sheets, nevertheless it is paid as salary and is numerously described as such in the pay documentation (Exhibit notes JAJN4, JAJN 5 and JAJN 6 to Exhibit A1).  It is also the amount by reference to which the respondent calculated the relevant contributions to be made to superannuation in respect of the employment. 

I have concluded that the applicant was engaged by the respondent on an arrangement where there was a base salary or wage. However, I am not convinced that a finding in the alternative, that is, that there was no base salary or wage, would have altered the outcome of these proceedings.

The question I am required to determine remains whether the amount of income received by the applicant which exceeded $58,545.00 was “relevant wages” for the purpose of s170CD (1)(b) of the Act and, in particular, whether any part of that income generated by commissions constitutes “relevant wages” for the purposes of S170CD (1)(b) of the Act. I now turn to this issue.

Counsel for the respondent submitted that regard ought be had to the Second Reading Speech of the Assistant Minister for Industrial Relations, and the intention of the Parliament to exclude high income earners from the benefit of this legislation. No doubt the Second Reading Speech is a useful tool in circumstances where there is an ambiguity to be resolved in relation to the interpretation of legislation. It is a relevant aid to interpretation and it is appropriate to take it into account.  I have considered the extracts to which I was referred and, whilst it is true that the Assistant Minister indicated an intention to exclude high income earners, reference was also made therein to confining the termination provisions to employees  “whose base wage” (my emphasis) is no more than $60,000.00. The applicant falls into both categories described by the Minister in the Second Reading Speech, and for this reason  the  Second Reading does not significantly progress the issue.

In this case the interpretation can also be assisted by reference to the ordinary meaning of words of the section, together with a significant body of authoritative case law as to the meaning of the word “wages” at common law and in other employment related statutes. In this regard I was referred to the decision of Chief Justice Wilcox in Ardino v Count Financial Group Pty Limited (1994) 1 IRCR 221 wherein his Honour at page 228 said:

the definition of “relevant wages” is concerned only with   payments that are wages, strictly so-called.

It was this aspect of the decision in Ardino which no doubt led to the analysis of the meaning of the term “wages” undertaken by Judicial Registrar Murphy in Brown v Listaglen Pty Limited (1994) 1 IRCR 440. At page 441 of that decision there is an extensive consideration of the authorities in so far as the meaning of the term is concerned. I adopt that analysis in this matter. In particular it is appropriate to set out the extract from Commissioner of Payroll Tax (Vic) v Reserve Bank of Australia [1987] VR 241 where at page 251 Brooking J. said:

The Commonwealth Pay-roll Tax Assessment Act always
  reached out far beyond wages in the ordinary sense. The
  reference to ‘salary’ made it clear that the tax extended to the
  remuneration of ‘white-collar workers’ or other persons who
  might have been thought to receive salary rather than wages
  ...A bonus, also included in the definition, would not
  ordinarily be regarded as wages; neither would commission. 
  Allowances are mentioned.           

and the following extract from Mutual Acceptance Co Ltd v Federal Commissioner of Taxation (1944) 69 CLR 389 where Dixon J, at page 403, said:

In the definition of ‘wages’ the first two words ‘wages’ and
  ‘salary’ refer to ordinary forms of remuneration for work
  done. ‘Commission’ covers percentage rewards and
  ‘bonuses’ occasional or periodical additions whether
  contracted for or voluntary.  

Whilst the above decisions are concerned with the interpretation of taxation statutes, the ordinary understanding of the meaning of such terms as “wages” and “commission” are being considered. The approach  taken in Listaglen is consistent with these extracts and with the manner in which the term “wages” is commonly understood and is interpreted at common law. I am not satisfied that the applicant is by operation of s170CD(1)(b) of the Industrial Relations Act 1988 precluded from bringing the application. The respondent’s notice of motion is dismissed. The application is referred to the list of matters ready to be set down for hearing.

The orders of the court shall be:

1. That the  respondent’s notice of motion filed 11 October 1995 is      dismissed.

1. That the matter be placed in the list of cases ready to be fixed for     hearing.         

I certify that this and the preceding six (6) pages
are a true copy of the reasons for decision of
Judicial Registrar Parkinson.

Associate:
Dated:  6 February 1996

APPEARANCES

Solicitors for the applicant:  Kenna Croxford & Co
Counsel appearing for the applicant:                   Mr P Burchardt

Solicitors for the respondent:  Clayton Utz
Counsel appearing for the respondent:               Mr S Wood

Date of hearing:   27 November 1995

Written submissions filed:  11 December 1995