Jarrod Letizia v Australian Music Group T/A Allans Billy Hyde Music
[2012] FWA 9609
•9 NOVEMBER 2012
[2012] FWA 9609 |
|
DECISION |
Fair Work Act 2009
s.394—Unfair dismissal
Jarrod Letizia
v
Australian Music Group T/A Allans Billy Hyde Music
(U2012/11700)
and
John Joseph Ryan
v
AMG Shared Services Pty Ltd, Australia Music Group Pty Ltd, Allan Music Group Australia Pty Ltd, Allans Music & Billy Hyde Pty Ltd Trading as Allans Billy Hyde
(U2012/11966)
COMMISSIONER JONES | MELBOURNE, 9 NOVEMBER 2012 |
Company in Administration - effect of s.440D Corporations Act on Unfair Dismissal Applications
[1] Mr Letizia and Mr Ryan have both filed applications under s.394 of the Fair Work Act 2009 (the Act) for an unfair dismissal remedy (the Applicants). Mr Letizia filed his application on 24 July 2012 and named Australian Music Group T/A Allans Billy Hyde Music as the Respondent. Mr Ryan filed his application on 1 August 2012 and named AMG Shared Services Pty Ltd, Australian Music Group Pty Ltd, Allans Music Group Australia Pty Ltd, Allans Music & Billy Hyde Pty Ltd T/A Allans Billy Hyde as the Respondents.
[2] AMG Shared Services Pty Ltd (AMG Shared Services) identified itself as Respondent in the Employer’s Response to Application for Unfair Dismissal Remedy (Form F3) to Mr Letizia’s and Mr Ryan’s applications.
[3] AMG Shared Services Pty Ltd is one of 17 companies that formed part of the Australian Music Group Holdings Pty Ltd group of companies (AMG).
[4] On 23 August 2012, each of the companies in the AMG was placed into administration following which, receivers and managers from Ferrier Hodgson were appointed over AMG.
[5] On 14 September 2012, the Supreme Court of Victoria made Orders extending the time for the convening of a meeting of creditors under s.439A of the Corporations Act 2001 (Cth) (Corporations Act) until 18 January 2013.
[6] The Administrators object to Fair Work Australia (FWA) proceeding with each of the applications.
[7] The matter was listed for Mention on 27 September 2012. The Administrator was represented by Mr Biviano of Counsel. Mr Ryan was represented by Mr Burrell, Solicitor and Mr Letizia represented himself. Both Mr Ryan’s representative and Mr Letizia attended by telephone. At the Mention Mr Biviano tendered written submissions (Exhibit R1) and made oral submissions. The matter was adjourned to enable the Applicants to provide written submissions and the Administrator to provide further submissions in reply.
Submissions
Administrators Submissions
[8] Specifically, the Administrators submit that each of the applications be adjourned indefinitely or until leave of the Court is obtained pursuant to s.440D of the Corporations Act. Alternatively, it is submitted each of the proceedings be adjourned until after 18 January 2013.
[9] The Administrator states in summary that the current status of the administration is that:
(a) The Administrators have limited resources;
(b) The Receiver controls and operates the businesses, which are likely to be closed down; and
(c) As at 27 September 2012, no buyer has been found for the business and the Receivers have commenced the stock liquidation process.
[10] The Administrators submit that s.440D of the Corporations Act precludes the commencement or continuation of a proceeding in FWA unless an applicant has the written consent of the Administrator or leave of the Court.
[11] S.440D of the Corporations Act provides:
Stay of proceedings
(1) During the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, except:
(a) with the administrator's written consent; or
(b) with the leave of the Court and in accordance with such terms (if any) as the Court imposes.
(2) Subsection (1) does not apply to:
(a) a criminal proceeding; or
(b) a prescribed proceeding.
[12] The Administrators submit that “the purpose of section 440D Corporations Act 2001 is to freeze proceedings against the company in voluntary administration, so that the administrator is not distracted with the litigation and can attend to the company’s affairs.”
[13] The issue to be determined is whether an unfair dismissal application before FWA, is a proceeding in a court for the purpose of section 440D of the Corporations Act.
[14] The Administrators argue that there is a divergence in authorities on this issue (see discussion below) but that the approach adopted in decisions of State Supreme Courts and the Federal Court of Australia that FWA exercises its powers judicially and is a court for the purpose of section 440D of the Corporations Act 1 should prevail.
[15] Mr Ryan submits that the decision of Smith and Ors v Trollope Silverwood and Beck Pty Ltd (in liquidation) 2 (Smith) remains good law and should not departed from by a single Member. As the determination of the matter involves the exercise of the Tribunal’s discretionary power, the consideration of the Administrator’s objections ought to commence from the prima facie right of a party to insist on the exercise of jurisdiction.3 Mr Ryan submits that determination of the proceedings by FWA has utility (in addition to vindicating his reputation) in that, “re-instatement will enable the applicant access to GEERS in respect of lost remuneration and termination benefits”.
Authorities
[16] In Smith the Full Bench considered whether the (then) Australian Industrial Relations Commission has jurisdiction to deal with an unfair dismissal application in circumstances where the respondent employer is in liquidation and the applicant employee had not obtained the leave of the relevant court to commence or proceed with the application.
[17] The Full Bench considered the effect of s.471B of the Corporations Act, which provides as follows:
Stay of proceedings and suspension of enforcement process
While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with:
(a) a proceeding in a court against the company or in relation to property of the company; or
(b) enforcement process in relation to such property;
except with the leave of the Court and in accordance with such terms (if any) as the Court imposes.
[18] The Full Bench in Smith concluded that s.471B did not apply to the commencement or the continuation of proceedings in the Commission.
[19] It is appropriate to set out the reasoning of the Full Bench, as it includes consideration of the authorities relied on by the Administrators:
[7] Section 471B includes the terms "court" and "Court". Each of these terms is defined in s.9 of the Corporations Act. Section 9 provides that unless the contrary intention appears, "court" and "Court" have the meanings given by s.58AA. Section 58AA relevantly provides:
"(1) Subject to subsection (2), in this Act:
court means any court.
Court means any of the following courts:
(a) the Federal Court;
(b) the Supreme Court of a State or Territory;
(c) the Family Court of Australia;
(d) a court to which section 41 of the Family Law Act 1975 applies because of a Proclamation made under subsection 41(2) of that Act.
(2) Except where there is a clear expression of a contrary intention (for example, by use of the expression "the Court"), proceedings in relation to a matter under this Act may, subject to Part 9.7, be brought in any court."
[8] As indicated, pursuant to s.9 of the Corporations Act "court" has the meaning it bears in s.58AA of the same Act unless the contrary intention appears. The first question is, therefore, what meaning does the term "court" bear in s.58AA?
[9] It seems clear that in s.58AA, the terms of which we have just set out, "court" means a body capable of being invested with the judicial power of the Commonwealth. In other words, the term is confined in meaning to Federal and State courts. This conclusion arises primarily from the terms of s.58AA(2). Proceedings in relation to a matter under the Act would require to be brought in a curial body exercising judicial power. It is beyond argument that the Commission is not a body capable of exercising the judicial power of the Commonwealth: R v Kirby; Ex parte Boilermakers' Society of Australia; Miller v University of New South Wales. If the term "court" is to be given its defined meaning it excludes the Commission. Therefore the Commission is not a court within the definition of that term in s.9. This was the conclusion reached by a justice of the Federal Court of Australia in Australian Liquor, Hospitality and Miscellaneous Workers Union v Home Care Transport Pty Ltd. We respectfully agree.
[10] It follows from the terms of s.9 that the expression "any court" in s.471B includes only courts capable of exercising the judicial power of the Commonwealth, unless the contrary intention appears. Does an intention appear, either in s.471B itself or from the statutory context, that in s.471B "court" includes the Commission?
[11] In Home Care, Merkel J found that while the Commission, not being capable of being invested with the judicial power of the Commonwealth, is not a court as defined in s.9 of the Corporations Act nevertheless, as provided for in s.9, a contrary intention appears in s.471B. That intention is that in s.471B the term "court" should include non-judicial bodies such as the Commission.
[12] His Honour noted two decisions in which it was held that a state industrial tribunal was a court in a similar statutory context. The Full Court of the Supreme Court of Western Australia held that the Western Australian Industrial Relations Commission was a court for the purposes of the leave provision in s.471B of the Corporations Law: Helm v Hansley Holdings Pty Ltd (In liquidation) and a member of the Supreme Court of New South Wales held that the Industrial Relations Commission of New South Wales was a court for the purposes of the leave provision in s.440D of the Corporations Law: Brian Rochford Ltd (Administrator appointed) v Textile Clothing and Footwear Union of New South Wales. In each case the court adopted a purposive approach to the relevant provisions. Merkel J concluded that in enacting the Corporations Act with the relevant provisions unchanged the legislature intended not to disturb the decisions in Helm and Rochford. It follows that if the two state industrial tribunals were included in the term "court", so also was the Commission, which has broader powers and the capacity to make awards affecting the property and affairs of a corporation.
[13] His Honour also found that it was difficult to discern any reason for excluding the Commission from the ambit of the leave provision. The reverse was likely to be the case given the Commission's powers to make awards which might affect the rights of unsecured creditors.
[14] While a number of non-judicial bodies were held to be a court in Helm, Rochford and Home Care a different conclusion was reached by Master Evans of the Supreme Court of Victoria in Silvarich v Rathner. There are two decisions of members of the Commission sitting alone which support the view that the Commission is not a court for the purpose of the same or similar provisions. We were also referred to a case in which "court" was given a broad construction by reference to the purpose of the Suitors' Fund Act 1951 (NSW): Australian Postal Commission v Dao and others (No. 2). In that case, however, there is no suggestion that the Court of Appeal of New South Wales was required to deal with the question of whether a contrary intention appeared in the legislation.
[15] In ascertaining whether the terms of a statute give rise to a contrary intention it is necessary to have regard to the relevant text. In our view there is nothing in the text of s.471B itself which evidences an intention that applications to bodies other than courts should be subject to the leave provision. Those decisions which have held that there is such an intention are based upon the purpose said to be implicit in the section. In Home Care and Helm that purpose was said to be to enable the court effectively to supervise all claims being brought against the company which is being wound up. To permit the Commission to deal with claims without leave might undermine the effectiveness of the court's supervision and permit an alteration or diminution of the rights of creditors which the court would be powerless to influence.
[16] Without the benefit of authority, it seems to us that there are some difficulties with the respondent's reliance on a purposive approach. This is because of the nature of the Commission, its jurisdiction and the powers available to it.
[17] The Commission's jurisdiction includes the prevention and settlement of industrial disputes (Part VI of the WR ACT), the fixation of minimum entitlements of employees (Part VIA) including applications for relief in respect of termination of employment (Part VIA, Division 3) and facilitating the making and certifying of agreements of various kinds (Part VIB). In exercising its powers the Commission is sometimes required to take into account the public interest, as well as the interests of the parties directly concerned. When exercising its arbitral function the Commission is concerned with the creation and adjustment of rights, rather than with the declaration and enforcement of existing rights, the latter being functions of a court: Re Ranger Uranium Mines Pty Ltd: Ex parte Federated Miscellaneous Workers Union of Australia. This is so even when the Commission exercises jurisdiction to determine applications for a remedy in relation to termination of employment on the basis that the termination was harsh, unjust or unreasonable. While it is clear that by the exercise of its arbitral and other functions the Commission might affect the rights of creditors, by altering or extinguishing existing rights or creating new ones, it is not apparent that it is a purpose of s.471B that the Commission should be prevented from exercising those functions save with the leave of the relevant court. Because the Commission exercises predominantly arbitral power and may be required to take into account the public interest rather than just the interests of creditors, restraint of the Commission raises a number of issues that do not arise when restraint of a court is in contemplation.
[18] Since the Commission is primarily concerned with what rights there should be rather than with existing rights, the court could not supervise the exercise of the Commission's jurisdiction in the same way in which it might supervise the exercise of jurisdiction by a court. The Commission is required to take policy considerations into account in deciding what rights should exist whereas a court is not primarily concerned with such questions. If Commission proceedings were subject to the leave requirement, in exercising its discretion on the question of leave in a particular case, the relevant court may have to take into account considerations additional to those which might be relevant if leave were sought in relation to court proceedings. It is a truism that the relevant court could not itself exercise the Commission's jurisdiction and accordingly the nature of the supervision would be different on that account also. Because supervision of Commission proceedings would differ significantly from supervision of court proceedings, we think some specific indication would be required for an intention to appear that "court" should be given a meaning which differs from its defined meaning and which includes the Commission.
[19] We also think it is significant that the legislature has not included specific reference to the Commission and similar bodies. While one explanation is that the legislature has relied upon the decisions in Helm and Rochford and by implication endorsed those decisions by enacting the 2001 statute with the definition of court in relevantly the same form as it took in the preceding legislation, that explanation is negatived to a significant extent by the fact that the Commission has dealt with many applications involving companies in liquidation without the leave of the relevant court being obtained either for the initiation or the continuation of the applications. Examples may be found of Commission decisions relating to liquidations of great notoriety and national significance: Re Trustees Executors and Agency Company Ltd (In liquidation); Re Clerks' (Domestic Airlines) Award 1980 (Compass Airlines); Re Insurance Industry Award 1998 (HIH Insurance).
[20] If the legislature had intended to make proceedings in the Commission subject to the leave requirement it could have done so by express provision. An example of such a provision may be found in s.5 of the Suitors' Fund Act 1951 (NSW) which defines court in these words:"includes such tribunals or other bodies as are prescribed."
[21] Taking these considerations into account, we have concluded that the contrary intention does not appear and that "court" in s.471B should be given its defined meaning. With respect to those who have held otherwise, in our view the purposive approach does not take the respondent the distance it needs to go. 4
[20] Whilst Smith was decided under a former legislative regime, the analysis of the jurisdiction, functions and exercise of the powers in that decision are apposite to the scheme and provisions of the Fair Work Act 2009 (the Act). FWA’s jurisdiction includes the making of workplace determinations (Part 2-5), determining applications for unfair dismissal remedy (Part 3-2), facilitating the making and approval of enterprise agreements (Part 2-4). Fair Work Australia continues to exercise predominantly arbitral powers and may be required to take into account the public interest. 5
[21] The approach of the Court in Smith has been adopted in decisions of FWA. 6
[22] No authorities subsequent to Smith which favour the approach adopted in HomeCare, Helm and Brian Rochford were brought to my attention.
Consideration
[23] I am satisfied that, as a single member of FWA I should apply the approach of the Full Bench in Smith.
[24] I am satisfied the s.440B does not apply to unfair dismissal proceedings conducted by FWA.
[25] The Administrators have submitted that in the alternative to their primary submission, I should exercise my discretion and adjourn both applications until after the meeting of creditors under s.439A of the Corporations Act, to be held, consequent upon a Court Order, on 18 January 2012.
[26] A creditors meeting held under s.439A of the Corporations Act may resolve to pursue a number of options, these being executing a deed of company arrangement, to end the administration or to wind up the company: s.439C. In circumstances where the meeting resolves, under s.439C, that the company should be wound up, the Corporations Act provides that the administrator becomes a liquidator: s.446A.
[27] Mr Ryan submits that a relevant and persuasive consideration, in the exercise of the Tribunal’s discretion is the eligibility of the Applicant to the GEERS Scheme where this application is determined in his favour.
[28] GEERS refers to the Commonwealth Government General Employee Entitlements and Redundancy Scheme.
[29] The Operational Arrangement (OA) to GEERS issued on 1 January 2011 provides that:
a) The Australian Government established GEERS as a basic payment scheme for
Employees’ unpaid Eligible Entitlements when:
i) their Employer has been subject to an Insolvency Event;
ii) there are insufficient funds or assets available to the Employer to pay those
entitlements; and
iii) no other source of funds is available to pay those entitlements.
b) These OAs are the primary document which we use to set out how the Government’s policy is administered.
[30] The objects of the Scheme are described as:
a) GEERS is intended to:
i) provide a basic payment scheme for Employees’ unpaid Eligible Entitlements when their Employer has been subject to an Insolvency Event, there are insufficient funds or assets available to the Employer, and no other source of funds is available to pay the Eligible Entitlements; and
ii) recover any Advance if and when funds become available.
[31] Eligibility to GEERS is dealt with at paragraph 6 of the OA which relevantly provides:
a) Claimants may be eligible for a GEERS Advance if we can verify that they were an
Employee of an Employer subject to one of the following Insolvency Events:
i) in the case of an incorporated Employer, when a provisional liquidator or liquidator has been appointed under the Corporations Act 2001;
.................................
b) Unless one of the exceptions in Clause 7 applies, the Claimants’ employment must have been terminated due to the Appointment of an Insolvency Practitioner.
c) A Claimant must be owed Eligible Entitlements by their Employer.
[32] Other matters which affect an employee’s eligibility to GEERS are dealt with at Clause 7 of the OA which relevantly provides:
b) Employees may also be eligible for an Advance if:
i) they resigned following the Appointment of an Insolvency Practitioner;
ii) they resigned or their employment was terminated up to six months prior to the Appointment of an Insolvency Practitioner; or
iii) their employment was terminated before the Appointment of an Insolvency
Practitioner but they have been reinstated by a court or tribunal.
c)...
v) their claim was received more than 12 months after either the termination of their employment, or the date of the Insolvency Event, whichever is the later.
[33] Under paragraph 8 of the OA eligible entitlements under GEERS consist of unpaid annual leave and long service leave, unpaid wages in the 3 months prior to the Appointment of an Insolvency Practitioner, unpaid pay in lieu of notice up to a maximum period of 5 weeks and unpaid redundancy pay up to a maximum of 4 weeks per completed year of service.
[34] Clause 14 relevantly provides:
Provided the other requirements of Clause 6 are met, Employees who fall within the following categories may be entitled to a GEERS Advance if:
c) Employees who were terminated before the Appointment of an Insolvency Practitioner but have been reinstated by a court or tribunal.
i) Despite the provision in Clause 6(b), where their employment was terminated before the Appointment of an Insolvency Practitioner, Employees may be eligible for a payment under GEERS if they have a Reinstatement Order.
ii) Where a Reinstatement Order has been obtained and the normal 12 months to claim for GEERS has expired, Employees can still claim within 1 month of the date of the Reinstatement Order.
Note: the Order must be for reinstatement, not an award of compensation.
[35] It is relevant to observe that the Respondent is presently in administration with Receivers and Managers appointed. The OA of GEERS limits eligibility to the scheme to circumstances where the Employer has been subject to an Insolvency Event: 2(a)(i). An Insolvency Event is relevantly defined in 6(a)(i). In the case of an incorporated Employer, an Insolvency Event occurs when a provisional liquidator or liquidator has been appointed under the Corporations Act. As presently advised, this has not yet occurred.
[36] It is the case that the applicants do not claim unpaid entitlements. Even if they did, it is doubtful given the definition of Insolvency Event that the Applicant’s would presently be eligible to access advances from GEERS.
[37] However, Clause 14 of the OA provides that employees who have been terminated before an Insolvency Event (as has been the circumstance in this matter) may be entitled to a payment under GEERS if they have a Reinstatement Order. True it is that the Applicant’s are not entitled to awards of compensation under s.392 of the Act. However, an Order of reinstatement following a finding of unfair dismissal may have utility in terms of accessing GEERS. First, FWA may order an amount for lost remuneration under s.391(3) of the Act. It is arguable that such an Order constitutes unpaid wages. Secondly, an Applicant who is reinstated and subsequently made redundant because of the financial circumstances of a Respondent becomes entitled to redundancy pay.
[38] The Administrator rejects Mr Ryan’s submission that the application is highly likely to succeed and correctly points out that the merits of the claim are yet to be tested. The Administrator further argues that Mr Ryan’s arguments go to remedy not the future progress of proceedings. It submits that there is no prejudice to the Applicants if the further progress of the matters are held over until after the creditors meeting.
[39] I am satisfied, however, that there is a potential prejudice to the Applicants from adopting such a course, namely that if the creditors meeting resolves to voluntarily wind up the Respondent, s.500 of the Corporations Act would prohibit the applications being further dealt with by FWA except by leave of the Court. 7 I accept the Administrators presently lack resources and that events are occurring apace and that liquidation may occur sooner than expected and that, in these circumstances, costs in preparation may be thrown away. However, as matters presently stand, no matter how remote an Order of reinstatement may appear, I am satisfied that granting the Administrator’s application may result in real prejudice to the Applicants. On balance, I have decided to exercise my discretion to enable the Applicants to proceed to determination.
[40] I therefore refuse the Administrator’s application.
[41] I have decided that, both applications (U2012/11700 and U2012/11960) will be heard jointly. Directions for the filing and serving of material will be issued shortly. It is noted that pre-arbitration conciliation is available should the parties so desire.
COMMISSIONER
Appearances:
Mr Biviano of Counsel for the Respondent
Mr Burrell - Representative of the Mr Ryan
Mr Letizia - Appearing on behalf of himself
Hearing details:
2012
Melbourne
September 27
1 Brian Rochford Ltd (Administrator Appointed) v TCFU (1998) 47 NSWLR 47, Helm v Hansley Holdings Pty Ltd (In Liquidation) (1999) WASCA 71, ALHMWU v Home Care Transport Pty Ltd [2002] FCA 497.
2 (2006) 142 IR 137
3 R v Commenwealth Court of Conciliation and Arbitration; Ex parte Ozone Theatres (Aust) Ltd (1949) 78 CLR 389 at 398-399 and Re Queensland Electricity Commission; Ex parte Electrical Trades Union of Australia (1987) 61 ALJR 392 at 399-400.
4 Smith PR 940508 at [7] to [21].
5 See for example sections 187, 189, 211, 243, 226, 275, 318-319 and 532 of the Act.
6 Mounsey v Matrix Developments Pty Ltd[2011] FWA 6392.
7 Silalahi v CMI Industrial (Forge) [2012] FWA 7273
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