John Anthony Ardino v Count Financial Group Pty Limited

[1994] IRCA 109

C A T C H W O R D S

INDUSTRIAL LAW - Termination of employment - Claim of unlawful termination - Question whether Subdivisions B and C of Division 3 of the Industrial Relations Act apply to the termination - Whether the "relevant wages" of the applicant exceeded $60,000 during the period of 12 months before termination - Whether computation should include moneys earned but not paid in this period - Whether payments made at the applicant's direction to a superannuation fund should be included - Whether Court should allow proceeding to continue so that applicant may add a claim in the Court's associated jurisdiction.

Industrial Relations Act 1988, ss.170CD, 170EA, 170EE, 430.

JOHN ANTHONY ARDINO v. COUNT FINANCIAL GROUP PTY LIMITED

NO. NI 517 of 1994

CORAM:    WILCOX CJ
PLACE:    SYDNEY

DATE:     14 NOVEMBER 1994

IN THE INDUSTRIAL RELATIONS COURT )

)No. NI 517 of 1994

OF AUSTRALIA  )
  )
NEW SOUTH WALES DISTRICT REGISTRY )

BETWEEN:JOHN ANTHONY ARDINO

Applicant

AND:COUNT FINANCIAL GROUP P/L ACN 001 974 625

Respondent

CORAM:WILCOX CJ

PLACE:    SYDNEY
DATE:     14 NOVEMBER 1994

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The Application be dismissed.

Note:Settlement and entry of orders is dealt with in Order 36 of the Industrial Relations Court Rules. 

IN THE INDUSTRIAL RELATIONS COURT )

)No. NI 517 of 1994

OF AUSTRALIA  )
  )
NEW SOUTH WALES DISTRICT REGISTRY )

BETWEEN:JOHN ANTHONY ARDINO

Applicant

AND:COUNT FINANCIAL GROUP P/L ACN 001 974 625

Respondent

CORAM:WILCOX CJ

PLACE:    SYDNEY
DATE:     14 NOVEMBER 1994

REASONS FOR JUDGMENT

WILCOX J:   This is a Notice of Motion, referred to me by a Judicial Registrar, whereby a respondent to an unlawful termination of employment claim seeks an order that the proceeding be dismissed for want of jurisdiction.

As a general rule, I do not favour pre-trial applications for dismissal.  Ordinarily, it is better for all issues to be determined at the one time.  However, sometimes there is no doubt about the relevant facts, but an issue of law that, decided one way, must lead to dismissal of the proceeding.  In such a case it may be appropriate to entertain a pre-trial application for dismissal.  When the matter came before me, it quickly became apparent that this is such a case.  Accordingly, I heard argument on the motion.  I have now reached the view that the case is outside the jurisdiction of the Court and must be dismissed.

The facts

The applicant, John Ardino, was employed for some years by the respondent, Count Financial Group Limited, formerly known as Investment & Tax Service Pty Ltd. His employment was terminated on 24 June 1994. On 8 July 1994 he commenced the present proceeding by filing an Application in which he sought a declaration that the termination contravened Division 3 of Part VIA of the Industrial Relations Act 1988 and an order for payment of compensation. He relied solely on the Act; he did not make any claim based on breach of contract.

Affidavits were subsequently filed.  One of them was made by Kylie Lambert, financial controller of the respondent.  The part of this affidavit that was read by counsel for the respondent in support of this motion said:

"8.In relation to the financial year ended 30 June 1994, the Applicant's total remuneration package comprised:

(a)a base salary of $75,000.00;

(b)5% superannuation contribution ($3,750.00) paid by the Respondent; and

(c)a Christmas bonus of $1,000.00 together with an additional bonus of $5,000.00.

9.In relation to the base salary component, the Applicant, of his own volition, decided to divert some of his income.

10.In early May 1994, the Applicant left a signed note asking me to pay his May salary into the A & N Ardino Superannuation Fund.

11.In early June 1994, the Applicant approached me and we had a conversation to the following effect:

He said:Can you please pay my salary into the A & N Superannuation Fund.

I said:    Okay.

12.Annexed hereto and marked 'C' and 'D' respectively are cheque butts dated 1 May 1994 and 1 June 1994.  The cheques to which these butts were attached, were paid into the Applicant's nominated superannuation fund.  They were debited to the Respondent's bank account and represented the Applicant's salary for the months of May and June 1994.

13.In view of the foregoing salary certificate, the Applicant was paid $63,000.00 for work performed in the months July 1993 through to April 1994.  A copy of the financial spreadsheet detailing payments made to the Applicant for those months is annexed hereto and marked 'E'.

14.Annexed hereto and marked 'F' is a copy of the Applicant's Group Certificate for the financial year ended 30 June 1994.  That Group Certificate does not take into account the payments referred to in paragraph 10 of this Affidavit."

Annexure "C" is a cheque butt dated 1 May 1994 and endorsed:  "John Ardino's salary no tax deducted gross paid into self managed super fund $6,750.  This includes $500 from last month".  Annexure "D" is a cheque butt dated 1 June 1994 referring to a cheque for $6,250 and endorsed "John Ardino Superannuation".  The spreadsheet, annexure "E", contains information relating to several employees, one of them Mr Ardino.  The relevant information is:

July           August              September

Gross 6,340.00       6,160.00            12,500.00
Tax       2,350.00       2,350.00             4,700.00
Net       3,990.00       3,810.00             7,800.00

October        November            December

Gross         0.00       6,250.00            7,250.00
Tax           0.00       2,350.00            2,259.30
Net           0.00       3,900.00            4,990.70

January        February            March

Gross 6,250.00       6,250.00            6,250.00
Tax       2,259.30       2,259.30            2,259.30
Net       3,990.70       3,990.70            3,990.70

April          May                 June

Gross 5,750.00           0.00                0.00
Tax       2,017.30           0.00                0.00
Net       3,732.70           0.00                0.00

Annexure "F" is a copy of a Group Certificate issued by the respondent to Mr Ardino.  It is dated 4 August 1994 and covers the year 1 July 1993 to 30 June 1994.  The certificate shows "Gross Salary, Wages, Bonus etc" of $63,000 and deducted tax instalments of $22,804.50.

Mr Ardino responded to Ms Lambert's affidavit with an affidavit that contained the following:

"12.In relation to the contents of Paragraphs 4-10 of the Affidavit of Kylie Lambert I say that from 20th May 1986 I was party to an arrangement with the Respondent (who was at this time known as Investment & Tax Service P/L) whereby the proportion of my total renumeration payable as salary varied from year to year depending on the contribution made by the Respondent to my superannuation. 

The Respondent had the discretion to contribute any amount up to 30% of my total renumeration to my superannuation fund.  A copy of this agreement is annexed to this affidavit and marked 'A'.

"13.I admit the contents of Paragraph 11 of the Affidavit of Kylie Lambert.  When I said these words I was referring to the renumeration I expected to receive for work carried out in June 1994 on behalf of the Respondent.

14.In relation to the contents of Paragraph 13 of the Affidavit of Kylie Lambert I say that the renumeration totalling $63,000 which I received in the 1993-1994 financial year included payment for work carried out from 1/6/93 to 30/6/93.  This is because the Respondent renumerated me monthly for the work carried out in the previous month.  I calculate that the renumeration I received in relation to the period from 24/6/93 to 23/6/94 to be $58,102.

15.I say that the renumeration I received in relation to the period from 24/6/93 to 23/6/94 included:

(a)my Christmas bonus of $1,000; and

(b)possibly some reimbursement for travel related expenses which I incurred in the course of conducting interstate and intrastate training sessions on behalf of the Respondent."

The document identified as Annexure "A" is a letter dated 20 May 1986 from the respondent to the applicant.  Omitting formal parts, it reads:

"SUPERANNUATION ARRANGEMENTS

Investment & Tax Service Pty Ltd

undertakes to provide non contributory superannuation for you on the following basis:

LIFE INSURANCE COVER -   $150,000 cover

INVESTMENT -      Contributions up to a maximum of 30% of Salary

Contributions will be on an annual end of year basis and are completely at the discretion of Investment & Tax Service P/L Directors.  However once made, they will be immediately fully vested.  Single premium superannuation bonds or S23F arrangements may be used as Investment & Tax Service sees fit."

At the hearing of the motion, counsel for the applicant obtained leave to obtain some supplementary oral evidence from their client.  Mr Ardino was then briefly cross-examined.  It became clear that the letter of 20 May 1986 was a cover for an arrangement whereby Mr Ardino could obtain tax-deductibility for all the contributions he made to his superannuation fund, notwithstanding that they exceeded the permissible limit.  The purpose of the letter was to create the pretence that the contributions were at the employer's expense.  They were not.  The contributions made pursuant to the letter were not "non-contributory" payments by the respondent.  They were contributions made upon the instruction of Mr Ardino and at his expense, in the sense that salary payments due to him were diverted to the fund.  This is what happened in each of the months of May and June 1994.  In relation to each month, he was entitled to receive a salary cheque ($6,750 less tax for May, $6,250 less tax for June).  In each case he instructed Ms Lambert to pay the gross amount due to him into the superannuation fund, rather than to himself.  She complied.  The Group Certificate did not include these payments, so Mr Ardino put himself in a position where he might expect to escape tax on his earnings for these two months.  From the respondent's point of view, however, the payments were able to be claimed as tax-deductible expenses pursuant to its discretionary obligation, under the letter of 20 May 1986, to make "non-contributory" superannuation payments on Mr Ardino's behalf.

The statutory provisions

Mr Ardino's Application was brought under s.170EA of the Industrial Relations Act. That section is included in Subdivision C of Division 3 of Part VIA. So is s.170EE, the section that empowers the Court to provide relief in unlawful termination cases. The statutory provisions imposing requirements for lawful termination are in Subdivision B. Mr Ardino's case depends on his establishing a breach of one or more of those requirements.

A few days before the proceeding was commended, on 30 June 1994, the amendments made to Part VIA of the Act by the Industrial Relations Amendment Act (No.2) 1994 came into force. Amongst other things, those amendments inserted a new section, s.170CD, which excluded from the subsequent Subdivisions of Division 3 terminations of certain non-award employees. Those employees include "an employee who was continuously employed by the employer during the period of 12 months immediately before the termination day" whose "relevant wages exceeded the applicable amount on the termination day": see subs.(1).

A number of expressions are defined in the section.  The term "applicable amount" is defined by subs.(2) as $60,000 or such amount as might be calculated by reference to a formula for annual indexation prescribed by regulations.  No regulations have yet been prescribed, so the "applicable amount" is $60,000.  Subsection (3) explains what is meant by an employee being taken not to be employed under award conditions.  It is not necessary to examine this provision in the present case.  It is common ground that Mr Ardino is such an employee.  The definition of "relevant wages" in subs.(4) is important.  It reads:

"'relevant wages', in relation to an employee, means the total amount of the wages that the employee received, or was entitled to receive, from the employer in respect of:

(a)if paragraph (1)(a) applies to the employee - the period of 12 months referred to in that paragraph; or

(b)if paragraph (1)(b) applies to the employee - the lesser period referred to in that paragraph;

but, in relation to an employee whose contract of employment prescribes normal hours for the performance of work ... does not include any wages, additional to normal wages, in respect of additional hours of work performed or in respect of work performed at other times;"

In the present case para.(1)(a) applies; Mr Ardino was continuously employed by the employer throughout the period of 12 months immediately before the termination day.  So the question is whether "the total amount of the wages that
(he) received, or was entitled to receive", from (the respondent), in respect of that period of 12 months, exceeded $60,000.

Despite the ingenious arguments of counsel, there can only be one answer to that question; the total amount did exceed $60,000. Mr Ardino's case has problems on two levels. Even if the superannuation payments made in May and June are ignored, the amount that he received, or was entitled to receive, exceeded $60,000. I will leave aside the $1,000 bonus. Although taxable, and properly included in the amount stated on the Group Certificate, it is arguable that a bonus is not "wages" within the meaning of s.170CD. I need not determine that question. Even if the bonus is excluded, $62,000 is left. There is no evidence to suggest that the Group Certificate amount includes reinstatement of any travel expenses, as speculated by Mr Ardino in his affidavit.

The broken period

Following the lead given by the applicant in para.14 of his affidavit, counsel argued that the bulk of the payment received on 1 July 1993, representing wages for work done during June 1993, should be disregarded.  They said that this payment was largely attributable to the period from 1 June to 23 June 1993.  Those days were outside the relevant 12 month period.  Their argument was that only 7/30ths of the payment should be counted, this being the proportion attributable to the last week of the month.  On this basis, counsel contended, the total payments are below $60,000.

I asked counsel for their submission as to the position in relation to the period from 1 June 1994 to 23 June.  After his dismissal Mr Ardino received a cheque for moneys due to him that included wages for this period.  Counsel said this payment should be disregarded because it was not received within the 12 months before termination.

I accept that the wages earned prior to 23 June 1993 should be disregarded.  They were not wages that Mr Ardino received, or was entitled to receive, "in respect of" the relevant 12 month period.  It does not matter that they were received within it.  However, I do not think the wages attributable to the period 1 June - 23 June 1994 should be ignored.  These were wages that Mr Ardino "was entitled to receive" in respect of part of the 12 month period.  It does not matter that they were not received within it.  Nor does it matter if, as appears to be the case, the wages did not become due and payable until the end of the month; a date outside the relevant period.  The definition does not speak of wages that the employee becomes entitled to receive within the 12 month period, but rather wages "in respect of" that period.  If wages are attributable to days within the 12 month period, they are to be counted.  It does not matter when the employee became entitled to receive the wages or when (if ever) payment was made.

This interpretation not only most naturally accords with the language used in the definition; it is readily understandable in policy terms. The purpose of s.170CD was to exclude highly paid non-award employees from the benefits of Division 3. If that purpose was to be fulfilled, Parliament had to fix a remuneration level beyond which the exclusion would apply. It is understandable that Parliament thought this could best be done by reference to the monetary payment the employee was entitled to receive, rather than subjecting the parties to the vagaries that might ensue, in cases where the rate was near the cut-off point, by having regard to actual receipts.

I am of the opinion that, even if it is correct to ignore the payments made to the superannuation fund on 1 May and 1 June 1994, Mr Ardino's "relevant wages" exceeded $60,000.  So Subdivisions B and C did not apply to his termination by the respondent.

The superannuation payments

I should say, however, that I do not think it is right to exclude the superannuation payments.  I agree with counsel that the definition of "relevant wages" is concerned only with payments that are wages, strictly so-called.  I do not think it includes payments made by an employer on behalf of an employee pursuant to a binding antecedent obligation, whether statutory or contractual.  It is now commonplace for employers to make payments to a superannuation fund in respect of individual employees.  This is usually because of a statutory obligation to that effect, sometimes because of a binding contractual obligation.  If the situation is that the employer never had any option but to pay particular moneys to a superannuation fund, as distinct from making it available to the employee, the payment cannot properly be described as "wages".

Counsel for the respondent drew attention to a decision of the United Kingdom Court of Appeal, Adams v. Liverpool Corporation (1927) 137 LT 396, containing discussion of the meaning of the term "full salary or wages" in a council resolution designed to encourage council employees to join the armed services during the First World War. Bankes LJ, with whom Scrutton LJ and Romer J agreed, said at 397 "where the word used is 'salary' or 'pay' or 'wages', you are entitled to interpret that language as meaning something to which a person is contractually entitled". A payment made by the employer, that the employee was never contractually entitled to receive, cannot be regarded as "wages". It is not sufficient that the payment arose out of the contract of employment.

I appreciate, of course, that an employer's obligation to make a payment that the employee was never contractually entitled to receive may have arisen out of negotiations between the employer and the employee as to the terms and conditions of employment.  Ordinarily, I suppose, these negotiations will have preceded the commencement of the employment; but sometimes terms and conditions of employment are renegotiated during the course of the employment.  The parties may agree that the employer will provide non-pecuniary benefits, such as use of a car or overseas travel, or make payments to someone else, such as for superannuation or school fees.  The effect of that agreement may be to diminish the periodical payments made directly to the employee.  Part of what might have been available to the employee as salary is diverted elsewhere.  I do not think any of this matters.  The question is not the genesis of the obligation but its nature.

In relation to non-pecuniary benefits, I cannot see how they can ever be regarded as "wages" for the purpose of the definition.  The word "wages" is not defined by the Industrial Relations Act, so in s.170CD it bears its ordinary meaning. The Shorter Oxford Dictionary defines "wage" as:

"A payment to a person for service rendered; now esp. the amount paid periodically for the labour or service of a workman or servant.  Freq. pl."

The Macquarie Dictionary gives the primary meaning of "wage", noting that it is often plural, as "that which is paid for work or services, as by the day or week; hire; pay".  I think these definitions' emphasis on payment makes it difficult to argue that benefits that do not take the form of money payments are "wages".

So far as money payments are concerned (superannuation, school fees etc), the critical question is whether the employee ever had an entitlement to receive the money himself or herself.  If the contractual arrangement between the employer and employee was that the money would be paid to someone else as soon as the occasion arose, to the exclusion of any right of the employee to obtain payment, the money was not something that the employee received or was entitled to receive.  Although no attention was directed to the matter, it seems that the 5% superannuation payment referred to in para.8(b) of Ms Lambert's affidavit may have been in this category.

However, the situation was different in respect of the superannuation payments made on Mr Ardino's instructions in May and June 1994.  These were "payments" by the respondent, in the ordinary sense of that word.  The fact that they were made to a superannuation fund, rather than to Mr Ardino personally, was not something that arose out of pre-existing contractual obligation.  Mr Ardino was entitled to receive the payments himself.  He chose to have them diverted elsewhere.  I agree that the moneys were not "wages that the employee received".  He did not receive these moneys; he caused them to be received by someone else.  However, the definition includes wages that the employee "was entitled to receive".  It is beyond argument that Mr Ardino was entitled to receive the moneys paid in May and June to his superannuation fund.  If he had said nothing, he would have received them.  The only reason why he did not receive the moneys was that he elected to have them paid to someone else.  This is not a case of a previous obligation of the respondent to make the payments to the superannuation fund, with Mr Ardino never being entitled to receive wages for those months.  This is a case where, being entitled, he elected not to receive his wages but to have them paid to someone else.  Accordingly, the payments must be taken into account in determining whether or not Mr Ardino's "relevant wages" exceeded $60,000.

The contract claim

At the hearing of the Notice of Motion, counsel for Mr Ardino sought to amend the Application so as to add a claim of breach of contract.  They wished to litigate a contention that the notice given to Mr Ardino fell short of that which he was entitled to receive pursuant to his contract of employment with the respondent.  The contention does not depend upon anything in Part VIA of the Industrial Relations Act.  So it does not matter, for the purposes of that argument, whether or not Mr Ardino's "relevant wages" exceeded $60,000.

Section 430 of the Industrial Relations Act gives the Court jurisdiction "in respect of matters not otherwise within its jurisdiction that are associated with matters in which the jurisdiction of the Court is invoked".  This jurisdiction extends to claims under non-federal law that arise out of the same substratum of facts as those said to give rise to the federal claim committed to the jurisdiction of the Court:  see Fencott v. Muller (1983) 152 CLR 570 and Stack v. Coast Securities (No.9) Pty Ltd (1983) 154 CLR 261. It does not matter that the federal claim may ultimately fail: see Burgundy Royale Investments Pty Ltd v. Westpac Banking Corporation (1987 18 FCR 212. Ordinarily, a contract claim that arises out of the same substratum of facts as an unlawful termination claim could be litigated in this Court, in reliance on s.430.

However, Burgundy Royale indicates that, for the associated jurisdiction to arise, the federal claim must be bona fide and arguable.  The Court said at 219:

"The position may have been different if the claims under the Act had been 'colourable' in the sense that they were made for the improper purpose of 'fabricating' jurisdiction:  see P H Lane, Lane's Commentary on the Australian Constitution (1986), pp 367-368 and the cases there cited.  There is no room for such a suggestion here.  The applicants' case that the second and third respondents were bound by the Act cannot be said to be unarguable; and we think it was pursued bona fide."

I see no reason to believe that Mr Ardino's claim under s.170EA of the Industrial Relations Act was made colourably, in the sense that he or his advisers set out to fabricate jurisdiction.  But it is apparent from what I have already said that the claim is unarguable.  Whatever the appropriate response if the contract claim had been originally included in the Application, before any issue of jurisdiction arose, the Court should reject the applicant's plea to keep alive a proceeding that is plainly outside its jurisdiction for the sole purpose of allowing him to add, and litigate, an associated claim.  This Court lacking jurisdiction to hear his principal claim, it is not unfair to Mr Ardino to leave him to pursue his contract claim, if he wishes, in a court constituted for that purpose.

The Application should be dismissed.

I certify that this and the preceding twenty (20) pages
are a true copy of the Reasons for Judgment
of the Honourable Chief Justice Wilcox.

Associate:

Dated:     14 November 1994

APPEARANCES

Counsel for the Applicant:     W R Haylen QC and   

R Reitano

Solicitors for the Applicant:       Michael Hume & Co   

Counsel for the Respondent:         A Moses

Solicitors for the Respondent:  Dunhill Madden Butler

Date of hearing:  1 November 1994