Joseph Hooi Peng Chan v M C Formals Pty Ltd

[2010] FWA 868

[2010] FWA 868

FAIR WORK AUSTRALIA

DECISION

Fair Work Act 2009
s.394 - Application for unfair dismissal remedy

Joseph Hooi Peng Chan
v
M C Formals Pty Ltd
(U2009/11770)

COMMISSIONER LARKIN SYDNEY, 8 FEBRUARY 2010

Termination of employment – jurisdictional objection.

[1] Mr Chan has applied to Fair Work Australia (FWA) under s.394 of the Fair Work Act 2009 (the Act) for an unfair dismissal remedy against his employer, M C Formals Pty Ltd (M C Formals). The employer response to the application was filed by Formal Wear Rentals Pty Ltd (Formal Wear), signed by Mr Calabro, Director, and stated that Mr Chan was employed by Formal Wear Rentals Pty Ltd. Reference was made to a letter to FWA from the Administrators of Formal Wear Rentals Pty Limited. 1

[2] In his application Mr Chan stated that he was employed on 23 April 2007, was notified of dismissal on 25 August 2009 and that dismissal took effect on 26 August 2009. Mr Chan was employed as the company accountant. Mr Chan stated that his dismissal was unfair for the following reasons:

“1. On Wed 26 Aug 09, Michael Calabro Snr, the owner, advised me that I was terminated because it was too stressful to work with me. Twenty minutes later, he came to office and told me not to take it too personally as he was terminating me because he wants to cut cost and downsize the organisation.

2. Later, I found my job is being advertised.

3. As at now, I have not received any payment for unused annual leave, payment in lieu of notice and redundancy entitlements.

4. The dismissal was unfair because of the lack of warning.”

[3] Attached to Mr Chan’s application was the letter of termination from Lawler Partners, Administrators Appointed and a reference/statement of service, on the letterhead of Calabro Formal Eveningwear Menswear, signed by Mr Michael Calabro, Managing Director.

[4] M C Formals has raised a jurisdictional objection to Mr Chan’s application. M C Formals stated that it was not the employer of Mr Chan and that Mr Chan was an employee of Formal Wear.

[5] At the jurisdictional hearing Mr Chan was self represented. Mr Calabro, Managing Director, appeared on behalf of M C Formals. Both Mr Chan and Mr Calabro gave written and oral evidence during proceedings. There was no appearance on behalf of Formal Wear, however, on 10 September 2009 correspondence was received from Lawler Partners, Deed Administrators. 2

BACKGROUND

[6] The business of Formal Wear, as the name would suggest, was the selling and renting of bridal and formal attire. The business was registered with the Australian Securities & Investments Commission (ASIC) on 26 May 1980. The sole Directors/Shareholders are Mr Calabro and a Barbara Terese Calabro. 3

[7] From the statement of Mr Calabro 4 and, correspondence to FWA from Lawler Partners,5 it appears that the company, Formal Wear, ceased trading and went into voluntary administration on 6 July 2009. Formal Wear entered into a Business Licence Deed with M C Formals on 6 July 2009 to enable the business to continue to trade.

[8] M C Formals was registered with ASIC on 15 June 2009. Mr Calabro is the sole Director/Shareholder.

[9] A meeting of the creditors of the Formal Wear business, on 10 August 2009, resolved that Formal Wear execute a Deed of Company Arrangement (DOCA) as proposed by the Directors of Formal Wear. The DOCA was made on 28 August 2009. This deed appears to be signed by Barbra Terese Calabro and Mr Calabro, Directors of Formal Wear and Mr Calabro, Director of M C Formals. The DOCA was also signed by Barbra Terese Calabro and Mr Calabro as Directors of Occasion Wear Pty Ltd, which, on my understanding, is a related unsecured creditor. 6

[10] Mr Chan stated that he was notified of his termination of employment on 25 August 2009. The letter of termination, from Mr Wykes, Lawler Partners, stated:

“24 August 2009

Mr Joseph Chan

….

Formal Wear Rentals Pty Limited

(Administrators Appointed)

A.C.N. 001 912 349

(formerly T/a Calabro Bridal Eveningwear Menswear)

(“the company”)

I refer to the previous notice to employees dated 10 July 2009 and to the appointment of Brad Tonks and myself as Joint and Several Administrators of the abovenamed company on 6 July 2009.

As you are aware a Business Licence Deed was executed by M C Formals Pty Limited (“M C Formals”) on 6 July 2009 and the company ceased to trade as at that date, although the business continued to trade via M C Formals.

We have been instructed by M C Formals that your services are no longer required as of Tuesday, 25 August 2009.

Accordingly, the outstanding entitlements you accrued during your tenure with the company have crystallised. Attached for your consideration is a statement detailing your outstanding entitlements. Please note, this excludes any applicable termination entitlements that may be due to you.

Please complete the attached Form 535 Formal Proof of Debt and return same to this office.

Should you have queries regarding the above, please do not hesitate to contact Senray Loy of this office on [phone].

…” 7

THE EVIDENCE

[11] In his statement, 8 Mr Chan stated that after he received the letter of termination he telephoned Mr Calabro to ask if he could come into the office to collect his belongings. He stated that Mr Calabro agreed and asked him to work one more day. He stated that he was terminated on 26 August 2009. He subsequently learnt that the assistant accountant, who had left the business in June 2009, had filled his position for less remuneration than he had been paid. He continued:

“(d) Formal Wear Rentals Pty Ltd issued a business license to M C Formals Pty Ltd on 15.6.09 to enable it to continue trading because Formal Wear Rentals pty (sic) Ltd went into voluntary administration on 6.7.09. Michael Calabro Senior is the director and owner of both companies. There was a creditors meeting on 10.8.09 for Formal Wear Rentals Pty Ltd when it was resolved to grant M C Formals Pty Ltd a deed of arrangement. This deed of arrangement was signed on 28.8.09. I was terminated on 26.8.09.

(e) M C Formals Pty Ltd, as directed by the administrators, also reported to the ATO for PAYG and June 2009 BAS purposes that the fortnightly payroll ending Sun 21.6.09 as belonging to M C Formals Pty Ltd.

(e) (sic) I am seeking to get M C Formals Pty Ltd or Formal Wear Rentals to pay my termination pay. I have already sent my figures to both M C Formals Pty Ltd and lawler (sic) Partners…

(f) Since Formal Wear Rentals Pty Ltd has a deed of arrangement, I am unable to apply to GEER to get my termination payment.”

[12] Mr Chan stated that he was working as the accountant when M C Formals commenced operating the business of Formal Wear from 15 June 2009. He stated that Mr Calabro was the owner of both companies. He stated that payments to the Australian Taxation Office (ATO) were from 21 June 2009 under M C Formals. In his evidence, Mr Chan stated:

“…the books were kept on the same computer system …on the books, yes, as far as the Taxation Office is concerned the pay was MC Formals. Remember when I left there the books were not completely done, but under the deed of arrangement those employees who go over to MC Formals are taken to cross over, so now the dispute would be – so the original question the books weren’t completed yet when I was leaving on 28 August. Of course…I did change the payroll system from Formal Wear Rentals to MC Formals. I was the one who did most of the calculations, but now there is this dispute. But if you look at the chronology, 15 June ’09 business licence was given by Formal Wear Rentals to MC Formals, so the MC Formals will trade in this name on 6 July the voluntary administrators were appointed and on 10 August there was this creditors’ meeting for Formal Wear Rentals where it was resolved that the deed of arrangement was given to MC Formals and on 28 August the thing was signed and I was just sacked on 26 August, that’s two days before the signing of the deed. Of course if you sign the deed – if you sign it after the deed of agreement arrangement then it would be clearer too, but meanwhile the business of MC Formals from 16 June was carried out on the same premises by the same staff and the owners are the same.” 9

[13] Mr Chan stated that as the accountant he understood the facts and was working closely with Lawler Partners in the reconciliation of all the figures. In answer to a question put by me, Mr Chan stated that he had not received a group certificate from his employer. He stated that M C Formals had received letters from the ATO asking that M C Formals provide group certificates for the last fortnightly pay ending 21 June 2009. Mr Chan continued:

“…this is MC Formals’ payroll, and now the ATO has asked them or asked me to provide them group certificates, to amend all my group certificates which I sent earlier because before the...voluntary administration I assumed that up to 21 June it all belonged to Formal Wear Rentals but the administrators told me no, since you received money – I mean you received the sales for 15, 16 June to 30 June and MC Formals you have got to declare that on the payroll as part of MC Formals. So the PAYG and the June BAS and GST for MC Formals would include my payroll for all the payroll ending – fortnight ending 21 June it’s all under MC Formals according to the Australian Taxation Office.” 10

[14] In cross examination Mr Chan agreed with Mr Calabro that M C Formals paid him his entitlements from 6 July to 26 August 2009.

[15] Arising from questions that I put to Mr Chan, he stated that he was directed by the administrators, approximately two weeks after the 7 July 2009, to reflect a zero balance for all employees’ leave accruals and to change the name on the system to M C Formals from Formal Wear effective 7 July 2009.

[16] In reply to further questions put by Mr Calabro, Mr Chan acknowledged that if M C Formals had not taken out a business licence the company would have ceased to trade and all employees would have been out of work. Mr Calabro put the following to Mr Chan:

“And that’s why MC Formals had a business licence, to preserve everyone’s employment, and what happens after 28 August?

I guess those employees would become MC Formals employees is it, the order leave…

I’m asking you the question, you’re the accountant with the pay?

The leave would all be transferred over.

Exactly, that’s correct, and they were transferred over to MC Formals. So prior to that were they employees of Formal Wear Rentals, prior to the 28^th, if they were transferred like you said to MC Formals after 28 August 2009; is that fair to say?

My contention is – no, my contention is if you report to the ATO that the wages on 21 June belongs to MC Formals they should be transferred over on that date, that’s MC Formals employees. If you already tell the Australian Taxation Office that 21 June the payroll ending the fortnight – the fortnight ending 21 June pay belongs to MC Formals if you have reported that is the time when we should transfer the accruals and if that is the case I am entitled to those accruals.” 11

[17] Mr Calabro’s evidence was that Mr Chan was employed by Formal Wear. He stated that the licence taken out by M C Formals was to continue the business while Formal Wear decided what actions to take in the form of a deed of company arrangement. He stated that, under that deed, employees of Formal Wear will be paid all entitlements by the deed administrator. He stated that any further employment with MC Formals would include the transfer of employee entitlements to M C Formals and that “MC Formals is now liable for the past entitlements, as under the deed of company arrangement”. 12

[18] Mr Calabro stated that of the 80 Formal Wear employees approximately four were terminated and that those employees were to be paid their entitlements under the deed and that M C Formals was not liable for those employees.

[19] Mr Chan sought confirmation from Mr Calabro in relation to instructions from the administrators “to declare the wages the payroll ending 21 June 2009 as MC Formals for PAYG and June 2009 purposes?”. 13Unfortunately, Mr Chan did not wait for an answer to his question and the cross examination continued until he came back to the question as follows:

“Can you confirm that that is what happened, Lawler & Partners asked us to treat 21 June---?

Under the licence agreement MC Formals had to pay the statutory charges because it was in the licence agreement, but the employment was still under Formal Wear Rentals. Someone had to pay the tax, the taxes and whatever because under the licence MC Formals was liable to pay all employment expenses from the date that the licence was signed.” 14

[20] Mr Calabro, in evidence, relied upon the Business Licence Deed, attached to his statement at tab 4, at clause 4.5, the licence deed of 6 July 2009.

CONSIDERATIONS

[21] The matter before me concerns the jurisdiction of FWA to hear and determine Mr Chan’s application under s.394 of the Act against M C Formals. Neither Mr Chan nor Mr Calabro was legally represented during proceedings. Neither gentleman put into evidence any documentation in the form of employment contracts, payslips or other material of that nature. The jurisdictional objection raised by M C Formals must be determined and I must determine that matter on the basis of the material before me as presented by the parties.

[22] Most of the facts in this matter have been outlined in the background section to this decision. In summary:

Mr Chan was employed as an accountant with Formal Wear in April 2007. There is no written contract of employment. The sole Directors/Shareholders are Mr Calabro and a Barbra Terese Calabro.

On 16 June 2009 a Licence Deed, reflecting Formal Wear Rentals Pty Ltd ACN 001 912 349 as the licensor and M C Formals Pty Ltd ACN 137 125 467 as the licensee, was signed by Mr Calabro and a Barbra Terese Calabro. The licence granted to M C Formals the right to operate the business of Formal Wear. I shall return to this deed.

M C Formals was registered with ASIC on 15 June 2009. Mr Calabro is the sole Director/Shareholder.

It appears, from the evidence of Mr Chan which was not contested on this point, that from June 2009 M C Formals operated the business. M C Formals generated sales, paid wages to employees and submitted BAS statements for the purpose of GST to the ATO.

On 6 July 2009 Mr Tonks and Mr Wykes, Lawler Partners, were appointed Joint and Several Administrators for Formal Wear.

Also on 6 July 2009 a Business Licence Deed was executed between Formal Wear and M C Formals, which, by its terms, terminated the first license deed of 15 June 2009. I will return to this deed.

Mr Chan’s employment was terminated by letter, dated 24 August 2009, from the administrators upon instructions from M C Formals.

A meeting of Formal Wear creditors was held on 10 August 2009 whereby “creditors resolved to accept the Deed proposal put forward by the directors”. 15

On 28 August 2009 a Deed of Company Arrangement (DOCA) was executed on behalf of Formal Wear, M C Formals and Occasion Wear Pty Ltd.

[23] The DOCA came into existence after Mr Chan’s employment had been terminated.

The Business Licence Deeds

[24] The first deed, dated 15 June 2009, was executed by Barbra Terese Calabro, Director/Secretary, and Mr. Calabro, Director, for Formal Wear. The deed was signed on behalf of M C Formals by Mr Calabro, Director. There is no evidence before me identifying the relationship between Ms Calabro and Mr Calabro. However, I think it is safe to assume that it is a family relationship. This deed was not witnessed. The terms of the deed grant M C Formals the right to use the business assets, which are set out in a schedule to the deed, “on the terms and conditions contained herein”. 16The expiry date of the deed is stated to be six weeks from the date of the deed. Clause 9, Complete Deed, inter alia, states: “The contents of this Licence record the entire agreement between the parties in relation to its subject matter”.On my reading of the deed, it does not address the subject of the Licensor’s employees.

[25] Accordingly to Mr Calabro’s statement 17 and the administrators report to the creditors on 31 July 2009 (at page 4), this deed was terminated by the second deed dated 6 July 2009.

[26] The second deed was signed by Mr Tonks, administrator, and witnessed by Mr Senray Loy, pursuant to section 437A of the Corporations Act 2001, which provides that while a company is under administration, the administrator has certain powers. There appears to me to be some difficulty with the execution of this particular deed. First, on the execution page it states, inter alia, “Signed, sealed and delivered by Gourmet Smallgoods Pty Limited (Administrators Appointed) by Joint & Several Administrator pursuant to section 437A of the Corporations Act 2001 (Clth) in the presence of.” 18The relationship between Gourmet Smallgoods and the entities subject to this matter is not clear to me. The entity Gourmet Smallgoods does not appear in any of the other material before me. The signatures that then appear are those of Mr Tonks and Mr Loy. The deed is not executed by M C Formals as it is not signed by the sole Director, Mr Calabro pursuant to s.127 of the Corporations Act 2001, albeit his name appears on the execution page. There is doubt in my mine that this document is a legally enforceable document.

[27] The second deed is a comprehensive document. It refers to the first deed entered into by the Licensor and Licensee and that the first deed is terminated. It provides that the Licensee has an exclusive licence to use the business assets and stock, the business name and to conduct the business from the premises. At 4.4 of the business license it states that the Licensee is liable for all liabilities during the term, which includes employment costs, as well as other business costs. At 10.6, Warranties, the document sets out what each party warrants to the other, including that the execution and delivery of the deed has been properly authorised and that each party has lawful authority and full corporate power to execute and deliver the deed. At 11.4, Cooperation, the deed states that: “Each party must sign, execute and deliver all deeds, documents, Instruments and act reasonably and effectively to carry out and give full effect to this deed and the rights and obligations of the parties under it”. 19

[28] As previously stated, there is doubt as to the legality of the document. While the administrator has certain powers under s.437A of the Corporations Act 2001 to perform functions and exercise powers that Formal Wear could exercise if not under administration the same can not be said for M C Formals. On the material before me M C Formals has not executed the deed. M C Formals appears not to have consented to the terms of the deed. Further, it does not appear that there was an intention to create a legal and enforceable relationship between Formal Wear and M C Formals.

[29] Mr Calabro, with Ms Calabro, are the sole Directors/Shareholders of Formal Wear and Mr Calabro is the sole Director of M C Formals. On the evidence, M C Formals commenced to operate and trade the business of Formal Wear in June 2009. In June 2009 M C Formals took responsibility for the employees of Formal Wear in relation to payment of wages and associated costs. If the second deed is not a legally enforceable document then it follows that the terms of the second deed cannot terminate the first deed.

[30] Can reliance be placed on the first deed in ascertaining who was the employer of Mr Chan, at the time of his termination of employment?

[31] The first deed was executed on 15 June 2009. At clause 1 of the deed the definition of expiry date is “that date which is 6 weeks from the date of this Deed”. 20 It would appear that the intention of the parties to the deed was that the deed was to expire towards the end of June 2009. The deed appears to be silent in relation to the licensee’s rights and obligations to the employees of Formal Wear, who on my understanding continued to perform duties in the business. Whatever Mr Calabro’s intention in the execution of the deed was, or his belief of the contractual position in relation to employees, namely Mr Chan, and M C Formals, the deed does not appear to reflect those beliefs.

CONCLUSION

[32] From the evidence, it is clear that Formal Wear was experiencing difficulties financially, which culminated in its voluntary administration. In his position with the company, Mr Chan was aware of these difficulties. To trade out of these difficulties M C Formals was to take over the operation of the business. As stated previously, Mr Calabro owned M C Formals and was part owner of Formal Wear.

[33] I also note that Mr Chan was advised of this termination of employment by the administrator. The termination was actioned by the administrator on instructions from M C Formals. This action was taken prior to the execution of the DOCA. There is no formal contract of employment between Mr Chan and M C Formals and, indeed no formal contract of employment with Formal Wear. In other words, there was no written offer and acceptance. However, Mr Chan continued to perform the same duties with M C Formals as he had done for Formal Wear and, on my understanding, under the same terms and conditions of employment.

[34] The parties to this matter did not provide documentation in the form of group certificates or payslips. It appears on the evidence that in June 2009 M C Formals commenced operating and trading the business of Formal Wear with the associated responsibilities to employees engaged in the business, including Mr Chan, and its responsibilities to the ATO. Mr Calabro is the owner of M C Formals and co-owner of Formal Wear. In my view, Mr Calabro controlled both businesses.

[35] In considering all of the circumstances of this matter and the evidence before me I am persuaded that Mr Chan was an employee of M C Formals. Mr Chan’s employment was terminated on 26 August 2009 by M C Formals. Mr Chan’s application under s.394 of the Act will be referred to the appropriate Panel Head for allocation.

COMMISSIONER

Appearances:

Mr J Calabro, on behalf of M C Formals Pty Ltd.

Mr J Chan, on his own behalf.

Hearing details:

Sydney.

2009:

November, 20.

 1   See Exhibit R2.

 2   Exhibit R2.

 3   This is the name appearing on the ASIC extract, however, on my understanding, the correct spelling is Barbra Terese Calabro.

 4   Exhibit R1.

 5   Exhibit R2, letter dated 8 September 2009.

 6   See page 14 of the Report to Creditors attached to Exhibit R2.

 7   Exhibit A2.

 8   Exhibit A1.

 9   PN98.

 10   PN115.

 11   PN170 to PN172.

 12   PN210.

 13   PN214.

 14   PN226.

 15   Exhibit R2, letter dated 8 September 2009 to FWA.

 16   Exhibit R1 at Tab 5.

 17   Exhibit R1 at 11.

 18   Exhibit R1 at Tab 4, page 10.

 19   Exhibit R1 at Tab 4, page 9.

 20   Exhibit R1 at Tab 5.

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