Juy Hepner v Fine Food Solutionz T/A Crazy Dragon

[2012] FWA 7523

[2012] FWA 7523

FAIR WORK AUSTRALIA

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Juy Hepner
v
Fine Food Solutionz T/A Crazy Dragon
(U2012/8468)

COMMISSIONER GAY MELBOURNE, 10 SEPTEMBER 2012

Unfair dismissal - jurisdiction objection - extension of time

[1] The following decision, now edited, was given in transcript at the conclusion of proceedings in Melbourne on Friday 24 August 2012.

[2] “I am going to deal with these matters one by one. It is true to say, of course, that the legislative requirement for applications to be made within the time limit must be complied with. It is true similarly that time can be extended in appropriate cases, subject to account being taken of the matters set out at s.394(3) of the Fair Work Act 2009 (the Act) and if Fair Work Australia is satisfied that there are exceptional circumstances.

[3] Now, in this case Mr Hepner (the applicant) clearly did not consider himself terminated. It would normally be a response to such a position that that may be so, but a person must lodge within the time limit. To not lodge puts them at risk clearly of the application falling outside the time limit and them not having a valid reason. In this case one has to consider that Mr Hepner waited until 21 May, when his pay ‘came up short’, as he says, and he then realised that for practical purposes he was terminated. There is then a delay of nine days, which weighs heavily on my mind, when Mr Hepner considered his position and, it is likely, took advice. So there is some irony in this case that the applicant’s fundamental position was that he did not consider himself terminated and I think, at a very base level, continues to hold that view, but took the position on a practical basis that, as May went on, he was in fact terminated.

[4] Were it not for the unusual position that obtains in this case where there are two directors of Fine Food Solutionz (trading as Crazy Dragon), it might be thought that an employee who somehow took it upon themselves to think that the termination of their employment in the clear terms announced by Mr Catalano on 30 April was to no affect was adopting a very illogical position. But in this case, as soon as one looks at the materials and sees the dealing between the parties and has regard for the heads of agreement between Mr Kurth, Mr Hepner on the one part and Mr Hepner as shareholder, but not as director, and Mr Catalano of the other part, one sees that there is a foundation for Mr Hepner’s view. This is because of the heads of agreement and material which has since passed between the directors. In this case Mr Kurth, the second director, has not authorised the dismissal and has taken active steps to identify with Mr Hepner. These steps included Mr Kurth emailing Mr Catalano on the day following the termination being advised, 1 May 2012, to the following effect:

“Re: Employment

Nathan, you have no authority to sack Juy, given the terms of the HOA and especially given there is an ongoing investigation that you are being shadow directed by an undischarged bankrupt.”

That is at JH29 to what is called the unsigned affidavit material submitted by Mr Hepner.

[5] I have taken some notice of attachment A to Mr Nathan Catalano’s affidavit of 24 May, the heads of agreement by which Equicap Pty Ltd Provident Fund acquired shares in the Kurth-Hepner interests, which saw the set-up of Fine Food Solutionz with Mr Nathan Catalano and Mr Kurth as sole directors. It provides at point 16 on page 5 that:

“Nathan Catalano and Juy shall each be salaried employees of Fine on terms and conditions and salaries to be determined by the directors.”

[6] It is true that Yates J (in the Federal Court application [2012 FCA 632] for breach of the Corporations Act 2001 (Cth)) does refer to the termination on 30 April of Mr Hepner in outlining the parties and their narrative. I do not think it is right to say that his Honour made any finding in relation to the legitimacy or authority behind the termination. There is no detailed finding as to the termination in that decision of 14 June 2012. Indeed, at paragraph 9 Yates J acknowledges that the second director, Mr Kurth, does not accept that Nathan Catalano had authority to terminate Mr Hepner’s employment. And it seems to me that, as I consider the reason for the delay, as I must pursuant s.394(3)(a) of the Act, that does constitute an exceptional circumstance.

[7] I am aware from the materials that Mr Kurth immediately challenged the termination, and I am also aware that Mr Hepner spoke with Mr Catalano very shortly after the termination in relation to this matter of threats. I am also conscious from the narrative that materials, exchanges between the parties, reflect that prior to the termination co-director Kurth had told his colleague, director Catalano – and this is on 19 April, by way of example; in an email Mr Kurth advised Mr Catalano:

“It’s a waste of time, Nathan. Juy’s job is in the HOA, and, unfortunately, unless both directors agree, neither of you can get the boot. I do notice you have given yourself a position change from general manager to managing director. Congrats on the promotion.”

[8] But it is really the first point that is relevant there. Although the material before me does not reflect in any detail the passage of information to Mr Hepner as he contested the fact of his dismissal and then his duty to make application, it is clear that at some point in May he sought legal advice, and I am conscious that this application is 14 days out of time.

[9] I will deal quickly with the matter of exceptional circumstances so that the parties can understand what it is that constitutes exceptional circumstances for the purpose of s.394. Perhaps the easiest way to do that is to acknowledge the leading authority in this regard, which is a Full Bench decision of Fair Work Australia, comprised of his Honour Vice-President Lawler, Deputy President Sams and Commissioner Williams in the case of Cheyne Leanne Nulty v Blue Star Group Pty Ltd [2011] FWAFB 975. There is a paragraph here, which I am going to read, and I think it will be of interest to the parties because it sets out how the term “exceptional circumstances” has been construed. And I quote:

“In summary, the expression “exceptional circumstances” has its ordinary meaning and requires consideration of all the circumstances. To be exceptional, circumstances must be out of the ordinary course, or unusual, or special, or uncommon but need not be unique, or unprecedented, or very rare. Circumstances will not be exceptional if they are regularly, or routinely, or normally encountered. Exceptional circumstances can include a single exceptional matter, a combination of exceptional factors or a combination of ordinary factors, which, although individually of not particular significance, when taken together are seen as exceptional. It is not correct to construe exceptional circumstances as being only some unexpected occurrence, although frequently it will be. Nor is it correct to construe the plural circumstances as if it were only a singular occurrence, even though it can be a one-off situation. The ordinary and natural meaning of “exceptional circumstances” includes a combination of factors which, when viewed together, may reasonably be seen as producing a situation which is out of the ordinary course, unusual, special or uncommon.”

[10] That is the prism, that is the basis through which one applies the expression “exceptional circumstances” as it appears in the Act to the individual circumstances of each case. So in my view it is the unusual circumstances of this case which put it into that category to which I have just referred, including that there was a legitimate basis for Mr Hepner to initially think that his termination was not effective. Whether he is right or not in thinking that – whether he was right or not, or legally correct or not, is not really what I am considering. It seems to me that it was reasonably open to him to be of that frame of mind for part of the period, and that goes to provide an explanation for some of the delay.

[11] Now, there is a further reason that I want to make mention of in that regard, because I have sought to have the highest regard for what has been put by Mr Catalano for Fine Food Solutionz. One of the points that were relied upon in the Federal Court was that Mr Catalano had been vested with the authority as general manager to run the day-to-day operations of the company, and that is something which I think is central to Mr Catalano’s case. Mr Catalano in fact, in the written submissions to me, highlights annexure E to the affidavit that he swore on 24 May, which was used in the Federal Court proceedings. I think it is instructive to look at that material because there is clearly some contest between the parties as to what authority Mr Catalano did or should have and what day-to-day management of the business really meant. They are not issues that I am going to be able to resolve today or address myself to in their entirety, but I am aware that at paragraph 12 of Mr Nathan Catalano’s affidavit put before his Honour Yates J, Mr Catalano said:

“I have had day-to-day management of the company’s business”

[12] I will read this –

“which is headquartered in Sydney, and all payments required for the company’s business are required to be jointly authorised by both Byron Kurth and myself. Attached hereto and marked “E” is a true copy of an email from Byron Kurth to me dated 6th February, confirming my day-to-day management role.”

[13] So it can be seen that that annexure E was important to Mr Catalano in proceedings before Yates J as it was today and is included at paragraph 12 – which is 12 in both documents – in his written submissions. When one goes to paragraph E one finds the communication from Mr Kurth – a lengthy one which I will not read – of 6 February 2012 to Nathan Catalano, and it sets out a range of broad management and some specific management issues which Mr Kurth as Director felt required clarification. It is right to say in summary that Mr Kurth sought to identify and underline the role of the Board. It certainly says as much, and it goes on towards the bottom of the first page, and I quote:

“Just to refresh your memory, these are some of the responsibilities.”

[14] And then it sets out some responsibilities that most people would be well familiar with. Then it reads at the sixth last dot point:

“Adopt clearly defined delegations of authority from the board to the GM or a statement of matters reserved for decision by the board, and agree on performance indicators with management and give guidance on the appointment and remuneration of other senior management.”

[15] It is likely that, certainly from Mr Kurth’s perspective – the suggestion was that power not specifically delegated to Mr Catalano continued to inhere in the Board.

[16] Of course it is necessary to then look at point four, within attachment E. It is a few points later in Mr Kurth’s email, under the heading “Employment”. It reads:

“The employment and dismissal of senior management and long-term contractors will be at board level, in keeping with the Corporations Act.”

[17] There is some dispute as to whether Mr Hepner can be said to be a senior manager, but certainly Mr Kurth had set out in those clear terms prior to the termination what his view was in relation to the termination of employment. I am reminded – I remind myself that in the heads of agreement of November 2010 under “Employees” the clause reads, and I will read it. I quote -

“Nathan Catalano and Juy shall each be salaried employees of Fine on terms and conditions and salaries to be determined by the directors.”

[18] So certainly Mr Catalano and Juy Hepner by the heads of agreement are accorded a status, and I am mindful that it is not a large company. Mr Hepner was the manager with responsibility for the commercial interests, as I understand it, in three states at the time of the termination, and I am mindful also that he was the founder of the company and, I think, owns 30 per cent of the shares in the company, but he is not a director. An appreciation of those issues is necessary, I think, to inform oneself as to the force with which Mr Kurth could communicate with Mr Catalano as he did after the termination to say, as I have already indicated, that Mr Catalano was not authorised to take that action.

Action taken to dispute the termination

[19] In relation to subsection (3)(b), I am aware that Mr Catalano first became aware of the dismissal on 30 April. As to action taken by the person to dispute the dismissal, certainly there is no doubt that the two directors vociferously debated the powers that existed to exercise the termination, and it cannot, I think, be said that Mr Hepner accepted the termination. It is likely that further evidence will reveal that conversations took place between them after the termination, certainly in relation to some other aspects, including Mr Draper.

Prejudice to the respondent

[20] I will deal with the question of prejudice. It seems to me that there is a point to be made here for Mr Catalano because an appointment has it seems been made. Whether that appointment is in Fine Food Solutionz – I assume it was, but I have been told that that person had been appointed on 1 August, and I note, of course, that by 1 August the appointment by Mr Catalano’s interests – by Mr Catalano, one expects – was well within the time that he knew the application had been lodged. While on the one hand it might be thought that there is some prejudice in the event that Mr Hepner is reinstated, if this application is permitted to go further and his application is ultimately successful, that is something that Mr Catalano, of course, was well aware of. I understand the practical realities that someone has to be engaged to do these things, but someone might have been employed on a conditional basis, for a fixed term or to perform a particular task or until the outcome of this case was made known. So to the extent that there is prejudice I must say it is not persuasive in my view.

Merits of the application

[21] As to the merits of the application, there is very strong contest between the parties in that regard. Mr Catalano says the merits provide very strong support for the objection to jurisdiction because of acts taken by Mr Hepner which reflect repudiation on his part and which Fine Food Solutionz could only regard as repudiation of his essential obligations. In this instance also I have had evidence from Mr Kurth and from Mr Hepner that there are similar claims made on the other side. I do not think it is safe for me to come to any conclusion about those contested issues. There is a complaint made about Mr Hepner having taken a period of leave that was not authorised. It seems to me that that is at least arguable. I have, though, to say that with these matters in strong contest a detailed examination of the substantive case is not something which one can do at this stage.

[22] I do hope it is clear that there will be, in the event that time is extended, very substantial evidence required to be heard before someone could come to a confident view about where the merits lay. An answer is given by Mr Kurth that there were extenuating circumstances in relation to the provision of services by the applicant to another company, and it is necessary for me to accept that evidence that was given, and it is very likely that that matter would require significant hearing of evidence. As was said by a Full Bench of the Australian Industrial Relations Commission, as it then was, presided over by his Honour Giudice J, the President, Senior Deputy President Acton and myself in H Kyvelos v Champion Socks Pty Limited AIRC Print T2421, 10 November 2000:

“It should be emphasised that in considering the merits the Commission is not in the position to make findings of fact on contested issues, unless evidence is called on those issues. Evidence is rarely called on the merits and there are sound reasons why the Commission should not embark on a detailed consideration of the substantive case in an application for an extension of time for the lodgement of an application. In particular, it is undesirable for the parties to be exposed to the requirement to present their evidentiary cases twice.”

[23] This is just such a case in my view, where, as I have already said twice, it will be necessary to hear extensive evidence. So I am neutral in relation to the merits of the application. Importantly however I do not find that this is an application clearly without merit. It is true, though, that findings will have to be made favouring Mr Hepner in the face of the objections made by Mr Catalano for conclusion ultimately to favour him.

Fairness

[24] Now, the sixth criterion, or the sixth matter which I must take into account, is fairness as between the person and other persons in a similar position. I do not think that has any great role to play in this proceeding today.

[25] I am mindful that the application was some 14 days out of time, which in a general sense is not a particularly lengthy period of time. I form the view that, because of the circumstances that I have sought to explain, possibly not in sufficient detail, much of the time taken up by Mr Hepner initially regarding his termination as not effective was open to him, was reasonable, and to my mind that goes to explain a great part of the delay. In light of the corporate machinations and uncertainty it can properly be seen as providing or constituting an exceptional circumstance.

[26] On balance, I am going to extend time for the application, and I will issue an order to this effect that the time be extended until 28 May 2012.”

[27] Following the giving of these reasons the parties participated with me in an unsuccessful attempt to resolve the application through conciliation. The file is now remitted for arbitration.

COMMISSIONER

Appearances:

J Hepner the applicant.

N Catalano for Fine Food Solutionz T/A Crazy Dragon.

Hearing details:

2012.

Melbourne/Sydney/Cairns video-hearing:

August 24.

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