Karlovasitis v Link Property Services Pty Ltd

[2018] FCCA 1803

FEDERAL CIRCUIT COURT OF AUSTRALIA

KARLOVASITIS v LINK PROPERTY SERVICES PTY LTD [2018] FCCA 1803

Catchwords:
INDUSTRIAL LAW – FAIR WORK – entitlement under the Real Estate Industry Award 2010 – how contract of employment interacts with the Award – interpretation of both contract and Award provisions.

Cases cited:

Electroboard Administration v O’Brien (13 March 1998) Cohen J BC9800640

Electroboard Administration v O’Brien [1999] NSWCA 452
Linkhill Pty Ltd v Director of the Fair Work Building Inspectorate [2015] FCAFC 99
Pacific Publications Pty Ltd v Cantlon [1983] 4 IR 415
Poletti v Ecob (No 2) [1989] 31 IR 321

Applicant: JOHN KARLOVASITIS

Respondent: LINK PROPERTY SERVICES PTY LTD

File Number: SYG 721 of 2017

Judgment of: Judge Altobelli

Hearing date: 20 March 2018

Date of Last Submission: 20 March 2018

Delivered at: Sydney

Delivered on: 17 July 2018

REPRESENTATION

Counsel for the Applicant: Mr Rodgers

Solicitors for the Applicant: Delfino & Delfino Solicitors

Counsel for the Respondent: Mr Young

Solicitors for the Respondent: Fontgalland Lawyers Pty Ltd

ORDERS

1. Within 21 days, the parties are to submit an agreed form of order that reflects the findings the Court has made in these Reasons for Judgment.

2. The matter be adjourned to 14 August 2018 at 9:30am for Mention (Court 3D, Lionel Bowen Building, 97-99 Goulburn Street, Sydney).

NOTATION

A.The purpose of the adjourned date is to consider the issue of pecuniary penalty.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 721 of 2017

JOHN KARLOVASITIS

Applicant

And

LINK PROPERTY SERVICES PTY LTD

Respondent

REASONS FOR JUDGMENT

Introduction

1. These Reasons for Judgment explain why the Court has determined that:

   a)The Applicant has not been paid his Award entitlements;

   b)The Applicant may not as yet have received all the commissions to which he was entitled pursuant to his agreement with the Respondent, and his Award entitlement.

   c)The Applicant has an entitlement to receive commissions notwithstanding the cessation of his employment with the Respondent.

Background

1. Most of the background facts are uncontentious. The Applicant commenced employment with the Respondent on 3 February 2014 having signed a Contract of Employment on 20 September 2013. The Court finds that there was a variation of the terms of his employment as a result of which the manner in which his commission entitlement was calculated was changed. The Applicant in cross-examination accepted that there was this variation. The Applicant’s employment ceased in April 2016.

2. The basis of the Applicant’s case is set out in a document entitled ‘Amended Points of Claim’ dated 4 May 2017, but filed 22 May 2017.

3. The Respondent opposes this claim. The Respondent’s case is set out in a document entitled ‘Amended Points of Defence’ dated and filed on 20 June 2017.

4. The Court believes that once it has adjudicated on the contentious issues identified by the parties, they will be ideally placed to quantify the payments to the Applicant and provide an Order for the Court to make. Whilst the Court is of the preliminary view that a pecuniary penalty should be imposed, it will hear from the parties about this at a future date, including on the question of quantum.

The Employment Agreement

1. The Employment Agreement between the parties is contained in a letter dated 20 September 2013, which bears the Applicant’s signature on 6 October 2013. The relevant provision is clause 6 entitled ‘Remuneration’ which states:

   Your remuneration is a combination of salary and commission based. You will be paid as follows:

   Total Remuneration Package (TRP) - $40,000, including salary and superannuation ($28,000) and car allowance ($12,000). A phone allowance equal to $100 per month will also be paid to you.

   Commission structure – Upon writing two times the TRP within the financial year the employee will be entitled to a 50% commission, for every dollar in excess of the two time TRP amount (based on the GDT exclusive fee amount). This commission will be inclusive of any compulsory superannuation payable. The commission will be payable to the employee on the monthly pay run after the funds have been received and cleared in the Company’s account.

   You will be paid monthly by direct deposit into an account nominated by you.

2. The Agreement was varied by way of a letter dated 25 June 2015. This short letter states:

   Dear John,

   Total remuneration package review

   It is with pleasure the partners of the firm wish to grant you an increase of $4,000 gross as at 1 July 2015 in recognition of your efforts over the past year in helping Link Property Services achieve its goals. Your package will increase from $40,000 per annum (including salary, superannuation and car allowance) to $44,000 per annum. Your car allowance will remain at $12,000 per annum, with the balance being made up of salary and superannuation.

   Your mobile allowance of $100 per month is payable in addition to this amount.

   You are a valued member of our team and we sincerely appreciate your role and what you do for us on a daily basis.

3. The Court accepts that the Applicant did not sign this Agreement. In cross-examination, however, he explained that he considered the matter and then accepted he variation to the initial Agreement. There is no doubt that he took the benefit of a more generous package of remuneration.

4. Counsel for the Applicant submitted that there could be no agreement between the parties because there was no consideration for the agreement. Counsel relied on Electroboard Administration v O’Brien (13 March 1998) Cohen J BC9800640. This decision was overturned on appeal: [1999] NSWCA 452 (10 December 1999). Applying that case to the present situation, the consideration was plainly evident with both parties obtaining benefit from the Agreement. The Applicant’s total remuneration package increased.

The relevant Award

1. The relevant Award (at the relevant time) is the Real Estate Industry Award 2010. There is no dispute that it governed the employment of the Applicant. The relevant clauses are extracted below:

   15.1 Where the employer and the employee agree that, in addition to the minimum weekly wage, the employee will be entitled to a portion of the commission paid to the employer, then any method of calculation or any formula for calculating the amount of commission that will be payable to the employee must be evidenced in a written agreement between the employer and the employee.

   …

   17.1 Written agreements generally

   (a) Once a written agreement has been made with respect to clause 15—Payment by wages with commission, bonus or incentive payments or clause 16 — Commission-only employment, any subsequent agreement to vary the employee’s commission, bonus or incentive payment arrangements must be evidenced in a further written agreement between the employer and the employee.

   A signed copy of every written agreement regarding commission, bonus or incentive payment arrangements must be provided by the employer to the employee.

   …

   21.1 Frequency of payment

   (a) Except as provided in clause 21.1(c),wages and allowances will be paid by the employer on a weekly, fortnightly or monthly cycle.

   (b) A casual employee will be paid at the end of the employer’s usual pay cycle unless the parties agree to payment being made upon conclusion of the employee’s shift.

   (c) Where an employee has become entitled to receive any commission, bonus or incentive payment in accordance with a written agreement made under either clauses 15—Payment by wages with commission, bonus or incentive payments or 16—employment, payment to the employee must be made within 14 days of the entitlement becoming payable. Provided that the employee’s entitlement to commission, bonus or incentive payment only becomes payable once the employer has received cleared funds from its client for the transaction(s) to which the employee’s entitlement relates.

2. Both clauses.15.1 and 17.1 do not specify that agreements must in in writing.  What these clauses specify is that the agreement must be evidenced in a written agreement.  Both agreements in this case were in writing. The first one was signed by both parties. The second one was only signed on behalf of the Respondent and evidenced the agreement. There was no need for it to be signed by the Applicant in circumstances where he clearly accepted the variation, and took the benefit of such variation.

Evidence before the Court

1. The Applicant relied on:

   a)Affidavit of John Karlovasitis, affirmed 3 July 2017.

2. The Respondent relied on:

   a)Affidavit of Mark Stephen Cadman, affirmed 1 August 2017;

   b)Affidavit of Matthew James Herrett, affirmed 1 August 2017;

   c)Affidavit of Jeffrey Pond, affirmed 2 August 2017.

3. The following documents were tendered:

   a)Real Estate Industry Award 2010, with wage variations; and

   b)Documents produced by Link Property Services Pty Ltd.

4. The Applicant was cross-examined. Only one of the witnesses in the Respondent’s case was required for cross-examination, Mr Mark Cadman. Both witnesses gave their evidence in a satisfactory manner. There are no overt credit issues in this case.

Was the Applicant paid in accordance with the Award?

1. The Respondent did not put into contention that the Award applies, that the Applicant’s classification is correct, and that the weekly wage rates contended by the Applicant, as well as the amount he was paid, are all correct.

2. The Respondent’s case is that the Court must look to the substance of the arrangement between the parties, which included an agreement that the total remuneration of the Applicant consisted of the amount agreed to be paid plus commissions, which total significantly exceeded the Award entitlement. Thus, the Respondent contends, the Applicant has suffered no loss.

3. The Applicant contends that the Award prescribes minimum conditions of employment, namely a minimum weekly wage. The Award prescribes that parties can agree to something ‘in addition to’ that but certainly cannot set-off other payments, such as commission, against that Award.

4. Counsel for the Applicant referred the Court to Poletti v Ecob (No 2) [1989] 31 IR 321 and Pacific Publications Pty Ltd v Cantlon [1983] 4 IR 415, in support of submissions. In reality the decision of the Full Court of the Federal Court in Linkhill Pty Ltd v Director of the Fair Work Building Inspectorate [2015] FCAFC 99, is more helpful. The discussion about the principles governing the right to deduct payments made from Award Entitlements commences from paragraph 39. The Full Court refers to extensive case law. For present purposes, those authorities suggest that this Court must pay close attention to what the parties in this case have agreed to as to the purpose of payment and to the employer’s characterisation of payments. In this case, it is abundantly clear from their written agreement. The commission was regarded as entirely separate and distinct from, and in addition to, the salary, superannuation and allowance package. That fact that the calculation of commission was dependant on that package is irrelevant. Thus, the Respondent as employer cannot now claim that payments made pursuant to a contractual obligation to pay commission can be relied on in satisfaction of Award conditions.

5. It must follow that the Applicant has not, on the evidence, been paid in accordance with the Award.

Did the Applicant receive the commissions he was entitled to?

1. The first issue related to split-commissions, that is, arrangement where, in effect, the Applicant’s share of commissions earned were shared with other employees of the Respondent. Even the Applicant conceded that this, in fact, took place. The Court is satisfied that business records he either created solely, or in conjunction with other employees of the Respondent, evidence this arrangement. In reliance on this, the Respondent has deducted that part of the commission referrable to the split-commission arrangement.

2. On behalf of the Applicant it was contended that any agreement to split commission needed to comply with cl.17.1 of the Award, that is. ‘must be evidenced in a further written agreement between the employer and the employee’. Moreover, a signed copy of the said agreement must be provided to the employee. Counsel for the Applicant also contended that if there was an agreement, there was no consideration for the same.

3. The consideration argument fails. It is clear that both parties obtained benefit from this commission-splitting. The evidence is clear: the properties in respect of which commissions were shared were not properties that the Applicant has introduced. In short, he was never entitled to 100% of the relevant commission. Thus there was a clear benefit to him of a split-commission arrangement.

4. Clause 6 of the Employment Agreement, and the document that varied it, clearly refers to a 50% commission in the circumstances set out therein. How then could there be an agreement to pay lesser amounts, in compliance with cls.15.1 and 17.1 of the Award? The Court finds that the written agreement for the purpose of the Award may be constituted by an oral agreement that is evidenced in writing. The invoices and other documents in evidence about the split-commission evidence this agreement. There were discussion between the Applicant and Mr Cadman about this. The latter was clear in his recollection about this, the Applicant was not. His actions, however, were clearly consistent with Mr Cadman’s evidence about ‘two operatives working on each transaction’ (found at paragraphs 13 and paragraphs 17 through to 33 of his Affidavit filed 1 August 2017.) The schedules the Applicant submitted also evidence the split-commission arrangement. The Applicant had ample time and opportunity to controvert Mr Cadman’s evidence, including in cross-examination, but did not.

5. The lack of certainty in clause 6 is evident about the commission share. Clause 6 prima facie entitles the Applicant ‘to a 50% commission’. What that actually means is demonstrated by how both parties implemented this provision. What they in fact did was pay to the Applicant 50% of the ‘portion of the commission paid to the employer’ (the words used in cl.15.1 of the Award). Thus, where the Respondent acted as a conjunction agent (e.g. 2 -4 Picrite Close property: refer to schedule being annexure MSC 2-4 Cadman Affidavit) the Applicant received 50% of 75% received by the Respondent as commission. This is notwithstanding clause 6 simply referring to ‘commission’. When it came to split commission, the parties acted in exactly the same way. They understood what clause 6 meant, even if their understanding was not, at least from a lawyer’s perspective, based on the actual words used in their Agreement. To allow the Applicant to now depart from his previous understanding would be to permit an unacceptable interpretation of their contractual arrangement, which was evidenced not just by what is contained in their written agreement, but by what they said and did.

6. The second issue that arises is in relation to commission in respect of transaction completed after the Applicant left his employment with the Respondent. Mr Cadman’s evidence was that the Respondent had been paying to the Applicant his share of commission as they were received by the Respondent. Indeed he confirmed in evidence that there was no issue about the TRP threshold because this had been met. It is unclear, therefore, what the Applicant’s complaint is?  In any event, clause 17.3(b) of the Award is clear in this regard.  The Court has already ruled that his commission entitlement is based on his share of commission after splitting or sharing as agreed. There appears, therefore, to be no further issue for determination.

Conclusion

1. The result of the Court’s findings set out above will result in an order for payment to the Applicant, though not in the amount that was contended for on his behalf.  The parties are best placed to make these calculations and submit an appropriate form of order.

I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of Judge Altobelli

Date:     17 July 2018