Karlovasitis v Link Property Services Pty Ltd (No.2)

[2018] FCCA 2848

FEDERAL CIRCUIT COURT OF AUSTRALIA

KARLOVASITIS v LINK PROPERTY SERVICES PTY LTD (No.2) [2018] FCCA 2848

Catchwords:
INDUSTRIAL LAW – Fair work – interpretation of a contract of employment insofar as it relates to commissions for work written before resignation but not paid until afterwards.

Cases cited:

Dowie v Brookwater Realty Pty Ltd [2014] FWC 531
Karlovasitis v Link Property Services Pty Ltd [2018] FCCA 1803

Applicant: JOHN KARLOVASITIS

Respondent: LINK PROPERTY SERVICES PTY LTD ACN 140 184 738

File Number: SYG 721 of 2017

Judgment of: Judge Altobelli

Hearing date: 14 August 2018

Date of Last Submission: 14 August 2018

Delivered at: Sydney

Delivered on: 5 October 2018

REPRESENTATION

Counsel for the Applicant: Mr Rogers

Solicitors for the Applicant: Delfino & Delfino

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. Leave be granted to the parties to relist the matter of 14 days’ notice should the parties be unable to agree on the form of order, and/or to seek direction as to an application for costs.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 721 of 2017

JOHN KARLOVASITIS

Applicant

And

LINK PROPERTY SERVICES PTY LTD ACN 140 184 738

Respondent

REASONS FOR JUDGMENT

Introduction and Background

1. On 17 July 2018 I made orders and delivered Reasons for Judgment in this matter: [2018] FCCA 1803. The relevant order was as follows:

   (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 parties were unable to reach agreement about the form of the order. The matter returned before me on 14 August 2018. The Applicant proposed an order for payment to him of $129,072.45 plus interest. The Respondent proposed $20,725.43.

3. Mr Rogers of Counsel continued to appear for the Applicant, and Mr Young of Counsel for the Respondent.

4. Some issues were dealt with on the day. The parties agreed that the Applicant was entitled to be paid $20,725.43 together with interest, being quantification of his entitlements under the Real Estate Industry Award 2010. The Court imposed a pecuniary penalty in the sum of $500 on the Respondent within such sum to be paid to the Applicant within 30 days.

5. The primary case in dispute between the parties was the Applicant’s entitlement to commissions. This involved considerations of proof, entitlement and quantification.

Relevant Facts

1. The Applicant commenced employment with the Respondent on 3 February 2014 and ceased employment in April 2016 having tendered his resignation by way of email on 17 March 2016.

2. Whatever may be the Applicant’s entitlements after he ceased employment with the Respondent, those entitlements will be derived from 2 sources: the employment agreement between the parties contained in a letter dated 20 September 2013, varied by way of a letter dated 25 June 2015; and the Real Estate Industry Award 2010.

The Applicant’s Case

1. The Applicant’s case was that at the time he had left employment with the Respondent, he has already arranged a number of sale and lease transactions the financial benefit of which had not been received by either party at the time he left. These transactions are listed in a document that was provided to the Court as an aide memoire. He contended that he was entitled to be paid his share of those commissions when those funds were received by the Respondent, without application of what clause 6 of the Employment Agreement describes as the TRP (the Total Remuneration Package). The TRP is, in effect, a deductible based on salary. Specifically, the Applicant’s claim was for $28,905.75 in respect of Telstra commissions and $79,441.25 relating to commissions for the Greystanes Estate. During submissions Counsel for the Applicant conceded that he could not prove 6 transactions. Leave to adduce further evidence in this regard was declined. On the Court’s calculations this reduces the Applicant’s claim by a total of $23,600, thus bringing his claim to $84,747 in total.

The Respondent’s Case

1. The Respondent contends that the Applicant has not adduced evidence to support his claim in relation to the commissions. The effect of the Employment Agreement and the Award is that any commission payable by the Respondent is, in any event, subject to a TRP of $88,000, and the Applicant would only receive 50% of the commissions after that.

Clause 6 of the Employment Agreement

1. Clause 6 of the Employment Agreement 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. For present purposes, the key provision relates to commission structure, and the key concept is that of “writing”. This term is not defined in the Agreement. The meaning of this seems to be assumed by the parties, rather than articulated by them. The affidavit of Matthew James Herrett affirmed 1 August 2017 at 19(b) may provide some insight into what those involved in the industry consider amount to ‘writing’. The context is clear: it is the writing of business in the form of sales or leases that result in the payment of commissions to the Respondent and, ultimately, to the Applicant. The elements of this are described in Mr Herrett’s affidavit as involving all of:

   a)The Applicant being the effective cause of the sale in introducing a purchaser and/or a tenant who then proceeds to settlement

   b)Settlement taking place

   c)Receipt by the Respondent of cleared funds into its bank account

   d)The Applicant reaching his TRP quota within the relevant financial year

3. The Applicant’s case demonstrated an acceptance of the first three points, but not the fourth point insofar as it related to years after he left the employment of the Respondent.

4. On this basis, therefore, business is written for the purposes of clause 6 of the Employment Agreement when the Applicant is the effective cause of the sale and/or lease, which is duly settled, and where the Respondent has received the commission derived from the sale or lease in cleared funds into its bank account. In a claim for unpaid commission, the Applicant bears the onus of proof to establish these matters. One would have thought that there would be in existence clear business records that document the above, and which would have been requested and produced well before the hearing of this case.

5. It is clear from the terms of Clause 6 that the Applicant’s entitlement to commission does not cease merely because he leaves the Respondent’s employment. If the Applicant can establish each of the matters described above, he remains entitled to commissions. The Court accepts that the business was ‘written’ before he resigned. In that respect the business was written, and the commission earned, subject to a condition subsequent i.e. settlement and payment of the commission to the Respondent. The Court does not accept that the Employment Agreement required the Applicant to remain in employment as a condition precedent to earning commissions: Perri v Coolangatta Investments Pty Ltd [1982] HCA 29. Nor does the Court accept that the payment of commission to the Respondent was a condition precedent to the Applicant ‘writing’ the business.

6. An issue raised in the Respondent’s case was that the Applicant may not have been the only person to ‘write’ the business. Indeed the Court noted in its earlier judgment that this was sometimes the case, and resulted in split commissions. This does not change the fact that the Applicant wrote the business. All the Applicant needs to establish under the Employment Agreement is that he was the effective cause of the sale or lease. That he might not have been the only cause of the sale or lease us irrelevant to whether he wrote the business, but it is relevant to the share of commission. It must be noted that the agreement between the parties did not contain a provision that required the Applicant to be involved in “all aspects” of the relevant transaction: see Dowie v Brookwater Realty Pty Ltd [2014] FWC 531. This means, for example, that whatever happened after he left is irrelevant, if the conditions subsequent are satisfied.

7. The next issue is whether, and if so how, the TRP deductible applies after the Applicant has left the employment of the Respondent. If the business was written before he ceased to work for the Respondent, subject only to the condition subsequent referred to above, then the TRP deductible cannot apply in any year except the Applicant’s final year. This is because the Employment Agreement creates the entitlement to commission “within the financial year the employee will be entitled to a 50% commission”. This is a necessary and reasonable interpretation of the agreement. Otherwise the Applicant could, for example, be the effective cause of a sale in April 2016, one week before he left, and which generated a commission of $20,000, but not receive his 50% because he has not written “two times the TRP” in the financial year after he had resigned. If the employer had intended that result, clause 6 of the Agreement should have so stated.

8. Does reference to the relevant Award change this conclusion?

Clause 17.3 Real Estate Industry Award

1. Clause 17.3 of the Real Estate Industry Award states:

   17.3 Entitlements after employment ends

   (a) The employee is entitled to be credited with a portion of the commission paid to the employer, incentive payments or bonuses calculated in accordance with a written agreement, for any transaction where:

   (i) there was an existing legally -enforceable contract either:

   ·   Before the cessation of the employee’s employment;

   ·   If the employer gave notice to the employee, during the notice period; or

   ·   If the employer asked the employee to waive the notice period and the employee agrees, during the notice period to which the employee would have been otherwise entitled; and

   (ii) the employer is paid commission by the client in respect of the existing legally –enforceable contract referred to in clause 17.3(a)(i); and

   (iii) the commission payment referred to in clause 17.3(a)(ii) is cleared into the employer’s bank account.

   (b) Unless the written agreement specifies otherwise. The portion of the commission referred to in clause 17(a) must be the same as that with which the employee would have been entitled to be credited of employment had continued.

2. The Court notes that clause 17.3(a) reflects the Courts findings about writing business and earning commission. For present purposes the focus is on 17.3(b) which quite properly gives primacy to the agreement between the parties i.e. the Employment Agreement. In the absence of such an agreement, however, clause 17.3(b) is quite clear – the commission payable after employment ends is to be the commission payable before employment ends. The Award is an invitation to employers to, in effect, contractually displace the general rule stated in clause 17.3 which is one of continuity of commission entitlements. Reference to the Award does not lead the Court to reconsider its interpretation of clause 6 of the Employment Agreement – indeed it demonstrates consistency.

The Proof Issue

1. The Applicants claim was crystallised in the aide memoire provided to the Court. It is a schedule of property transactions the Applicant alleges he wrote, but where the transactions settled after he left the Respondent. On his case, therefore, he is entitled to one half of the commissions received by the Respondents, as mentioned earlier in these reasons, Counsel for the Applicant conceded the Applicant could not prove a number of the contended transactions. On the Court’s calculations, this brings his claim down to $84,747.

2. The aide memoire is, in effect, a spreadsheet listing the address of the property, the invoice number, the commission payable to the Respondent, the Applicant’s contended share of the commission, and then a final column setting out the Applicant’s contended cumulative entitlement. Commission splitting is reflected in the appropriate column,

3. Counsel for the Applicant submitted that the evidence in support of the aide memoire was found at Exhibit JK3 to the Applicant’s affidavit affirmed 3 July 2017. That does appear to be the case, but the Court has not systematically cross-referenced each row in the spreadsheet to the evidence in support of the claim. This is a matter for the parties, and the Court expects, a matter for reasonable concessions (on both sides if necessary).

4. Counsel for the Respondent submitted that, in effect, the Applicant had not proved his entitlement to commissions. In effect Counsel was submitting that the Applicant had not established the condition subsequent to his entitlement to commission.

5. The Court does not agree. The evidence that the Respondent contends is not before the court, is either:

   a)In fact before the court, either as an exhibit to the Applicant’s evidence, or in evidence tendered, or

   b)In the possession or control of the Respondent.

6. It is not for the Respondent to put the Applicant to proof on matters that are within its own business records or knowledge. The aide memoire merely crystallises the Applicant’s claim in respect to commissions received by the Respondent after he left. There should be no surprise to the Respondent, nor disadvantage. It is quiet inappropriate for the Respondent, as the Applicant’s former employer, to complain that he Applicant had none of the agency agreements that form the foundations for the commission claim, or that the Applicant cannot establish non-payment by the Respondent to him. This is all information that is in the possession or control of the Respondent in its business records. Indeed one might be more sympathetic to the Respondent’s complaint that the Applicant did have these business records after resignation, rather than not having them in this context.

7. The Court accepts that it needed to rule on the contentious issues that it has dealt with in these Reasons for Judgment. The Court now believes that it has given sufficient guidance to the parties so that they can jointly submit the order for payment of commissions to the Applicant. If the Applicant’s contention for a commission is supported by a document presently in evidence, then it falls to the Respondent to either establish that it has already been paid (as was indeed asserted in passing in submissions), or that the claim for commission is incorrectly calculated. It is not for the Court to use its time to trawl through the evidence to quantify what part of the Applicant’s claim is established, having regard to the competing contentions (which sometimes have the flavour of lacking evidentiary support).

I certify that the preceding twenty-six (26) paragraphs are a true copy of the reasons for judgment of Judge Altobelli

Date:     5 October 2018