Kosserkas v Reymer Pty Ltd
[2020] WADC 139
•6 NOVEMBER 2020
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: KOSSERKAS -v- REYMER PTY LTD [2020] WADC 139
CORAM: VERNON DCJ
HEARD: 3, 4 & 5 SEPTEMBER, 3 DECEMBER 2019 & 17 FEBRUARY 2020
DELIVERED : 6 NOVEMBER 2020
FILE NO/S: CIV 4074 of 2015
BETWEEN: TOM KOSSERKAS
Plaintiff
AND
REYMER PTY LTD
Defendant
Catchwords:
Employment contract - Breach of contract - Unpaid wages and entitlements - Oral agreement for percentage of research and development tax rebate
Legislation:
Limitation Act 2005 (WA)
Long Service Leave Act 1958 (WA)
Minimum Conditions of Employment Act 1993 (WA)
Result:
Judgment for the plaintiff and counterclaim dismissed.
Representation:
Counsel:
| Plaintiff | : | Mr A P Hershowitz |
| Defendant | : | Mr J Ramachandran |
Solicitors:
| Plaintiff | : | D'Angelo Legal |
| Defendant | : | Deva & Jeyen Barrister And Solicitor |
Case(s) referred to in decision(s):
Fazio v Fazio [2012] WASCA 72
Re Bias Boating Pty Ltd [2017] NSWSC 1524
Willis v Health Communications Network Ltd [2007] NSWCA 313
VERNON DCJ:
The plaintiff, Tom Kosserkas, makes two claims totalling $203,339.70, and interest, against the defendant, Reymer Pty Ltd, his former employer, as follows:
(a)$142,732 for wages and accrued entitlements said to have been unpaid between 13 May 2011 and 11 November 2011 (the employment claim);[1] and
(b)$60,194, and interest, said to be owed as a result of an oral agreement with Reymer, whereby Mr Kosserkas alleges that Reymer, by its director, Mr Paari Vell,[2] agreed to pay Mr Kosserkas a sum equal to 5% of any research and development tax rebate (R & D tax rebate) received by Reymer from the Australian Taxation Office (ATO), in consideration for Mr Kosserkas successfully obtaining the R & D tax rebates on Reymer's behalf, in each and every year the rebate was successfully obtained (the rebate agreement).[3] This claim is limited to amounts said to be owing to Mr Kosserkas pursuant to the rebate agreement on R & D tax rebates received by Reymer for the 2010 and 2011 financial years.
[1] Plaintiff's closing submissions dated 17 February 2020 at par 1 refer to 20 May 2011, this being the first pay day after the last payment was made to Mr Kosserkas on 12 May 2011.
[2] Paari Vell is referred to in these reasons as Mr Paari, as he was referred to as such by his counsel throughout the trial, rather than Mr Vell.
[3] See the substituted statement of claim dated 19 September 2019, at par 4A.
At the commencement of trial:
(a)Mr Kosserkas withdrew a claim for entitlements said to arise from his alleged constructive dismissal by Reymer; and
(b)Reymer accepted that:
(i)Mr Kosserkas had been employed by Reymer to 31 July 2011, and had not been paid the amounts claimed for wages and other entitlements during that period; and
(ii)Mr Kosserkas was entitled to receive wages and other entitlements to 31 July 2011.[4]
[4] ts 31, ts 32. See also the defendant's closing submissions at 10B and ts 415 - ts 417.
However, Reymer said that:
(a)Mr Kosserkas did not work for Reymer from August 2011;
(b)Mr Kosserkas' salary and entitlements should be calculated on the basis of a rate of $52.12 per hour and not $64 per hour as Mr Kosserkas claimed; and
(c)Mr Kosserkas was not entitled to the claimed long service leave, because his period of service had been terminated for some time in 1996. In closing it was submitted that Mr Kosserkas' long service leave entitlements should be calculated from 1 January 1998.[5]
[5] Defendant's closing submissions at 10C.
These concessions limited the issues between the parties as far as the employment claim was concerned.
Reymer denied the rebate agreement had been entered into and counterclaimed to seek recovery of $100,000 which Mr Kosserkas, as Reymer's then financial controller, had arranged for Reymer to pay to Mr Kosserkas in September 2007, allegedly pursuant to the rebate agreement, as being made in breach of fiduciary duty.[6]
[6] Further amended defence and counterclaim dated 29 November 2019 at par 10.
Mr Kosserkas says that if the payment was made to Mr Kosserkas without authority, which was denied, the counterclaim is statute barred.[7]
[7] Reply and defence to further amended defence and counterclaim dated 15 June 2017 at par 1.
The issues
The issues in relation to the employment claim are as follows:
(a)Was Mr Kosserkas employed by Reymer until 11 November 2011, as he claims, or only until 31 July 2011 as Reymer says?
(b)Was Mr Kosserkas entitled to be paid a gross weekly salary calculated at a rate of $64 per hour or $52.12 per hour?
(c)What is the effect, if any, of the termination of Mr Kosserkas' employment in 1996 to his entitlement to payment for long service leave?
(d)What amount was owed by Reymer to Mr Kosserkas for unpaid wages, salary sacrifice entitlements, annual leave entitlements, long service leave entitlements, and superannuation in light of the determination of the issues referred to in (a) ‑ (c) above?
The issues in relation to the rebate agreement claim are as follows:
(a)Was there an agreement between Reymer and Mr Kosserkas, pursuant to which Reymer was obliged to pay Mr Kosserkas a sum equal to 5% of any R & D tax rebate received by Reymer from the ATO for each financial year?
(b)If there was such an agreement what amount is owing to Mr Kosserkas in relation to the R & D tax rebates received by Reymer for the 2010 and the 2011 financial years respectively?
(c)If there was no such agreement between Reymer and Mr Kosserkas;
(i)Is Reymer's claim for repayment of $100,000 statute barred?
(ii)Was the payment made to Mr Kosserkas without authority?
Mr Kosserkas bears the burden of proving the claims on the balance of probabilities, including establishing the rebate agreement and the quantum owed under that agreement.
In relation to the counterclaim, Reymer bears the burden of proving that the payment of $100,000 was not authorised, however, Mr Kosserkas bears the burden of establishing that that Reymer's claim for repayment of that sum is statute barred.[8]
[8] Section 79(1) Limitation Act 2005 (WA).
The witnesses
Mr Kosserkas gave evidence at trial and called a further witness, Arthur Gold, who was Reymer's Chief Executive Officer at the relevant time.
The only witness called by Reymer was its director, Mr Paari.
Uncontroversial findings
The evidence in [14] - [32] below was not the subject of any controversy and I make findings of fact in accordance with those paragraphs.
Mr Kosserkas commenced working as an accountant with a company called OKA Motor Company Limited (OKA) on 15 March 1992.[9]
[9] Exhibit 19; ts 63 (Mr Kosserkas); ts 229, ts 235 (Mr Paari accepted that Mr Kosserkas had been employed).
Subsequently Mr Kosserkas was employed by OKA pursuant to a written agreement dated 1 January 1998, but signed 29 October 1999 (Employment Contract).[10]
[10] Exhibit 19; ts 63 (Mr Kosserkas); ts 229, ts 235 (Mr Paari accepted that Mr Kosserkas had been employed).
The Employment Contract provided that Mr Kosserkas would be paid on a weekly basis (cl 4), would be entitled to annual leave, public holidays, sick leave, and long service leave (cl 5), and would be paid superannuation contributions (cl 8), as required by law.
OKA operated a business as a developer and manufacturer of four‑wheel drive vehicles.[11]
[11] ts 63 (Mr Kosserkas).
In July 2001, OKA transferred its business to Reymer, and Reymer took over the operation of the business with the same staff and premises.[12] Reymer then became liable for OKA's accrued obligations to its employees, including the obligations to Mr Kosserkas under the terms of the Employment Contract.[13]
[12] ts 64 (Mr Kosserkas).
[13] ts 31, ts 32 (defendant's counsel); ts 40, ts 92, ts 93 (Mr Kosserkas).
On 9 December 2002 Mr Paari was appointed a director of Reymer, and continues to be a director.[14] He is Reymer's effective owner, through his interest in a company, Bhavya Holdings Pty Ltd.[15]
[14] Exhibit 1.
[15] ts 269, ts 243 (Mr Paari).
Mr Gold was the Chief Executive Officer, and a director, of Reymer at all material times until 14 June 2011.[16] He had responsibility for the day to day management of Reymer's operations.[17]
[16] Exhibit 1; ts 270 (Mr Paari).
[17] ts 270 (Mr Paari).
Mr Kosserkas was appointed an alternative director to Mr Paari from 16 December 2005 to 14 June 2011[18] because Mr Paari principally lived in Malaysia.[19]
[18] Exhibit 1.
[19] ts 64 (Mr Kosserkas); ts 234, ts 269 (Mr Paari).
Whilst the ASIC records list one other person as a director from 1997 to 2009, there is no evidence as to his role in Reymer's management, if any. A further director, Sunita Nair Vejagaran, was appointed on 8 July 2011.[20]
[20] Exhibit 1.
At all relevant times, Mr Kosserkas was employed by Reymer as its financial controller, and was authorised to sign cheques drawn from Reymer's accounts.[21]
[21] ts 64, ts 101 (Mr Kosserkas); ts 232 (Mr Paari).
Reymer paid Mr Kosserkas one week in arrears, and he was entitled to 10 days sick leave per annum which would accrue.[22]
[22] ts 65 (Mr Kosserkas).
On 19 October 2010, Mr Gold approved an increase to the effective rate of Mr Kosserkas' salary, from $52.12 per hour, to $64 per hour, with effect from 1 October 2010.[23]
[23] Exhibit 25.
At all relevant times to and including 12 May 2011 Reymer paid:
(a)$2,291.20 gross wages per week to Mr Kosserkas calculated at a rate of $57.28 per hour for 40 hours;
(b)salary sacrifice payments of $268.80 per week; and
(c)superannuation contributions to Mr Kosserkas' superannuation fund at a rate of 9%, or $206.21 per week.[24]
[24] Exhibits 3, 7, 11 and 12.
Reymer did not pay Mr Kosserkas any further amounts after his last weekly salary was paid on 12 May 2011.[25]
[25] Exhibit 7; ts 74, ts 78.
Mr Kosserkas' nominated superannuation fund was a self‑managed fund called the Kosserkas Super Fund.[26]
[26] ts 94 (Mr Kosserkas' evidence).
In around June or July 2011, Mr Paari instructed an accounting firm, KPMG, to conduct an audit of Reymer, and Reymer ceased production of vehicles in around July 2011.[27]
[27] ts 230 (Mr Paari); ts 116 (Mr Kosserkas).
On 23 October 2011, Mr Kosserkas gave written notice of his resignation from his employment with Reymer.[28]
[28] The defendant admits that the plaintiff provided notice of his resignation from his employment on 23 October 2011 in par 13 of the further re-amended defence.
Reymer received payments from the ATO for R & D rebates of $724,552.50 in the financial year ending 30 June 2010,[29] and of $479,339.10 in the financial year ending 30 June 2011.[30]
[29] Exhibit 13.
[30] Exhibit 14.
Reymer's tax return claiming the R & D rebate for the year ending 30 June 2011 was lodged with the ATO on 11 November 2011.[31]
[31] ts 74.
The employment claim
Evidence
Mr Kosserkas
Mr Kosserkas agreed that he had been made redundant on 4 April 1996 and was re‑employed after about three weeks.[32]
[32] ts 166, ts 167.
Mr Kosserkas said that he was employed to work 40 hours per week,[33] however he estimated he worked 60 hours per week in the period May to November 2011 and worked on weekends when required.[34]
[33] ts 103.
[34] ts 179.
With respect to the increase to the rate on which his salary was calculated, from $52.12 per hour to $64 per hour, Mr Kosserkas said that he negotiated this increase with Mr Gold.[35] He did not discuss it with Mr Paari.[36] Mr Kosserkas agreed that Mr Paari told him in July 2011 that he had been unaware of the increase in salary,[37] but said that Mr Paari was not involved in Reymer's day to day operations.[38]
[35] ts 123.
[36] ts 136.
[37] ts 139.
[38] ts 138, ts 139.
Mr Kosserkas said that he had a salary sacrifice arrangement in place where payments would be made under a finance contract for a car. He said, in effect, that this arrangement was to end on 30 June 2011, when the finance contract came to an end.[39]
[39] ts 67, ts 173.
Mr Kosserkas agreed that, in 2013, he had submitted a workers' compensation claim form to Reymer's workers' compensation insurer[40] in which he identified August 2011 as the date he had to stop working.[41] Mr Kosserkas said the reference to August 2011 was an error.[42]
[40] ts 111.
[41] ts 108.
[42] ts 110.
Mr Kosserkas said that he said that he went on sick leave on 7 September 2011, and he thought his GP had given him a certificate for two weeks on 7 September 2011. Mr Kosserkas said that while he was on sick leave he continued to perform work until 11 November 2011.[43] He said that he was predominantly working from home but would also go to meetings at Reymer's offices to meet various people when his health permitted.[44]
[43] ts 72, ts 74, ts 112.
[44] ts 72.
Mr Kosserkas said that he had reported his illness at the time to Sunita, however, was not aware at that time that he could make a workers' compensation claim.[45]
[45] ts 112.
In response to the proposition that he had, in fact, stopped working in August 2011, Mr Kosserkas said:[46]
I filled out this form at - to the best of my knowledge at that time. I didn't stop work for the company until the 11th of the 11th 2011. Reymer and other officers of the company were asking me to perform my duties even though I was ill from 7 September. They were asking me to go to meetings, finalise the R & D, how long the R & D is going to take to - to be complete. And this all transpired (sic) with us lodging the tax return with the R & D at the offices of Sardul Singh where I oversaw the input of the tax return on the 11th of the 11th 2011.
[46] ts 110.
Mr Kosserkas accepted he had received a settlement of $60,000 of his workers' compensation claim, which settlement was stated to be on the basis that he had been totally unfit for work from 7 September 2011, but said that his recollection is that the settlement had nothing to do with his claim against Reymer for unpaid wages.[47]
Mr Gold
[47] ts 73.
Mr Gold said that Mr Paari spent most of his time overseas in Malaysia, and that he would come to the business in Perth every three months.[48]
[48] ts 184.
Mr Gold said that his role as CEO was 'to overlook the whole business, employ people, let people go, make sure the bills were paid, design and development, research and development.'[49]
[49] ts 184.
Mr Gold said that he was ultimately responsible for deciding whether a person received a salary increase.[50] He said that he was not required to inform Mr Paari of any increase in salary.[51] He said that he could not remember if there had been any discussion with Mr Paari about Mr Kosserkas' increase.[52]
[50] ts 185.
[51] ts 192.
[52] ts 192.
Mr Gold agreed that he had signed the form authorising the increase in hourly rate for Mr Kosserkas, from $52.12 to $64.[53]
Mr Paari
[53] Exhibit 25; ts 192.
Mr Paari said he came to Perth every two or three months.[54] He said he was not involved in the day to day management of Reymer's operations.[55] Mr Paari accepted that Mr Gold was Reymer's only 'hands on' director,[56] that Mr Paari did not know anything about the daily operation of Reymer,[57] that financial matters were left to Mr Gold and Mr Kosserkas,[58] that he was not involved in paying creditors, or in the preparation of accounts or records of the company,[59] and that he had no idea about employee entitlements.[60]
[54] ts 269.
[55] ts 272, ts 273.
[56] ts 273.
[57] ts 277.
[58] ts 273.
[59] ts 272.
[60] ts 273 - ts 274.
Mr Paari accepted that Mr Kosserkas had been employed from 1993 or 1994 at least.[61] He said that he thought Mr Kosserkas worked between 8.30 am or 9.00 am until about 4.00 pm or 5.00 pm, and worked a five day week generally.[62]
[61] ts 229, ts 235.
[62] ts 231.
Mr Paari said that he could not dispute that Mr Kosserkas had only been laid off for about three weeks in 1996.[63]
[63] ts 302.
Mr Paari agreed that he had been told by Sunita in about mid‑2011, that Mr Kosserkas had become ill and that he was suffering from stress‑related issues, but did not know whether, or when, Mr Kosserkas took sick leave, or was working from home.[64]
[64] ts 275.
Mr Paari initially said that Mr Kosserkas had been employed until Reymer's accounts for the 2011 financial years had been finished, which he thought was about July 2011.[65] However, subsequently Mr Paari said that, once the KPMG investigation began, Mr Kosserkas had come in to answer KPMG's queries as and when required.[66] Mr Paari said that this was 'not - not necessarily on - on daily basis (sic)'.[67] Mr Paari's recollection was that the KPMG audit went on for between seven to nine months.[68]
[65] ts 231.
[66] ts 231.
[67] ts 232.
[68] ts 235.
Mr Paari subsequently accepted in cross‑examination that he was communicating with Mr Kosserkas about the affairs of the business up until 11 November 2011, and that he was communicating with Mr Kosserkas about the financial statements, issues relating to the company including the R & D tax rebate, and the KPMG investigation.[69] He accepted that there were lots of these communications with Mr Kosserkas during the period September, October and November 2011.[70] Ultimately, Mr Paari accepted that he had no idea about the extent of the work Mr Kosserkas had performed for Reymer from July to November 2011.[71]
[69] ts 275.
[70] ts 275.
[71] ts 301.
Mr Paari said that Mr Gold did not have authority to approve the increase to Mr Kosserkas' salary to the effective rate of $64 per hour. Whilst he accepted that Mr Gold was in charge and made the decisions,[72] and was ultimately responsible for all employment matters,[73] in relation to the salary increase Mr Paari said 'I think those are things that normally [have] to go to the Board.'[74] He said that he did not authorise the pay rise.[75]
Findings and determination in relation to the employment claim
Period of employment
[72] ts 270.
[73] ts 271.
[74] ts 270.
[75] ts 241.
As he admitted, Mr Kosserkas did say on the workers' compensation form he submitted in 2013, in effect, that he had to stop working in August 2011 as a result of a 'workplace occurrence' in July 2011, being stress.[76] I accept his evidence that the reference to August 2011 was in error, but consider that it is more likely than not that Mr Kosserkas was referring to the date that he had been certified by his GP as being unfit to work, which was 7 September 2011, consistent with the instructions he gave his solicitors in his workers' compensation claim.[77]
[76] Exhibit 20.
[77] Exhibit 15; ts 73 (Mr Kosserkas).
A letter dated 4 September 2014 from Mr Kosserkas' then solicitors in the workers' compensation claim evidences that they had calculated Mr Kosserkas' total claim on the basis that he was totally incapacitated for work from 7 September 2011 to 1 May 2012 and that he was partially incapacitated from 1 May 2012 to 1 July 2014. The solicitors advised that they considered he would succeed in the claim for total incapacity, notwithstanding a lack of medical certification of unfitness to work, which is consistent with Mr Kosserkas' recollection that his GP's certificate was for two weeks.[78] The solicitors also considered there were risks in establishing the partial incapacity claim. They said a reasonable settlement was for $75,000.[79] The offer that Mr Kosserkas accepted was for $60,000, a portion of which was used to pay legal costs.[80]
[78] Exhibit 15, letter from Mr Kosserkas' then solicitors dated 4 September 2014, pages 2 and 3.
[79] Exhibit 15.
[80] Exhibit 15, letter from Mr Kosserkas' then solicitors dated 4 September 2014, page 3.
I do not draw any adverse conclusion as to Mr Kosserkas' credit generally from this evidence. I consider that it is likely that, by the time that Mr Kosserkas came to settle his claim, in September 2014, he was focussed on his recollections of when he became ill through stress at Reymer, not whether he actually performed work for Reymer during the two month period from 7 September to 11 November 2011, particularly given his uncontradicted evidence that, despite continuing to work, his doctor had certified him as unfit for work from 7 September 2011, and the evidence that he did not work at all for nearly six months after 11 November 2011.[81]
[81] I note that Reymer pleads that Mr Kosserkas' notice of resignation was due to ongoing personal and health issues, which is consistent with his not working after his resignation: Further re-amended defence dated 29 November 2019, par 13(b).
Mr Kosserkas' evidence that he continued to work until 11 November 2011, when the application for the R & D tax rebate was finalised, is, in my view, consistent with the evidence that the rebate application was lodged on that day, and the admissions made by Mr Paari, referred to in [50] and [51] above, about the work that Mr Kosserkas continued to do for Reymer through to November 2011.
In addition, whilst there is no evidence that Reymer terminated Mr Kosserkas' admitted employment in around July 2011, or at any time thereafter, Reymer has admitted that on 23 October 2011 Mr Kosserkas gave notice of his resignation from his employment, although the date that notice was to take effect is not admitted.[82]
[82] Further re-amended defence and counterclaim dated 29 November 2019, par 13(a).
It is not necessary for me to make an assessment of the precise hours that Mr Kosserkas worked during this period, as cl 3.1 of the Employment Contract provided that he would be paid for his services regardless of the time that they are performed.[83]
[83] Exhibit 19.
Accordingly I find, on the balance of probabilities, that Mr Kosserkas continued work for Reymer, as required by Reymer, and was employed by Reymer, pursuant to the terms of the Employment Contract, until 11 November 2011.
As noted Mr Kosserkas said that his recollection was that the settlement referred to in [54] above was unrelated to the current claim. Reymer has not sought, in its pleadings or submissions, to claim any set‑off of any amount paid by its workers' compensation insurer for the period 7 September to 11 November 2011, and relied on that evidence solely to attack the credibility of Mr Kosserkas' evidence that he was employed until 11 November 2011. In any event, whilst there is evidence that Mr Kosserkas' solicitors' assessment of his claim included that period within the total period of the claim to 1 July 2014, there is no evidence of the basis on which the final settlement was reached, or whether any portion of the final settlement was specifically attributable to that period. Accordingly, I have not taken the settlement into account in assessing Mr Kosserkas' claim against Reymer.
Rate of pay
I accept that Mr Paari now believes that increases in rates of pay ought to have been approved at a director's meeting. However, Mr Paari's evidence referred to at [52] above does not go so far as to evidence that, as at October 2010, salary increases were either required, or expected, to be put before Reymer's board for approval.
Whilst Mr Paari said that Mr Gold was not authorised to approve the increase, his evidence referred to in [46] and [52] above supports Mr Gold's evidence referred to in [43] - [45] above that he did have that authority.[84]
[84] See [54] above.
I prefer Mr Gold's evidence to that of Mr Paari on this point. Mr Gold was an entirely independent witness, who impressed me as giving his evidence honestly and reliably, and given his day to day management of Reymer, is likely to have a better recollection of these matters.
Accordingly, I find that Mr Gold had authority to, and did, approve the pay increase by which Mr Kosserkas was to be paid an effective salary of $64 per hour multiplied by 40 hours per week from 1 October 2010, and that, accordingly, Mr Kosserkas was entitled to be paid $2,560 per week from that date.
An apparent conflict in documentary evidence is that until Mr Kosserkas was last paid on 12 May 2011, he was apparently being paid at a rate of $57.28 per hour and not $64 per hour, with the total weekly amount being $2,291.20.[85] However, Mr Kosserkas' evidence referred to in [36] above, which I accept, was to the effect that his salary sacrifice arrangement came to an end on 30 June 2018. I have found that until 12 May 2015, Mr Kosserkas was being paid a salary of $2,291.20 per week and a salary sacrifice amount of $268.80 per week. This totals $2,560 per week, equal to the weekly rate calculated at $64 per hour.
[85] Exhibits 8, 10, 12.
Accordingly, I find, on the balance of probabilities, that from 13 May to 11 November 2011, Mr Kosserkas was entitled to a salary calculated at $2,560 per week, but was not entitled to any additional salary sacrifice amount.
Calculation of unpaid wages and salary sacrifice entitlements
On the basis of my findings in [53] - [66] above, I find that Mr Kosserkas is entitled to receive unpaid wages totalling $66,560 for 26 weeks from 13 May to 11 November 2011 at $2,560 per week gross, which includes the amount claimed as salary sacrifice entitlements.
Effect of termination of employment on long service leave entitlements
By s 8(1) of the Long Service Leave Act 1958 (WA) (the LSL Act) an employee is entitled to long service leave on ordinary pay in respect of continuous employment with one employer, or with a person who, being a 'transmittee', is deemed pursuant to s 6(4) to be the same employer.
Section 6(2), s 6(3) and s 6(4) of the LSL Act provide, relevantly, that:
(2)For the purposes of this Act, the employment of an employee whether before or after the commencement of this Act shall be deemed to be continuous notwithstanding -
…
(f)any termination of the employment by the employer on any ground other than slackness of trade if the employee is re-employed by the same employer with a period not exceeding 2 months from the date of such termination;
(g)any termination of the employment by the employer on the ground of slackness of trade if the employee is re‑employed by the same employer within a period not exceeding 6 months from the date of such termination.
…
(3)Any period of absence from, or interruption of employment referred to in subsection 2(c) to (i) inclusive shall not be counted as part of the period of an employee's employment.
(4)Where a business has, whether before or after the coming into operation hereof, been transmitted from an employer (herein called the transmitter) to another employer (herein called the transmittee) and an employee who at the time of such transmission was an employee of the transmitter in that business becomes an employee of the transmittee - the period of the continuous employment which the employee has had with the transmitter (Including any such employment with any prior transmittor) shall be deemed to be employment of the employee with the transmittee.
The uncontroversial evidence, which I have accepted, supports a finding on the balance of probabilities, which I make, that immediately before the transfer by OKA to Reymer of the business, Mr Kosserkas was an employee of OKA in that business, and thereafter he became an employee of Reymer in that business. Pursuant to s 6(4) of the LSL Act, Mr Kosserkas' employment with OKA is deemed to be employment with Reymer.
The only evidence that Mr Kosserkas' employment with OKA was interrupted at any point was his own, in cross-examination, that he had been made redundant on 4 April 1996 and was re‑employed after about three weeks.[86] I accept that evidence.
[86] ts 166, ts 167.
Accordingly, whatever the reason for Mr Kosserkas' redundancy in 1996, it has no effect on his entitlement to long service leave, under s 6(2)(f) of the LSL Act, as it was less than two months duration.
The Employment Contract did not purport to change Mr Kosserkas' long service leave entitlements under the LSL Act, and confirmed his entitlement to such leave in cl 5.[87]
Calculation of long service leave entitlements
[87] Exhibit 19.
The term 'ordinary pay' for the purpose of s 8(1) of the LSL Act, is defined in s 4(1), relevantly, as:
remuneration for an employee's normal number of weekly hours of work, calculated on the ordinary time rate of pay applicable to him, as at the time when any period of long service leave granted to him under this Act commences, or is deemed to commence … but does not include shift premiums, overtime, penalty rates, allowances or the like.
Section 8(2) of the LSL Act provides that:
An employee who has completed at least 10 years of continuous employment, as is referred to in subsection (1), is entitled to an amount of long service leave as follows -
(a)in respect of 10 years so completed, 8 2/3 weeks;
(b)in respect of each 5 year period of continuous employment so completed after such 10 years, 4 1/3 weeks;
(c)on the termination of the employee's employment -
(i) by his death;
(ii) in any circumstances otherwise than by his employer for serious misconduct,
in respect of the number of years of such continuous employment completed since the employee last became entitled under this Act to an amount of long service leave, a proportionate amount on the basis of 8 2/3 weeks for 10 years such continuous employment.
Section 9(2) of the LSL Act provides that, in a case to which s 8(2)(c) applies, the employee shall be deemed to have been entitled to and to have commenced leave immediately prior to such termination.
Accordingly, Mr Kosserkas' long service leave entitlement is to be calculated at the rate of pay to which he was entitled when his employment was terminated on 11 November 2011, that is $2,560 per week.
The evidence was that Mr Kosserkas had no outstanding long service leave entitlements for the period between 15 March 1992 and 14 March 2002.[88] Mr Kosserkas' statutory entitlement to payment for long service leave is therefore $21,427 calculated as follows:
From 15 March 2002 to 14 March 2007 = 4.33 weeks;
From 15 March 2007 to 11 November 2011 = (1,703 days ÷ 3,653 days) x 8 2/3 weeks = 4.04 weeks;
Total = 8.37 weeks x $2,560 per week = $21,427.
[88] Exhibit 10.
Exhibit 10 tendered as a business record which sets out a calculation of Mr Kosserkas' long service leave on which Mr Kosserkas' claim of $19,337 is based. However, that calculation is based on a rate of $57.28 per hour, rather than $64, which is the rate I have found Mr Kosserkas was entitled to be paid.
By reason of the matters referred to in [68] - [79] above, I find that Mr Kosserkas is entitled to a total of $21,427 for long service leave entitlements.
Annual leave entitlements
There is no dispute that Mr Kosserkas was not paid annual leave entitlements. There is, however, a conflict in Reymer's business records as to the amount of annual leave to which Mr Kosserkas was entitled.
Exhibit 6 evidences that as at the week ending 24 June 2011, Mr Kosserkas had accrued an entitlement to 360.02 hours annual leave totalling $23,041 calculated at $64 per hour. Exhibit 8 evidences that as at the week ending 24 June 2011, Mr Kosserkas had accrued an entitlement of 600.02 hours of which 240 hours was stated to be included as a provision to compensate for not being able to take long service leave. In his closing submissions, Mr Kosserkas relies on exhibit 8 to prove his claim of $34,369.15, rather than exhibit 6.
These exhibits were both tendered at the outset of the trial by the plaintiff, without objection. The only oral evidence about either of them occurred in cross‑examination of Mr Kosserkas, where he said that he did not prepare exhibit 6, and that it was probably prepared by the person in charge of payroll at the time. The following exchange about exhibit 6 took place:
Mr Kosserkas: But this document doesn't include the extra annual leave we got for not being able to take our - our long service, as per the agreement.
Mr Ramachandran: But are you saying it's not inclusive of the extra long service leave?
Mr Kosserkas: No. Not inclusive of the - the extra annual leave we were granted as person (sic) the agreement. This should be increased by 240 hours, as at 20th - well, as a 30 - or as at 24 June 2011.
Mr Ramachandran: But in this, that's not stated here, am I correct?
Mr Kosserkas: That's not included there, yes.
The only agreement referred to in evidence, other than the rebate agreement, was the Employment Contract, which makes no provision for long service leave being taken as annual leave.
It would appear that, at some time after 24 June 2011, the record which was exhibit 6 was amended to include an extra 240 hours, and I might speculate that may have been done to reflect an arrangement that Mr Kosserkas entered into with Reymer in relation to long service leave accrued before 15 March 2002 (and therefore not the subject of this claim) which he was unable to take. However the evidence is insufficient to prove that is what, in fact, occurred.
Given Mr Kosserkas bears the burden of proof, in the absence of that evidence, I cannot be satisfied that he is separately entitled to the 240 hours long service leave referred to in exhibit 8, and that it is not already encompassed by the claim for unpaid long service leave.
Accordingly, I prefer the evidence of exhibit 6 as to Mr Kosserkas' annual leave entitlements, and find that as at 24 June 2011 he was entitled to payment of $23,041 for annual leave calculated on 360.02 hours at $64 per hour.
Under s 23(1) of the Minimum Conditions of Employment Act 1993 (WA) Mr Kosserkas was entitled to annual leave for the number of hours he was ordinarily required to work up to a maximum of 152 hours.
I have found that Mr Kosserkas was required to work a 40 hour week or 160 hours per four week period. This exceeds 152 hours per week. Accordingly Mr Kosserkas was entitled to be paid annual leave at a rate of 152 hours leave per year, being 0.416 hours per day.
On that basis, I find that, for the period 25 June 2011 to 11 November 2011, Mr Kosserkas was entitled to a payment for annual leave of $3,727.36 calculated as follows:
140 days x 0.416 hours x $64 = $3,727.
By reason of the matters referred to in [81] - [90] above, I find that Mr Kosserkas is entitled to a total of $26,768 for annual leave being the total of amounts referred to in [87] and [90] above.
Total of the employment claim (excluding superannuation entitlements)
I have found that Mr Kosserkas is entitled to payment from Reymer of the following amounts:
(a)$66,560 for unpaid wages;
(b)$21,427 for unpaid long service leave entitlements; and
(c)$26,769 for unpaid annual leave entitlements.
By reason of the matters referred to in [92] above, I find that Mr Kosserkas is entitled to recover the sum of $114,756 from Reymer in relation to the employment claim.
Superannuation entitlements
There is no dispute that Reymer was obliged to pay superannuation on Mr Kosserkas' behalf at a rate of 9% per annum on any amount found to be unpaid wages.
It has been held that an employee whose contract of employment entitles him to superannuation contributions can enforce that entitlement in action for breach of contract and has standing to seek specific performance of the contractual entitlement to pay the outstanding contribution to his superannuation fund: Willis v Health Communications Network Ltd [2007] NSWCA 313 [79]. There was no dispute about this.
Exhibit 5 evidences that Reymer had not paid Mr Kosserkas' superannuation entitlements at a rate of 9% in the financial year ending 30 June 2010 in the amount of $8,499, or in the financial year ending 30 June 2011, in the amount of $10,167. That evidence was not challenged and I find accordingly.
I have found that Reymer did not pay Mr Kosserkas $66,560 in wages that were owing to him for the 26 week period from 13 May to 11 November 2011. This includes $48,640 for the 19 week period from 1 July to 11 November 2011. At a rate of 9%, I find that Reyner were obliged to pay superannuation on Mr Kosserkas' behalf in the amount of $4,377 for that period.
Accordingly, I find that Reymer are liable to pay Mr Kosserkas' nominated superannuation fund the amount of $23,043 being the total of the amounts referred to in [96] and [97] above.
Rebate agreement claim
Evidence
Mr Kosserkas
Mr Kosserkas said that the research and development offset was established by the Federal Government through the ATO, to encourage companies to spend money in eligible research and development entities.The ATO remitted the R & D tax rebate to a successful company once its tax return for a particular year had been assessed.[89]
[89] ts 79.
Mr Kosserkas said that in about July 2004, he and Mr Gold had discussions with Mr Paari about Mr Kosserkas and Mr Gold looking at the possibility of Reymer making an application to the ATO for the research and development offset, because they were looking for ways to fund Reymer. He said that Mr Paari asked Mr Kosserkas to investigate whether Reymer was eligible.[90] Mr Kosserkas said that Mr Paari said that 'upon Reymer receiving R and D offsets or tax concessions Arthur Gold and myself would each receive 5% of any successful claims Reymer made with the ATO'.[91]
[90] ts 80.
[91] ts 80.
Mr Kosserkas said that about two months later in September 2004, he told Mr Paari that Reymer may qualify. The following exchange took place:[92]
Mr Kosserkas: Mr Paari was very excited and he basically said that Arthur and myself had done a very, very good job in doing this and he confirmed what I had previously advised, your Honour, of the 5% each to be payable once we lodged our tax returns.
Mr Hershowitz: When you say 'he confirmed', what did he say to you, to the best of your recollection?
Mr Kosserkas: To the best of my recollection, out of every successful R and D claim by Reymer that Arthur Gold and myself would receive 5% each.
[92] ts 81.
Mr Kosserkas said that the application process was quite complex and that each year it was necessary to identify the projects the company had, and cost them out and identify if they complied with the legislation, and apply for registration of those projects, which process took about five months to complete.[93] Mr Kosserkas' role was to compile information provided by others, and he did some work on the process on a daily basis but was not able to identify how many hours work was involved per day.[94]
[93] ts 82.
[94] ts 82.
Mr Kosserkas' evidence was that the amounts he was entitled to receive in relation to the rebate agreement over the entire period after the agreement were as set out in the table below.[95] The documentary evidence was to the effect that the ATO credited to Reymer the R & D tax rebates on the dates referred to in final column of the table.[96]
[95] Exhibit 18.
[96] Exhibit 21.
Financial year
Rebate Amount
5% Rebate Amount
Running total
Date rebate amount credited by the ATO
2003/2004
$278,819
$13,940.95
24 March 2005
2004/2005
$368,546
$18,427.30
$32,368.25
21 December 2005
2005/2006
$349,584
$17,479.20
$49,847.45
7 December 2006
2006/2007
$353,373
$17,668.65
$67,516.10
29 February 2008
2007/2008
$346,987
$17,349.35
$84,865.45
2 December 2008
2008/2009
$358,303
$17,915.15
$102,780.60
14 October 2009
2009/2010
$724,553
$36,227.65
$139,008.25
24 September 2010
2010/2011
$479,339
$23,966.95
$162,975.20
29 November 2011
Mr Kosserkas said that he had received $100,000 from Reymer in September 2007, which payment was calculated at 5% of the amounts Reymer had received from the ATO for the R & D offset in the financial years 2003 to 2007.[97] He said that he had not received any payment since the payment in 2007.[98]
[97] ts 85.
[98] ts 85.
Mr Kosserkas conceded, on questioning in cross‑examination, and by the court, that the payment of $100,000 exceeded the amount calculated at 5% of the rebate for the years 2003 to 2007.[99] He said that they had done the calculations for the 2008 year, although the rebate had not been received.[100] Mr Kosserkas also said that the amount of $100,000 included $20,000 which he paid to Mr Gold, in relation to the agreement that he also receive 5%.[101] That is, the effect of his evidence was he had personally received $80,000 in September 2007.
[99] ts 151, ts 152.
[100] Exhibit 21; ts 152, ts 155.
[101] ts 155, ts 159.
Mr Kosserkas did not concede that, if the rebate agreement was as he alleged, the payment would have been paid to him on an annual basis after Reymer had received the refund from the ATO.[102] He said, in effect, that the payment was only made when Reymer's cash flow permitted.[103]
[102] ts 154.
[103] ts 162.
Mr Kosserkas disagreed when it was put to him that he had not told Reymer's directors about the payment in 2007, and said he had told Mr Paari and Mr Gold some time during 2007.[104] He later said in re‑examination that he 'definitely' discussed it with Mr Gold.[105] Mr Kosserkas said that Mr Paari would have annual discussions about 'the R & D' with Mr Gold and Mr Kosserkas.[106] He said each year he and Arthur Gold would look at the working capital of the company to see if it permitted payment of the success fee, after discussions with Mr Paari. He was, however, unclear about precisely when these conversations took place.
Mr Gold
[104] ts 162.
[105] ts 182.
[106] ts 162.
Mr Gold's evidence was that they had thought that Reymer was not entitled to the R & D tax rebate and that it was Mr Kosserkas who had found out that Reymer could be eligible.[107] He said that he had discussions about this with Mr Kosserkas, and Mr Paari attended some of these meetings.[108]
[107] ts 185.
[108] ts 185.
Mr Gold said that there were two or three meetings at which Mr Gold, Mr Kosserkas and Mr Paari discussed Mr Gold and Mr Kosserkas receiving a success fee if the company received the offset.[109]
[109] ts 185, ts 193.
Mr Gold's evidence about this was as follows:[110]
[110] ts 185 - ts 187.
Mr Hershowitz: And at any time was there anything discussed that you can recall regarding what would happen if Mr Kosserkas could get the R and D underway and if it was successful.
Mr Gold:Yeah, there was a - what's the word, there'd be a percentage awarded to me and Tom is we were successful - success fee is probably the word I'm looking for.
MrHershowitz: Well, what do you recall about that? Was there a meeting where this was discussed.
Mr Gold:We had about three general meetings at Reymer in the office about it.
Mr Hershowitz: Who is we?
Mr Gold:Myself, Paari and Tom.
Mr Hershowitz: Is that Paari Vell?
Mr Gold:Paari Vell, sorry.
Mr Hershowitz: Yes, and I know, do you have any idea when this might have been?
Mr Gold:I think it started around the end - might be the middle of 2004 roughly.
…
Mr Hershowitz: And doing the best you can, do you recall anything that was said at those particular meetings?
Mr Gold:Basically, how much we thought we'd get out of it, what was successfully a (sic)
Mr Hershowitz: What was said about that?
Mr Gold:From memory I think it was 5%.
Mr Hershowitz: But who said what?
Mr Gold:Paari said that if we can make it happen you can have a success fee out of the money.
Mr Hershowitz: Who was he talking to?
Mr Gold:Myself and Tom.
Mr Hershowitz: And did he mention how much that success fee would be?
Mr Gold:I think it was about 5% each. That was the figure I remember.
…
Mr Hershowitz: Now you mentioned that success fee of 5 per cent each. Do you recall whether that was discussed on more than the one occasion that you've told us about?
Mr Gold:I think it was discussed about three or four times.
Mr Hershowitz: Do you recall when that success fee would be - was to be paid? Was anything said about that?
Mr Gold:Only when the money came into our account from the success of the R and D fund.
Mr Hershowitz: How was the business travelling over the years?
Mr Gold:It was very up and down. The R and D grant started to make it work a little bit…
Mr Gold said he could not recall any particular dates on which these discussions took place.[111] He said that his recollection was he received two payments.[112] He could not remember how much he had received,[113] and said he thought it was about $45,000, maybe a bit more, but it was a long time ago.[114] He thought he would have received a payment in 2005.[115] Mr Gold said that Mr Paari was aware of the payments made.[116] In any event, Mr Gold said that he had authority to authorise the payments.[117] Mr Gold said Mr Paari never had a role in making payments for Reymer.[118]
[111] ts 194.
[112] ts 187.
[113] ts 189.
[114] ts 189.
[115] ts 189.
[116] ts 187.
[117] ts 187.
[118] ts 196.
Mr Gold said that he did 60% of the work involved in preparing the application each year, and Mr Kosserkas would have done 39% ‑ 45%.[119] He said that it involved 'months and months' of work.[120]
[119] ts 186.
[120] ts 195.
Mr Gold denied, when it was put to him that there was never an agreement for R & D success fees.[121] Mr Gold said, in effect, that he thought the figure shown in exhibit 23 as being owed to him, of $112,975, was less than the balance outstanding to him.[122]
[121] ts 189.
[122] ts 193; Exhibit 23 is a duplicate of exhibit 18, with additional notes.
Mr Gold said that he did not make a claim for a percentage of the offset after he left the company, because Mr Paari had been a good friend, he got on very well with Mr Paari's wife and daughter, and 'it just seemed like the wrong thing to do'.[123]
Mr Paari
[123] ts 196.
Mr Paari thought that Mr Kosserkas was involved in making applications for R & D tax rebates from 1993, 1994 or 1995 onwards, at which point Mr Kosserkas was working for OKA.[124] Mr Paari said the structure of the rebate kept being rearranged, presumably by the Australian Government, and that ultimately he had a firm of accountants, Ernst & Young, in to help.[125]
[124] ts 235.
[125] ts 237.
Mr Paari said that he did have a meeting in Perth where he asked Mr Kosserkas to investigate the possibility of making an application for the R & D tax rebate, however he did not know when this was.[126]
[126] ts 278.
Mr Paari denied he had ever agreed to Mr Kosserkas or Mr Gold receiving a success fee of 5% each or at all.[127] Mr Paari accepted that Mr Kosserkas and Mr Gold worked on the applications.[128] However, he said, in effect, that the work done by them in that respect was part of the normal scope of their work for which they were already being paid.[129] He said he considered it was part of their employment.[130] Mr Paari said that he had never had any discussion with Mr Kosserkas about that.[131]
[127] ts 240, ts 280.
[128] ts 239.
[129] ts 235, ts 280.
[130] ts 237.
[131] ts 238.
Mr Paari accepted that he had conversations with Mr Kosserkas and Mr Gold about the R & D tax rebate applications, but did not accept that he discussed the success fee.[132]
[132] ts 241.
Mr Paari accepted that the R & D tax rebates were a critical part of Reymer's cash flow and were critical to the company's survival.[133]
[133] ts 274.
Mr Paari said that he wrote a letter to Mr Kosserkas dated 20 April 2012 outlining issues arising from the audit that had been brought to his attention by KPMG.[134] It appeared that his evidence was that the letter had been drafted with reference to an interim report provided by KPMG, which was not in evidence.
[134] Exhibit 26.
The contents of that letter, which is exhibit 26, are as follows:
(a)The letter is addressed to Mr Kosserkas, and was signed by Mr Paari as director of 'Bhavya Holdings Pty Ltd';
(b)The purpose of the letter is stated to be to 'request information from you regarding a number of transactions KPMG has identified during their review of Reymer's financial affairs';
(c)The letter raises a number of queries including queries about transactions recorded in the Reymer general ledger;
(d)On page 1, under the heading 'Payments from account of Mr Vell Paari' the letter says:
The Reymer general ledger records two cash transactions on 27 September and 23 October 2007 totalling $102,000 of which, based on the description field, you appear to have been the recipient.
Table 1: General Ledger Extract
Date
Amount ($)
Details
Description
27/09/2007
100,000
Transfer Debit
Internet transfer loan AG
23/10/2007
2,000
Transfer Debit
Withdrawal – loan AG
1.Please supply an explanation of the nature of the payments and any supporting documentation that you may have.
(e)On page 3, under the heading 'Research & development', the letter says:
I believe that both Mr Gold and you are responsible for the submitting (sic) a claim to the Australian Tax Office for costs incurred relating to Research and Development. Reymer's general ledger reports a $150,000 cash withdrawal for a 'R & D success fee'.
5.Please provide an explanation of the nature, calculation and authorisation of the R & D success fee.
(f)The letter asks for a response to the queries raised within 21 days of receiving the letter.
Mr Paari said that Bhavya Pty Ltd was the company which owned Reymer.[135] He said that the letter was written after the audit by KPMG, and was based on what he had been told by KPMG.[136]
[135] ts 243.
[136] ts 249.
It was not in dispute that Mr Kosserkas did not respond to the letter.[137]
[137] ts 244, ts 267 (Mr Paari).
Mr Paari said that he found out about the $100,000 payment in KPMG's report.[138] He denied the payment was discussed with him in 2007.
[138] ts 282.
Mr Paari initially agreed that he became aware of the payment to Mr Kosserkas when KPMG pointed it out to him after September 2011 and by 2012.[139] Mr Paari then said that he only knew about a payment of $150,000 that had been made by Reymer in 2009, not a payment of $100,000 made by Reymer in 2007, and that he really was not sure whether KPMG had told him about the payment of $100,000.[140] Subsequently, Mr Paari accepted that KPMG had told him about a payment to Mr Kosserkas and Mr Gold of $150,000 appearing in Reymer's ledgers for an R & D success fee, and that he knew this in late 2011.[141] He said, however, that he thought that amount was paid in 2009 and not 2007.[142]
[139] ts 283.
[140] ts 284.
[141] ts 285.
[142] ts 244, ts 298, ts 299.
Mr Paari said in his evidence‑in‑chief that he did not know what the payment of $100,000 on 27 September 2007 referred to in exhibit 26 was for or who it was paid to.[143] He said that the initials in the description 'AG' may refer to 'Arthur Gold'.[144]
[143] Exhibit 26; ts 265.
[144] ts 266, ts 267.
Mr Paari said that he had conversations with Mr Gold and Mr Kosserkas about them putting in for R & D claims 'but in regards to this, giving the - what you may call it a successful claim, that was something I never agreed'.[145] English was clearly not Mr Paari's first language and it appears that his reference to 'a successful claim' was intended to be a reference to 'success fee'.
[145] ts 241.
Mr Paari said that he was not involved in paying creditors, or preparing the company accounts or records, and that Mr Gold was ultimately responsible for those things.[146]
Finding in relation to the rebate agreement claim
[146] ts 272.
There is no documentary evidence directly evidencing the existence of the rebate agreement. Over 14 years passed between the alleged creation of the rebate agreement and the witnesses giving evidence. Both Mr Kosserkas and Mr Gold left Reymer in 2011, at least eight years before they gave evidence. I must approach a finding based on such oral evidence with considerable caution, given the inevitable effect such lengthy delay will have on memory. However, in assessing that evidence, I may have regard to the evidence of subsequent conduct that reveals the existence of the agreement: Fazio v Fazio [2012] WASCA 72 [188] - [193].
Mr Kosserkas' evidence referred to in [99] - [107] above, was to the effect that there was an agreement between Mr Kosserkas and Reymer that in consideration of Mr Kosserkas undertaking work to prepare the R & D tax rebate applications each year, the defendant would pay to Mr Kosserkas 5% of any R & D tax rebate amount in each year Reymer was successful in obtaining the rebate.[147] There was nothing to suggest that Mr Kosserkas was not being honest in his recollection of the rebate agreement. He was firm in that evidence under cross-examination. In addition the evidence referred to in [131] ‑ [133] below, supports the existence of the rebate agreement. I find Mr Kosserkas' evidence about the rebate agreement was honest and reliable, and I accept that evidence.
[147] Substituted statement of claim dated 19 September 2019, par 4A.
Mr Gold's evidence referred to in [108] - [114] above supports a finding as to the existence of the rebate agreement. Mr Gold was an independent witness with no current connection to either Mr Kosserkas, or Reymer, and the CEO of Reymer. Whilst he said that he had decided not to pursue payment for himself under the rebate agreement, his reasons for doing so were personal and that fact does not undermine his evidence that the agreement was entered into. Whilst Reymer suggested in its closing submissions that there had been collusion between Mr Gold and Mr Kosserkas, this was not put to either of them in cross‑examination. I accept Mr Gold's evidence.
There is documentary evidence going to the existence of the rebate agreement after its formation and before Mr Kosserkas left Reymer's employment, in particular:
(a)Exhibit 18[148] identifies the amounts of the R & D tax offset received by Reymer for the 2004 to 2010 financial years, an amount to be received for the 2011 financial year, that $150,000 had been paid in '07/08' and identifies the balance outstanding at 30 June 2011 to Mr Kosserkas and Mr Gold. This document was identified by Mr Kosserkas to be a Reymer business record that he had prepared when he was Reymer's employee, at around 30 June 2011. He said that the purpose for creating the document was both to work out how much money Reymer owed him, but also as part of his research and development work file with Reymer. Exhibit 18 was tendered without objection;[149]
(b)Exhibit 26, which is the letter sent by Mr Paari to Mr Kosserkas dated 20 April 2012, refers to an entry in Reymer's general ledger reporting 'a $150,000 cash withdrawal for an R&D success fee',[150] contrary to the proposition put to Mr Kosserkas in cross‑examination that there was no record of such a fee being paid;
(c)Consistently with these documents Mr Gold's evidence referred to in [111] above was to the effect that he had received some payments pursuant to the agreement, although he could not now recall when or in what amount, that he had the authority to authorise those payments on Reymer's behalf, and that Mr Paari was aware of those payments;
(d)Neither exhibits 18 or 26 specify a date of the payment referred to therein, of $150.000. However the reference in exhibit 18 to '07/08' is consistent with a payment being made in September 2007. Whilst there is an entry in that portion of Reymer's general ledger that Reymer tendered in evidence,[151] to a payment of $150,000 on 28 October 2009, that payment appears on its face to be a payment to Reymer, rather than by Reymer, and is not described as an R & D success fee. Whilst exhibit 18 also refers to a payment of $100,000 on 27 September 2007, described as 'Internet transfer loan AG', that would appear to refer to Mr Gold, as Mr Paari assumed was the case; and
(e)The totality of the evidence in (a) - (d) above supports a finding, which I make, that it is more likely than not that payments totalling $150,000 were made by Reymer to Mr Kosserkas and Mr Gold in about September 2007, four years before Mr Kosserkas left Reymer's employment, and that this payment was identified in Reymer's general ledger as being for an R & D success fee.
[148] A further copy of which, with additional handwritten notes, is exhibit 23.
[149] ts 83, ts 84, ts 85.
[150] Exhibit 26, page 3.
[151] Exhibit 27, page 15.
Whilst Mr Paari referred to Reymer receiving rebates from the time Mr Kosserkas worked for OKA, he conceded that the structure of the rebate changed. He also conceded that he spoke to Mr Kosserkas in 2004 about investigating the possibility of making an application.[152] Mr Gold said, in effect, that prior to the discussions in 2004, they thought Reymer was not entitled to the R & D tax rebates. I accept this evidence, and the uncontroverted evidence of Mr Gold and Mr Kosserkas to the effect that the preparation of the necessary paperwork each year involved a considerable amount of work. I infer from this evidence that, at that time Reymer was not in receipt of R & D tax rebates, and the work associated with applying for the rebate in each year involved a significant addition to Mr Kosserkas' normal work duties.
[152] See [120] and [121] above.
I found Mr Paari's evidence concerning the existence of the rebate agreement to be unsatisfactory. He maintained his position that he had not agreed to Mr Kosserkas receiving a percentage of the R & D tax rebate, under cross‑examination, although he conceded that the work involved was very time consuming, that Mr Gold and Mr Kosserkas did most of that work, and the R & D tax rebates were critical to the success of the business, consistent with the evidence of both Mr Kosserkas and Mr Gold.[153]
[153] ts 279 - ts 281 (Mr Paari).
The effect of the evidence of Mr Gold and Mr Kosserkas was that Mr Paari knew of the payments that had been made to them at the time they were made. Mr Paari denied such knowledge.[154]
[154] ts 281.
I have no reason to believe Mr Paari was deliberately untruthful in his evidence. However, a great deal of time has passed since the discussions relied on in support of the rebate agreement are alleged to have occurred, and I have already referred to the inevitable effect that time will have had on memory. Mr Paari was vague and imprecise about the details of the operation of Reymer and the contents of the accounts, consistent with the evidence, which I accept, about his relatively limited involvement in the company's operations in Perth. He was particularly vague and uncertain in his evidence about when he became aware of the payment to Mr Gold and Mr Kosserkas that was apparently recorded in the Reymer records given to KPMG in 2011.
In light of the matters referred to in [134] - [136] above I do not accept Mr Paari's evidence is reliable.
Leaving aside Mr Paari's evidence, the evidence that weighs against existence of the rebate agreement is that the payment of $150,000 in September 2007 was apparently an amount greater than that to which Mr Kosserkas and Mr Gold were then entitled under the rebate agreement.
The plaintiff pleads in par 8A of the statement of claim as follows:
In September 2007, the defendant through Mr Paari paid to the plaintiff the sum of $100,000 being the R & D fee share owed to the plaintiff at that time. The plaintiff's fee share for the financial years 2009/2010, 2010/2011, amounting to $60,194.55 remains unpaid.
Contrary to that pleading, the effect of Mr Kosserkas' evidence referred to in [105] above was that, whilst he received, after discussion with at least Mr Gold, a net amount of $80,000 in September 2007. He was, however, attempting to recall these details some 12 years after the event.
There is evidence in Reymer's general ledger of a payment to Mr Kosserkas on 26 September 2007 of $82,911.78.[155] Although this amount is similar to the net amount Mr Kosserkas says that he had received, there is no evidence what that payment was for, and in particular, if it was related to the rebate agreement.
[155] Exhibit 27, page 5.
On the evidence, the amounts said to be owing for the 2004, 2005 and 2006 financial years were apparently not paid at all until sometime in the 2007/2008 financial year, consistent with Mr Kosserkas' evidence that the payment was only made when Reymer's cash flow could support it.
The combined amount claimed to be owing to Mr Kosserkas and Mr Gold in relation to the rebates for the 2003/2004 to the 2005/2006 financial years was $99,694, to the 2007/2008 year was $135,032, and to the 2008/2009 financial year was $169,730. If Mr Kosserkas received $80,000 of the total payment of $150,000, and Mr Gold received the balance of $70,000, they would each have received somewhat more than their entitlement at that time, as Mr Kosserkas appears to have conceded in his evidence, although less than their entitlement by the end of the 2008/2009 financial year.
Whilst there is no clear explanation for this, I have accepted that Mr Paari was told of payments being made to Mr Kosserkas and Mr Gold at the time they were made. I consider that this apparent inconsistency does not undermine the evidence that supports a finding that the agreement existed, referred to in [130] - [133] above.
Accordingly I find that, pursuant to the rebate agreement, Reymer was obliged to pay Mr Kosserkas a sum equal to 5% of the rebates received by Reymer in the financial years ending 30 June 2010 and 2011. The evidence referred to in [41] and [103] above evidences, and I find, that this totals $60,194.
Findings in relation to the cross claim and the Limitation Act defence
Whilst it is not necessary, in light of the above findings, to determine the counterclaim, I have considered that matter.
Although Reymer bears the burden of proof that the payment was unauthorised, had I accepted Mr Paari's evidence that the rebate agreement was not entered into, I would have had little difficulty in finding that the payment of $100,000 was repayable to Reymer in circumstances where on the plaintiff's own case, it was paid pursuant to that agreement. However, in my view that claim, had it succeeded, would have been statute barred.
The Limitation Act 2005 (WA) provides as follows:
(a)Subject to the provisions of div 3 of the Act, which includes s 27 and s 38 of the Act, an action on any cause of action cannot be commenced if six years have elapsed since the cause of action accrued: s 13.
(b)An action in equity cannot be commenced after the later of the elapse of six years after the cause of action accrued, or the elapse of three years since time started running on equitable principles: s 27(2).
(c)If the failure to commence an action is attributable to fraudulent or other improper conduct, the court may extend the time for commencing an action up to three years from when the action ought reasonably to have been commenced: s 38(2).
It was not in dispute that the counterclaim is an equitable claim and that s 27 of the Act applies, potentially extending the limitation period.[156]
[156] Plaintiff's closing submissions dated 17 February 2020, par 107.
Reymer pleads, that Mr Kosserkas breached his fiduciary duty as the financial controller and alternative director in relation to the payment of $100,000.[157] The reference to 'the payment of $100,000' is a reference to the plaintiff's pleading, that Reymer paid $100,000 to Mr Kosserkas in September 2007, being the R & D tax rebate success fee owed to Mr Kosserkas at that time.[158] In its particulars, Reymer refers to the breaches of duty occurring in September 2007.
[157] Further amended defence and counterclaim dated 29 November 2019, par 10 - par 23.
[158] Substituted statement of claim dated 19 September 2019, par 8A.
In the course of the hearing Reymer's counsel raised the issue that the relevant payment was one of $150,000 made 28 October 2009. As I understand the argument which is made in Reymer's closing submissions,[159] it is submitted that:
(a)Mr Paari based the contents of the 2012 letter on an interim audit report of KPMG, which, consistently with the contents of the 2012 letter, referred to a payment of $100,000 on 27 September 2007 and to a payment of a $150,000 cash withdrawal for a 'R&D success fee'.
(b)The only payment of $150,000 from the company's accounts was made on 28 October 2009, and the effect of Mr Paari's evidence was that:
(i)he understood that the R & D transaction related to the 2009 payment, and that, accordingly the request for an explanation in the 2012 letter referred to that payment and not the 2007 payment; and
(ii)he did not become aware of the September 2007 payment until it was pleaded in the amended statement of claim, that is after that pleading was filed on 8 June 2016.
[159] Defendant's undated closing submissions.
Mr Paari's evidence was not clearly to the effect that he believed the R & D transaction referred to in exhibit 26 was made in 2009, and that the documentary evidence does not evidence such a payment, as I have said in [141] - [143] above. Neither is there any evidence that Mr Paari only became aware of the September 2007 when it was pleaded in June 2016. However, even if that were the effect of the evidence, it does not assist Reymer.
Leaving aside the finding I have made that Mr Paari was made aware of the payments to Mr Gold and Mr Kosserkas at the time they were made, the evidence supports a finding, which I make, that on the balance of probabilities, Reymer, by Mr Paari, understood as at 20 April 2012, when he wrote to Mr Kosserkas, that Reymer had made a payment to Mr Kosserkas and Mr Gold in the sum of $150,000, described in the books as an 'R & D success fee'. This was the result of information he received from KPMG in the interim audit. It was Mr Paari's evidence that no payment for such a success fee was authorised. Whether he understood it to be a specific transaction of $100,000 to Mr Kosserkas in September 2007 or $150,000 to the two men in 2009, Reymer, by Mr Paari, was aware, or ought reasonably to have been aware, that it had a claim for an unauthorised payment in excess of the amount of $100,000 claimed in the counterclaim, as at 20 April 2012.
Accordingly, if the cause of action accrued on 27 September 2007, and Reymer, by its director, first became aware of the unauthorised payment to Mr Kosserkas before 20 April 2012, the limitation period expired at the latest under s 27(2) of the Act on 19 April 2015, being three years after time started running on equitable principles. Even allowing for, say six months after the letter was written, to obtain legal advice, the limitation period expired on 19 October 2015.
Even if the action accrued on the later date of 28 October 2009 the limitation period expired on 27 October 2015, being six years after the cause of action accrued.
The writ was filed on 16 November 2015 and Reymer filed its appearance on 1 December 2015. Reymer became a party when the writ was issued rather than when the appearance was filed.[160] Accordingly, the counterclaim is deemed, by the operation of s 81(2) of the LSA, to have been commenced on 16 November 2015.
[160]Re Bias Boating Pty Ltd [2017] NSWSC 1524 [12] (Brereton J).
Accordingly, as at 16 November 2015 the counterclaim was out of time, whichever date on which the cause of action accrued is calculated.
Reymer's counsel seeks an extension of time in the event that I find that the limitation period expires. However, on the basis of what I have already said about the state of the evidence, that I would not exercise the discretion to extend time under s 38 of the Act. In particular there is no evidence of any fraudulent concealment, by Mr Kosserkas or anyone for whom he was vicariously liable, contributing to Reymer's failure to commence the claim for repayment of the $100,000 within time. Whilst an allegation has been made that Mr Kosserkas did not record the payment for the R & D fee in Reymer's books, that allegation is not borne out by the evidence.
Conclusion
In relation to the employment claim, I find that:
(a)Mr Kosserkas is entitled to judgment in the sum of $114,756 for unpaid wages, long service leave and annual leave entitlements; and
(b)Mr Kosserkas is entitled to an order that Reymer pay $23,043 to Mr Kosserkas' nominated superannuation fund, the Kosserkas Super Fund.
In relation to the rebate agreement claim I find that Mr Kosserkas is entitled to judgment in the sum of $60,194, and interest.
The issue of the precise quantification of the interest owing was adjourned pending determination of the amounts, if any, to which Mr Kosserkas was entitled. Accordingly, I will hear from the parties as to that calculation, and the appropriate orders.
The counterclaim is dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
JG
Associate to Judge Vernon5 NOVEMBER 2020
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