Kwik & Swift Co Pty Ltd v Shawyer - [2002] WASC 14

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: KWIK & SWIFT CO PTY LTD -v- SHAWYER [2002] WASC 14

CORAM: MASTER BREDMEYER

HEARD: 24 JANUARY 2002

DELIVERED : 1 FEBRUARY 2002

PUBLISHED : 4 FEBRUARY 2002

FILE NO/S: COR 445 of 2001

BETWEEN: KWIK & SWIFT CO PTY LTD (ACN 079 665 008)
Plaintiff
AND
ALAN KEITH SHAWYER
Defendant

Catchwords:

Statutory demand - Offsetting claim - Employer's cross-claim against an employee for failure to give proper notice and for negligence in the performance of his work - Whether such a cross-claim can be a genuine cross-claim when an employer is prohibited by statute from deducting such cross-claims from the worker's pay

Legislation:

Corporations Law, s 459G, s 459H(5)

Minimum Conditions of Employment Act 1993, s 17A, s 17B, s 17D

Result:

Ruling on point of law made

Category: A

Representation:

Counsel:

Plaintiff: Mr M D Cuerden
Defendant: Mr M C Hotchkin

Solicitors:

Plaintiff: Gary Massey & Associates
Defendant: Hotchkin Hanly

Case(s) referred to in judgment(s):

BGC (Australia) Pty Ltd v Phippard [2001] WAIRC 03987
Conti‑Sheffield Real Estate v Brailey (1992) 72 WAIG 1756
Equuscorp Pty Ltd v Perpetual Trustees WA Ltd (1997) 15 ACLC 985
John Shearer &Arrowcrest Group Pty Ltd v Gehl Co (1996) 14 ACLC 147

Case(s) also cited:

Nil

MASTER BREDMEYER: I am asked to rule on a preliminary point of law. The plaintiff has applied to set aside a statutory demand issued by the defendant. The plaintiff used to employ the defendant, until the defendant left on 2 October 2001. The defendant issued a statutory demand against the plaintiff for:
18 days' annual leave $2,645.71
1 week's gross pay $ 735.00
Total$3,380.70
________
The plaintiff employer has applied to set aside the demand on the basis that it has a genuine dispute and/or an offsetting claim, details of which are as follows:
1.It is said that the employee gave insufficient notice of termination. He gave notice on Tuesday, 29 October or Wednesday, 30 October 2001 and quit on the Friday, 2 November 2001; ie, three or four days' notice. The employer says he should have given three weeks' notice.
2.It is said that the employee performed his work negligently. He failed to reconcile pallets held by the employer and this failure cost the employer $26,000, which he had paid out to Hi Trans, the owner of the pallets.
3.It is said that the employee transferred a company mobile account into his own name against the orders of the employer. This was a loss to the employer. The loss is not quantified.
Two other minor claims are set out at pars 27 and 28 of Mr Hughes' affidavit.
The preliminary point raised by the defendant's counsel, Mr Hotchkin, is that by virtue of s 17B and s 17D of the Minimum Conditions of Employment Act 1993(WA) and the authorities of Conti‑Sheffield Real Estate v Brailey (1992) 72 WAIG 1756 and BGC (Australia) Pty Ltd v Phippard [2001] WAIRC 03987, an employer cannot deduct from an employee's wages sums which it says are due to it unless (1) the employee has authorised that in writing, or (2) the written contract of employment permits it, or (3) required to do so by a court order.
The policy behind these sections is to protect the worker. He has to be paid in full. If the employer has a claim against him, for example, for lack of proper notice to quit, it must sue for it. It cannot deduct the sum from the wages due. Incidentally, "wages" are defined under s 17A of that Act to include money or anything given as a recompense, reward or remuneration. Those words are wide enough to include annual leave.
The two cases cited support the argument. There is no case dealing precisely with the problem before me of wages due to an employee, cross‑claims by the employer, and a statutory demand.
"Offsetting claim" is defined in s 459H(5) of the Corporations Law to mean:
"A genuine claim that the company has against the respondent by way of counterclaim, set‑off or cross‑demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates)."
The plaintiff relies on John Shearer &Arrowcrest Group Pty Ltd v Gehl Co (1996) 14 ACLC 147 and Equuscorp Pty Ltd v Perpetual Trustees WA Ltd (1997) 15 ACLC 985.
In the former case, the defendant issued a statutory demand against the plaintiff on a dishonoured bill of exchange. The trial Judge had said that an offsetting claim of damages for misleading and deceptive conduct could not be raised against a dishonoured bill of exchange on analogy with the common law that an offsetting claim for unliquidated damages is no defence to a claim on a dishonoured bill. The Full Court of the Federal Court said that a misleading and deceptive conduct claim could be an offsetting claim to a statutory demand based on a dishonoured bill. The Court said, at page 152:
"The word 'cross‑demand' is a word of considerable width. While the words 'counterclaim' and 'setoff' are technical words, the meanings of which are confined, the same is not true of the word 'cross‑demand'."
The Court, at 153, said:
"There can be no doubt that a claim for damages under the Trade Practices Act for breach of an implied contractual term will satisfy the description of a cross‑demand and thus be an off‑setting claim, whether or not it could be relied upon as a defence by way of counter‑claim or set‑off in proceedings on a bill of exchange on which the person claiming damages is liable.
The policy behind Division 2 of Part 5.4 of the Law supports the interpretation. Failure to comply with a statutory demand is taken to be evidence of insolvency. It is for that reason that application may be made to the Court to set aside a statutory demand in circumstances where the person against whom the demand is made has a genuine cross‑demand, at least equal to the amount of the sum demanded from him or her. If it should turn out that there was a real cross‑demand of equal amount to the sum referred to in the statutory demand, the company failing to comply with the statutory demand would be wound up in circumstances where clearly it was not insolvent and where a proof of debt from the person giving the statutory demand might well be rejected in liquidation because of the existence of a set‑off: cf Gye v McIntyre (1991) 171 CLR 609."
The plaintiff employer has breached s 17D of the Minimum Conditions of Employment Act. When Mr Shawyer left its employ, it failed to pay him one week's pay, ie, up to the date he left, and 18 days' leave pay. It did so because it says it has offsetting claims against him which exceed those sums. In failing to pay him his full pay, the plaintiff breached the Act. I am not familiar with the Act, but maybe the plaintiff employer could be prosecuted. The defendant, Mr Shawyer, can sue for these outstanding sums in the Local Court. Maybe he can sue for them in the Industrial Relations Commission. I do not know. But the non‑payment is a fact. It has happened. Mr Shawyer now wants to recover the moneys due. He has chosen to issue a statutory demand under s 459G of the Corporations Law. He has chosen that procedure, and by s 459H I consider the defendant is entitled to resist if it can raise a genuine offsetting claim. I consider its offsetting claims can be raised. For example, it could sue in the District Court and get a judgment which exceeds Mr Shawyer's claim and could, by court order, get the one offset against the other. It could be a race. The defendant could sue in the Local Court for unpaid wages and, because of s 17D, the employer would have no defence. Mr Shawyer would get judgment. But the plaintiff employer could also sue Mr Shawyer in the District Court on its claims. If it got judgment, the Court would, by order, offset the two judgments.
If there is any conflict between the two sections, s 459H of the Corporations Law and s 17D of the Minimum Conditions of Employment Act, s 459H must prevail in the corporation's jurisdiction. Mr Shawyer has chosen to invoke this jurisdiction and I consider he is stuck with the sections of the Corporations Law which include the wide ambit given to the meaning of "cross‑claim" under s 459H. If he chose to sue in another jurisdiction, in the Local Court, for example, s 17D would prevail. Section 459H would have no application.
The defendant's application on this preliminary point will be dismissed.