Lavert Pty Ltd v Boyd
[2013] NSWDC 319
•08 August 2013
District Court
New South Wales
Medium Neutral Citation: Lavert Pty Ltd v Boyd [2013] NSWDC 319 Hearing dates: 2, 3, 4 and 5 October 2012; 13 November 2012; 4 December 2012; 8 February 2013; 12 April 2013; 17 May 2013; 5 June 2013 (submissions) Decision date: 08 August 2013 Jurisdiction: Civil Before: Gibson DCJ Decision: (1) Judgment for the defendant against the plaintiff.
(2) Judgment for the cross-claimant against the cross-defendant.
(3) Liberty to the cross-claimant to bring in Short Minutes of Order reflecting the mathematically agreed sum, inclusive of interest, in relation to the cross-claim.
(4) Plaintiff/Cross-defendant pay defendant/cross-claimant's costs.
(5) Liberty to restore in relation to costs and interest.
(6) Exhibits retained for 28 days.
Catchwords: CONTRACT - claim by employee for unpaid superannuation, holiday pay and long service leave - whether plaintiff had standing to bring a claim for unpaid superannuation (Akmeemana v Murray [2009] NSWSC 979) - whether District Court had jurisdiction to hear a claim for unpaid superannuation - claim by employee for unpaid profit share - cross-claim asserting profit share payments made under a mistake of fact - whether defendants/cross-claimant entitled to raise unpleaded challenge to jurisdiction - whether defendants/cross-claimant should be granted leave to amend during the hearing Legislation Cited: Corporations Act (Cth)
Fair Work Act 2009 (Cth), ss 26, 27, 548
Industrial Relations Act 1966 (NSW)
Superannuation Guarantee (Administration) Act 1992 (Cth)
Superannuation Guarantee Charge Act 1992 (Cth)Cases Cited: Akmeemana v Murray [2009] NSWSC 979
Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175
Australia & New Zealand Banking Group Ltd v Westpac Banking Corp (1988) 164 CLR 662
David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353
Hookway v Racing Victoria Ltd (2005) 13 VR 444
Insight Oceania Pty Ltd v Philips Electronics Australia Ltd [2008] NSWSC 710
Kirby v Sanderson Motors Pty Ltd (2001) 54 NSWLR 135
Lee v Keddie [2011] NSWCA 2
McGrath v Sturesteps; Sturesteps v HIH Overseas Holdings Ltd (in liq) (2011) 81 NSWLR 690
Moore v National Mutual Life Association of Australasia Ltd [2011] NSWSC 416
Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116
O'Halloran v Legal Profession Complaints Committee [2013] WASCA 59
TRA Global Pty Ltd v Kebakoska [2011] VSC 480
Waddell v mathematics.com.au Pty Ltd (No 2) [2013] NSWSC 988
Ware v Amaral Pastoral Pty Ltd (No 5) [2012] NSWSC 1550
Watson v Meyer [2013] NSWCA 243Texts Cited: - Category: Principal judgment Parties: Plaintiff: Lavert Pty Ltd
Defendant: Paul BoydRepresentation: Plaintiff: Mr T Saunders
Defendant: Mr G A Rich
Plaintiff: Turks Legal
Defendant: Byrnes & Cox Lawyers
File Number(s): 2010/101340 Publication restriction: None
Judgment
The plaintiff (Lavert Pty Ltd, hereafter "Lavert"), by amended statement of claim filed on 26 March 2012, seeks reimbursement of profit shares and other non-salary sums paid to the defendant ("Mr Boyd"), a former employee of Lavert, made on 17 September 2009. Mr Boyd brings a cross-claim for unpaid superannuation, unpaid amounts of profit share payments, unpaid long service leave and unpaid holiday pay which he claims have been outstanding since the date of his resignation as an employee.
It is not in dispute that:
(a) During Mr Boyd's employment, Lavert's superannuation contribution was either not paid at all or paid in arrears after requests from Mr Boyd, including the sum of $32,050 paid after this litigation was commenced;
(b) Whatever Mr Boyd's profit share arrangement may have been, any such payments were also paid in arrears, and only after he made requests; and,
(c) The sum of $11,500 for unpaid annual leave is agreed to be outstanding (defendant's submissions, paragraph 54).
Mr Boyd cross-claims for his unpaid superannuation, profit share, long service leave and holiday pay.
An overview of the issues in the pleadings
Lavert's amended statement of claim seeks:
(a) Return of the $80,000 paid to Mr Boyd on 17 September 2009 on the basis that it was paid "by mistake"(paragraph 8);
(b) Repayment of $62,500 in respect of bonus payments;
(c) Repayment of an additional $64,068.56 for payments made by Lavert in relation to accommodation, credit card debts, wedding expenses and holiday costs made to Mr Boyd during his employment with Lavert.
The defence pleads that the Lavert is estopped from disputing these payment (paragraph 7) and that, if such payment was made by mistake (which is denied), there was no unjust enrichment (paragraph 8). The cross-claim seeks amounts calculated to represent the outstanding superannuation, holiday pay, long service leave and profit sharing as particularised above. The defence to the cross-claim is one of denial or (in paragraphs 12 and 13) of sufficient payment or overpayment.
The claim and cross-claim effectively form part of the same transaction. Both parties ask me to interpret the contract they made with each other, including but not limited to the circumstances in which Lavert paid Mr Boyd $80,000.
Although during the evidence allegations of misrepresentations or misleading and deceptive conduct were made, no cause of action based upon such allegations has been pleaded. There is no doubt that Mr Boyd, on any reading of the facts, was not paid significant entitlements from his work, either on time or at all, in circumstances which do not reflect any credit on Lavert or on Mr Blazevic, the sole director.
There is no submission that there was any implied term of good faith, although some of Lavert's submissions appear to suggest this. In Insight Oceania Pty Ltd v Philips Electronics Australia Ltd [2008] NSWSC 710 Bergin J explains (at [175]) the reluctance of courts to imply a term of good faith into the contract:
"[175] In Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd, Finkelstein J did not take the "major step" of the implication across the whole spectrum of the law of contract but limited it to "commercial contracts": at [64]. The appeal from his Honour's decision was dismissed (2006) 230 ALR 56. The Full Court of the Federal Court (Finn and Sundberg JJ; and Emmett J) did not deal with this point, other than Emmett J simply referring to his Honour's finding (at 105). I came to the conclusion in 2006 that commercial contracts are not a class of contracts that, as a legal incident, have an implied obligation of good faith: Australian Hotel Assn (NSW) v TAB Limited [2006] NSWSC 293 at [78]. I remain of that view. As Gyles J said in Council of the City of Sydney v Goldspar Australia Pty Ltd at 499 para [168]: "The best way for a single judge to travel through this thicket is to concentrate upon the particular contractual provision in question, the particular contract, in the particular circumstances of the case"."
The procedural history of the claim and cross-claim
The conduct of these proceedings by the plaintiff has been unsatisfactory. This claim and cross-claim were previously listed for hearing on 28 March 2012. The statement of claim upon which these proceedings were set down for hearing was filed in court on 26 March 2012, during an application by Lavert to vacate the first hearing date of 28 March 2012. This application, made by reason of late amendments to the statement of claim and the need to obtain further affidavit material, including an affidavit from Lavert's accountant, did not result from unforeseen events, but from a repleading of the claim and the filing of additional material which, on any view, should have been before the court for the first hearing.
The hearing date was accordingly vacated, with costs awarded against the plaintiff, and after further directions the matter was listed for this hearing before me. An amended statement of claim was filed by the plaintiff on 17 July 2013. Those amendments amounted to a substantial repleading of the claim.
On the first day of the hearing the plaintiff made a fresh application to amend its pleadings to plead that one of the sums claimed in the amended statement of claim of 17 July, namely the sum of $80,000, was either in part or in whole a loan. My reasons for rejecting this application are set out below.
Further delay occurred when the hearing of the proceedings had to be adjourned to enable Mr Boyd to meet an unpleaded claim that this court does not have jurisdiction to hear claims for unpaid superannuation. Lavert's final submissions on this issue were not received until 5 June 2013.
The plaintiff's application to amend its pleadings on the first day of the hearing
The previous hearing date, 28 March 2012, was vacated only two days beforehand, by reason of substantial non-compliance by the plaintiff with orders of the court. An amended statement of claim was filed in court. The contents of that document, as well as the need for affidavits by Mr Blazevic and Mr Bridges, resulted in Truss DCJ, the List Judge, vacating the hearing date of 28 March 2012 and making the following orders on 26 March 2012:
"1/ vac the hg of the 28.3.12. 2/ extend to today time for ptf/cross-def to serve aff's of ivan blazevic sworn 24.6.11 and micheal george bridges sworn 14.3.12. reserve any questions as to admissability for the trial judge. 3/ leave to ptf/cross-def to serve by 11.4.12 a further aff from Ivan Blazevic in relation to the DVD evidence exhibited at (124) to his aff by the 14.3.12. 4/ def/cross-claimant to serve any evidence in reply by 6.6.12. 5/ stand over for directions to the 13.6.12 9.30am before the list judge. 6/ leave to ptf/cross-defendant to rely on amended statement of claim filed in court (parties say was previously filed but not on file). 7/ def/cross-claimant to file/serve defence to amended statement of claim within 28dys. 8/ ptf/cross-defendant to file/serve defence to cross claim within 28dys. 9/ order ptf/cross-def to pay def/cross-claimants costs of motion and costs thrown away by vacation of the hearing date."
The statement of claim was amended on 26 March 2012 to increase the claim from $165,347.72 to $183,035.36 and to change the basis upon which Lavert's bonus was said to be payable to Mr Boyd in order to reflect the terms as identified by Mr Boyd (clause 3A). The claim then recited at paragraph 8 that the payment of $80,000 was made by mistake as follows:
"8. The payment of $80,000 was made by Lavert by mistake:
(a) The payment was intended by Lavert to be on account of its obligation to pay bonuses to Mr Boyd.
(b) The total of the bonuses which Lavert was obliged to pay Mr Boyd in respect of the 2006 - 2009 financial years was $80,000.00.
(c) At the time of the payment of $80,000 Lavert had already paid to or for Mr Boyd at Mr Boyd's request, amounts totalling $126,668.56.
(d) At the time of the payment of the $80,000 there was no amount owing by Lavert to Mr Boyd in respect of the bonuses."
The statement of claim then pleads in paragraph 10 that a further payment of long service leave of $23,146.15 was made by mistake for the following reasons:
"11. The LSL [Long Service Leave] payment was made by Lavert by mistake:
(a) The LSL payment was intended by Lavert to be the monetary value of what it believed at the time to be the leave due to Mr Boyd by operation of the Long Service Leave Act 1955.
(b) The LSL payment was calculated by Lavert as being the monetary value of leave due to Mr Boyd by operation of the Act.
(c) Mr Boyd was not due any payment under the Act."
On this basis, Lavert claimed the sum of $163,906.60.
However, the amended statement of claim filed on 17 July 2012, which purported to change a total claimed of $165,347.72 to $129,428.85, made further changes to the sums claimed, the terms of agreement and the amount the plaintiff was obliged to pay.
Despite the number of times the plaintiff had had the opportunity to amend the pleadings, and the circumstances in which the hearing was vacated so close to the trial, the plaintiff sought to amend yet again on the first day of the hearing, in circumstances where no effective prior notice had been given to the defendant.
A further application by Lavert to amend
On the first day of the hearing before me, Lavert sought leave to file a Further Amended Statement of Claim which provided in paragraph 8A and 8B as follows:
"8A. Alternatively, the payment of $80,000 was a loan by Lavert to Mr Boyd to the extent that it exceeded the amount due to Mr Boyd under the agreements referred to in paragraphs 3 and 3A.
8B. In the premises, the whole of the $80,000 exceeded the amount due to Mr Boyd under the agreements referred to in paragraphs 3 and 3A and was and has continued to be due and payable by Mr Boyd to Lavert."
Mr Saunders, counsel for the plaintiff, stated that the claim was "a new cause of action" and "an alternative cause of action" to the principal cause of action, namely a claim for "money he [sic] had and received" (T 3). This additional claim would be, he said, supported by affidavit material (T 4), although he conceded that the relevant affidavit material had been served in June 2011.
Mr Blazevic's first affidavit of 24 June 2011 deposes to a conversation with Mr Boyd. Mr Blazevic does not say in this conversation that the whole $80,000 payment was a loan, but that if it is an overpayment, Mr Boyd could treat any overpayment as a loan (the inference being that any such overpayment need not be repaid).
Mr Boyd had responded to that alleged conversation in his affidavit by denying it.
Mr Blazevic also stated in his email of 30 October 2009 that the whole of the $80,000 was a loan. Mr Boyd replied stating that it was not a loan. Mr Boyd had resigned at this stage, and the relationship between them was not cordial.
The first problem with the proposed pleading of the "loan" is its lack of clarity. The payment of $80,000 was made in two cheques, one of which is made payable to Mr Boyd and the other to Mrs Boyd. The language relied upon by Mr Blazevic was his statement that he was going to make a payment and "if it's an overpayment then the amount that it's an overpayment will be a loan from InVogue". In other words, the sum of money which was proposed to be a loan would relate to the overpayment (if there was one) presumably against further bonus entitlements.
The email of 30 October is written after the breakdown of the relationship between the two men. The claim that the whole $80,000 was a loan contradicts Mr Blazevic's account of this earlier conversation.
There is no other evidence supporting this claim of a loan (such as corporate records of the loan), with one exception - at some stage, Mr Blazevic wrote the cheque butt of $40,000 cheque payable to Mrs Boyd (but not Mr Boyd) that this cheque was a "loan".
The failure to discover or produce any documentation in relation to this loan, in the form of company minutes or tax returns, and the resolution of issues by further and better particulars are difficult issues to contend with on the first day of the hearing, for the reasons explained by the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175.
The second problem which the plaintiff faces is that no explanation is offered for this substantial change to the pleadings on the day of the hearing. This is not a case where the possibility of part of the whole of this sum being a loan was not considered before the case commenced; the issue of whether or not there was a "loan" conversation was already set out in the affidavits. Some explanation for the circumstances in which an amendment of this kind was proposed on the day of the hearing would have been required: Aon Risk Services Australia Ltd v Australian National University, supra, [102]-[106].
The High Court in Aon Risk Services Australia Ltd v Australian National University, supra, warned (at [103]):
"[103] The fact that an explanation had been offered for the delay in raising the defence was regarded as a relevant consideration in J L Holdings. Generally speaking, where a discretion is sought to be exercised in favour of one party, and to the disadvantage of another, an explanation will be called for. The importance attached by r 21 to the factor of delay will require that, in most cases where it is present, a party should explain it. Not only will they need to show that their application is brought in good faith, but they will also need to bring the circumstances giving rise to the amendment to the court's attention, so that they may be weighed against the effects of any delay and the objectives of the Rules. There can be no doubt that an explanation was required in this case."
Where a hearing date has already been vacated on one occasion by reason of a plaintiff's amendment as is the case here, the court will be particularly reluctant to consider an application for further amendment in circumstances which may endanger the hearing date. In Lee v Keddie [2011] NSWCA 2, the New South Wales Court of Appeal dismissed an appeal from a judgment of Nicholas J refusing the plaintiff's leave to amend a Reply some three months prior to the hearing in circumstances where the court was satisfied that the contents of the material were in fact already known to the plaintiffs, and where the plaintiffs had already sought to vacate a prior hearing date by reason of unreadiness due to the plaintiffs' senior counsel having to withdraw by reason of a conflict of interest.
The present situation is a far more extreme example than Lee v Keddie, supra. This is a change to the statement of claim, made on the day of the hearing, rather than several months beforehand, in relation to events occurring in 2009, where the relevant material has been known to the plaintiff and Mr Blazevic at all relevant times.
Mr Saunders, counsel for the plaintiff, told the court:
"There's no explanation I could provide to your Honour as to the lateness. The question is prejudice, with respect." (T 10)
On enquiry from me, Mr Saunders said that the error was "oversight" by his instructing solicitor.
One of the issues raised by Mr Saunders, for the defendant, was that while the cheque butt relating to the $40,000 payment to Mr Boyd contained no note of the document being a loan, the cheque butt for Mrs Boyd contained the word "loan" on it. The fact that this was not written on the cheque butt is not referred to in Mr Blazevic's 24 June 2011 affidavit (although the conversation in which he said any overpayment was a "loan" is included), but it is referred to in his affidavit of 14 March 2012 (at paragraph 60). There was no evidence as to when this word was written on the cheque butt. Mrs Boyd's understanding of whether or not the amount in question was a loan could have been of some significance (T 11-13), as would the evidence of the plaintiff's accounting staff, if this had been noted by them as a "loan" in company records.
Mr Rich said prejudice was a significant issue for his client. He had had no opportunity to speak to Mr Boyd. The first opportunity he had had to discuss the issue with him at all had been on the morning of the first hearing day, which was the next working day after long weekend. His solicitor had simply received an email at 9:25pm on the Saturday of the long weekend (T 15) advising of the proposed amendment. Mr Rich told the court that he was dealing with the application on the run.
I gave the parties a short adjournment so that each side could seek instructions as to whether, having regard to the lateness of the issue being raised, the plaintiff would seek an adjournment of the hearing if the application to amend were refused. Mr Saunders told me that Lavert would not seek an adjournment if the application to amend were refused.
The sole basis upon which I would be prepared to grant leave to amend to plead such a substantial matter on the first day of the hearing would be if the hearing were adjourned, subject to an appropriate order for payment of costs. In those circumstances, I had no alternative other than to refuse the amendment.
I indicated at the time that I would give reasons for my decision in the judgment in these proceedings. Having now seen the evidence as a whole, and the circumstances in which Mr Blazevic only raised the issue of the payment of $80,000 being a loan in his email of 30 October 2009, in circumstances where that clearly did not accurately reflect the nature of the transaction between the parties, I consider the explanations offered to the court on behalf of the plaintiff, including Mr Saunders' claim that the failure to amend the pleadings as a result of his instructing solicitor's oversight, to be less than frank.
The plaintiff has continued this ambush method of conducting its claim by bringing an unpleaded defence that this court has no jurisdiction to hear any claim for unpaid superannuation. This has effectively added six months to the hearing of these proceedings, by reason of the plaintiff/cross-defendant insisting upon serving further submissions and requiring extensive time to do so.
The basis upon which I have dealt with the plaintiff's claim is on the pleaded basis of payments made by mistake. These are addressed in the plaintiff's outline of submissions as being a money had and received claim. The unsatisfactory way in which this claim has been pleaded and the failure of Lavert to address a number of matters in its submissions should also be noted. There are, unfortunately, similar problems with the cross-claim and defence.
The factual background
Mr Boyd commenced employment with Lavert as a contract administrator on 16 February 1998. He remained there until going on a working holiday in Canada for six months in December 2001. During that time he had become a valued employee and on 7 May 2002, after a discussion with Mr Blazevic, a director and shareholder of Lavert ("Lavert"), he was reemployed, commencing in about June 2002.
Lavert was a company set up by Mr Blazevic and his wife. According to the company financial records, Mr Ivan Blazevic, Mrs Blazevic and their son received a regular salary and superannuation. Mr Blazevic had become a director of Lavert on 4 April 2002. He was also director of another company, Blazae Investments Pty Ltd. At all relevant times these two companies conducted a business known as "InVogue Projects Group" ("InVogue") which carried out fitout and construction work.
Mr Blazevic was primarily responsible for the day-to-day running of InVogue (affidavit of Mr Blazevic, 24 June 2011). Mrs Blazevic, who played no role relevant to these proceedings, assisted at some stage with the bookkeeping. I heard no evidence about the involvement of Mr Blazevic's son, whose role in the company is known only to me from the fact that, up until the date that he suffered a serious climbing accident on 23 February 2004, he received a salary from the company.
Between June 2002 when Lavert was reemployed and 23 February 2004, when Mr and Mrs Blazevic's son suffered the accident referred to, Mr Boyd worked as an employee for Lavert. As Mr Blazevic says in his affidavit of 24 June 2011 (paragraph 14), early on in his employment, first in 1998 and then again in June 2002, he found that Mr Boyd was a "capable, trustworthy and a valuable employee". As a result, Mr Blazevic received increasing responsibility, being promoted to construction manager in January 2004. This was, according to paragraph 19 of Mr Blazevic's affidavit, "a result of his continued good work and his ability to demonstrate that he could be trusted in a significant managerial role".
Mr and Mrs Blazevic's son's climbing accident was extremely serious. He remained in hospital for some time and thereafter required continuous full time care. Mr and Mrs Blazevic initially devoted all their time to the care of their son while Mr Boyd ran the company. Later, Mr Blazevic began to come to work one day a week.
Before the accident, Mr Blazevic had played a key role in the management of InVogue. After the accident, according to paragraph 20 of his affidavit of 24 June 2011:
"After my son's accident, I became reliant on Mr Boyd to assume virtually all the day-to-day affairs of InVogue Projects Group. I allowed Mr Boyd to assume such a position as I had complete trust in his ability to operate the business of InVogue Projects Group. I retained sole authority to sign cheques and to authorise any significant payments."
It is an indication of the degree to which Mr Blazevic trusted Mr Boyd that he would give him blank cheques signed (T 43) over the 18-month period that he was in the John Hunter Hospital in Newcastle with his son. The one area in which Mr Blazevic retains some control related to the supervision of the accounts and dealings with the accountant. Although Mr Blazevic said that he was not involved in the preparation of the accounts, he would meet with the accountant and go through the data that was collected from the office, and he attended the office approximately one day a week (T 44). He agreed (T 51) that he authorised the accountants to prepare the appropriate financial documentation for taxation and corporate obligations of the company's structure which conducted the business of InVogue.
Although Mr Boyd provided information to Mr Bridges, the accountant, he had little input and no involvement with the accounting process. Not only had this been conceded by Mr Blazevic, but it is self-evident from the fact that during this period Mr Boyd was one of a number of employees whose superannuation entitlements were, contrary to Superannuation Guarantee (Administration) Act 1992 (Cth), never paid at all for long periods of time. If Mr Boyd had been able to give instructions to the accounting staff and Mr Bridges, this would not have been the case. However, these persons took their instructions from Mr Blazevic, not Mr Boyd.
Mr Blazevic denied these periods of failure to pay superannuation were "long", and sought to explain this failure as follows:
"Q. You are aware of your obligations, aren't you, to pay your staff their entitlements?
A. Yes, I am.
Q. And you're aware, aren't you, that you didn't pay your staff their proper entitlements for a long period of time?
A. No, it wasn't for a long period of time.
Q. How long was it for?
A. I think, from memory, it may have been a couple of years. The superannuation entitlements and things like that were - my wife was the bookkeeper, financial controller, so when she left when my son had his accident, there was a period where everyone assumed somebody else was doing it. The accountants assumed that the bookkeepers were doing it, and the bookkeepers assumed that it was being done by the external accountants. So it was for that period of time. Also, we moved from AMP to Colonial First State, and we were issuing cheques to AMP, but they weren't appropriating them because there was no covering letter or something. So when that was switched over - so there was a period where things were still being sent by AMP to our old address, and we'd moved. So there was a period of confusion.
Q. There was a period of a couple of years where you didn't bother to pay any superannuation to any of your employees, wasn't there?
A. From memory, some of those were, you know, three, four-odd thousand dollars, so the period could have been considerably less than the two years. I'm just saying that it could have been for that duration.
Q. But since these proceedings have commenced, you've had a good opportunity, as you have, to look at your other accounts to satisfy yourself that there was a substantial period of non-payment of superannuation to your employees.
A. No, I didn't.
Q. Of some years.
A. Again, no.
Q. Well, you don't dispute, do you, that you hadn't paid Mr Boyd's superannuation?
A. That's correct, no, we didn't.
Q. How long for Mr Boyd hadn't you paid his superannuation?
A. I'm sorry, I can't recall.
Q. Some years?
A. Well, it totalled some 20-odd thousand dollars by the reconciliation, so I assumed that would have been a year and a half, I don't know. Two years, I don't know.
Q. You know exactly how long it was because he's provided you with countless emails setting out his demands for payment of superannuation. You've seen all those emails, haven't you?
A. I've seen all the emails and, no, he didn't make demands for his super to be paid.
Q. He brought to your attention the fact that his benefits, including his superannuation and bonuses, hadn't been paid. He had meetings with you about that, didn't he?
A. He did have meetings with me regarding that, yes, he did.
Q. It's more than one.
A. Yes, he did.
Q. He threatened to resign because they weren't being paid.
A. No, that's not true. That's not true.
Q. You made to him a number of promises that they would be repaid urgently, didn't you?
A. I promised Paul Boyd that everything would be paid up, yes, I did.
Q. And they weren't, were they?
A. Again, with the issues with the AMP and then with the Colonial First State, when it was raised and when it was brought to our attention that super wasn't paid - and it was actually one of the staff members telling Paul Boyd, and Paul Boyd saw me about it - we then immediately instructed the accountants to come in and to go through all of our records, and to give us a reconciliation as to what the scenario was as far as outstanding super. As soon as that was identified and completed, we paid all the super immediately, except for Mr Boyd's.
Q. Why didn't you pay Mr Boyd his super?
A. Mr Boyd kept on suggesting that - well, firstly, there were some financial constraints, but mostly because he was requesting that it be treated in other manners." (T 51 line 30 - T 53 line 12)
Mr Rich again put to Mr Blazevic that Mr Boyd asked to be paid his superannuation and that he was not paid. Mr Blazevic denied this (T 53 line 31). Subsequently the many emails Mr Boyd had sent were tendered; the text of some of them is contained in the correspondence set out below.
I find that Mr Blazevic's evidence that the company paid all its employees superannuation, and that Mr Boyd did not make demands for his superannuation to be paid, was knowingly dishonest. As for Mr Boyd, the correspondence and accounting records speak for themselves. In addition, this was a substantial failure to pay employees over a long period of time. For example, Mr Blazevic conceded (T 54) that another employee, Mr Edward Opperman, was not paid any superannuation for the entirety of his employment which commenced in 2004, until two years after he had left, in 2011 (T 54).
Nor was failure to pay superannuation the only omission. The company used the MYOB computerised wage record system (T 56-57). Mr Blazevic was cross-examined about his failure to pay leave loading (T 59ff). He was cross-examined at T 60-61:
"Q. Bearing in mind that this case has been pending since 2009 and we've adjourned it once and the issue of payment and proper payment of superannuation has been a clear issue from before the departure of Mr Boyd what steps have you taken to obtain from your computer system details of all the payments made for superannuation to Mr Boyd?
A. When the accountants came in and did an audit of the superannuation entitlements and payments that was for the period that wasn't complied with. From 2006 I think it was or earlier that was done automatically after that point so I'd do the transfers into Colonial First State but the period - so the question in regards to Mr Boyd's super was for a period which the information that I relied upon was the audit undertaken by the accountants for that specific period. Moving forward from that everything was automatically paid.
Q. The audit was done in about 2007, wasn't it?
A. It may have been.
Q. And bearing in mind - I put the question again - bearing in mind that since this case commenced and before it commenced there was an issue as to whether Mr Boyd had received all of his superannuation entitlements what steps have you made to provide or obtain a clear reconciliation from your computer system and/or your accountants providing a schedule of superannuation payments made to Mr Boyd and the date of those payments? Have you done that?
A. The specific transactions, no. It was raised by Mr Boyd as to the value that was issued to the accountants. The accountants then crossreferenced that and I took it at both of them being correct at quantifying. There was a discrepancy of some $2,000 from memory from one to the other and then it was agreed eventually as to the figure. I didn't go any further looking into things because it was agreed, it was agreed that that was the value.
Q. Mr Blaze Vic, it hasn't been agreed with Mr Boyd, has it?
A. There was correspondence
Q. Because Mr Boyd says that you still owe him superannuation, and he said that throughout the entire case and before he left your employment. He's made it as clear as possible to you, "You haven't paid me my superannuation." You understand that's the issue, don't you?
A. Yes, I do. I do understand that.
Q. The question is, what steps have you made in the two years plus this - three years since he left his employment with your company to provide a clear statement from your computer system or with the assistance of your accountant, a clear statement showing him what superannuation you have paid on his behalf, when you paid it, and how much he was owed, and how it was calculated? Have you done that?
A. I requested - as part of this process I requested the accountant to reconcile and provide me with, you know, where the position is in regards to his super.
Q. In the three years since you started these proceedings or since he left his employment, have you provided him with such a statement?
A. To whom, sorry?
Q. To Mr Boyd.
A. No.
Q. You say to Mr Boyd, "I've paid all your superannuation."
A. Yes.
Q. Where is the reconciliation that you've prepared from your accounts or from your accountant and when did you give it to Mr Boyd?
A. Mr Boyd interacted with the company accountant. There was figures that were raised by Mr Boyd, he was consulting his accountant, and the two parties, being our representatives and his, came to the agreement that it was a certain figure."
According to Mr Boyd (affidavit of Mr Boyd, paragraph 98), he became aware his superannuation contributions had not been paid in May 2005. At the same time, he was negotiating an increase in salary. He had the day-to-day conduct of the whole of the business, and was making decisions and carrying out work which prior to Mr and Mrs Blazevic's son's accident, Mr Blazevic would have either done himself or would have been consulted about. On 10 March 2006 he sent an email to Mr Blazevic requesting a $15,000 profit share payment in relation to two projects on which he had performed a significant amount of work.
By March 2007, a year later, he was on the point of resigning, partly because of the superannuation issue and partly because of the bonus issue, but requested a fixed minimum bonus, and on 9 March 2007 Mr Blazevic agreed to a request for a $20,000 minimum bonus each year to reflect the level of his involvement in the business activities of InVogue. Three bonuses (18, 25 and 26 October 2007) totalling $32,500, were paid.
Both parties identified the agreed basis of a profit share payments as being 7% up to the first $1 million and 10% thereafter, with a minimum of $20,000 per annum. The question is the basis and quantification of the applicable accounts.
There is no agreement between the parties as to:
(a) Whether the bonus was to be worked out on a cash or accrual basis;
(b) Whether these payments would be based on taxation financial statements prepared after the end of the financial year.
The parties' methods of accounting are not the same. The cash receipt basis advocated by Lavert would exclude the work done on profits earned during a financial year in respect of which no payment had been received during that year. Lavert relies upon a conversation between Mr Blazevic and his accountant in August 2007, two years after the agreement was made (T 145 line 40 - T 146 line 5).
Mr Boyd states that the intention was to pay profit share payments quarterly, which would be inconsistent with profit share payments being based on the completion of a financial year. In addition, end of year financial statements were inappropriate for the calculation of profit shares and were never relied upon by Lavert until after Mr Boyd resigned.
Lavert argues:
(a) They did not distinguish between construction work carried out by Mr Boyd in the Sydney office (these being the payments for which the profit share was to apply) and other parts of the InVogue group, to which Mr Boyd was not entitled to any share;
(b) There was agreement between the parties that the profit share calculation would exclude residential work and projects not completed by the Sydney construction office where Mr Boyd worked, costs and financial components relating to Blazae Pty Ltd, design costs relating to the design section of the InVogue group and profits (and costs and losses) arising from residential developments such as Telopia Avenue and Nandah Crescent.
Lavert has used the financial statements it has had prepared by its accountants for the purpose of lodging tax returns. It is not in dispute that Mr Boyd has used draft financial statements before they were reconciled and finalised and also that he has excluded the items referred to above. Lavert complains that the draft financial statements used by Mr Boyd are simply drafts which he has adjusted.
The circumstances leading to Mr Boyd's resignation
Mr Boyd, as is set out above, had effectively taken over the running of the business from the time of Mr and Mrs Blazevic's son's accident. He had come to an arrangement with Mr Blazevic that Mr Blazevic would come to the office one day a week to management business finances, including cash flow management, and making payments to subcontractors and suppliers (affidavit of Mr Boyd, 31 August 2011, paragraph 25). He also began to discuss including a profit share in his salary and on 15 February 2005 sent an email confirming this, following which Mr Blazevic and Mr Boyd had a series of discussions.
Mr Boyd's version of events is as follows. One of the questions that Mr Boyd asked Mr Blazevic was about the family and personal expenses which were written off on the business, on the basis that this should not form part of company overheads when determining the profit share. Mr Boyd claims Mr Blazevic's response was "I will have the accountant run two separate books, one for the tax man and the other to determine appropriate profit share" (affidavit of Mr Boyd, 31 August 2011, paragraph 30). The profit share was to be distributed quarterly. He also queried the reference to "fitout operating properties of all Sydney office works" and Mr Blazevic replied that this was only to eliminate profits from residential developments. He said to Mr Boyd, according to paragraph 32 of Mr Boyd's affidavit, "you profit share will be for all contractor works undertaken by the Sydney office, whether it be interstate or local".
Following these discussions, there was an exchange of emails between the parties between 22 February and 15 March 2005. On 15 March 2005 Mr Boyd accepted Mr Blazevic's revised salary offer, based, he states in his affidavit, on these assertions.
As has been noted above, following unsuccessful reminders in relation to superannuation (which commenced when Mr Boyd first reconciled his superannuation in November 2006 and realised the majority had not been paid: affidavit, paragraphs 35 and 36), Mr Boyd went to the office of Mr Blazevic on Thursday 8 March 2007, and stated he was intending to resign from Lavert. When he advised Mr Blazevic of his wish to resign, Mr Blazevic was "shocked and disappointed" according to the affidavit of Mr Boyd. At this stage the amount of superannuation outstanding was over $30,000 (paragraph 42 of Mr Boyd's affidavit). According to Mr Boyd's affidavit, there was a long discussion between himself and Mr Blazevic, from 4:00pm till 11:00pm, that night, in the course of which Mr Blazevic said "I guess I just took you for granted" (paragraph 39 of the affidavit). Following this meeting, on 9 March 2007, Mr Boyd sent the following email:
"Ivan,
In light of our discussions yesterday I wanted to put some things together with the aim to reach an agreement today to enable us to move forward together into the future.
Firstly I would like to list the items we agreed on yesterday with some guarantees on time frames added.
- Super - As discussed Accountant is to provide clarification of figures later today. Interest component to be reimbursed via renovation of my unit.
- Long Service Leave - $3,530 to be paid by end of next week.
- Bonus system and calculations for 05/06 financial year to be provided by end of next week with a staged payment strategy to be provided at this time should payments not be able to be made in full at the end of next week given the organisations current financial situation.
Now that we have eliminated the majority of financial frustrations I would like to put forward my proposal in regards to my Salary package.
The concept of profit share and the ability for me to earn more than the industry says I should earn is something I have to take into consideration in assessing my current salary. As we discussed yesterday my ability to perform will always continue however in the past the poor performance of other sectors namely Marketing has had a direct impact on me achieving my financial goals. Originally when we implemented the profit share it was to create ownership and was the initial stages of partnership and directorship, not as a means that when I perform I receive bonus's [sic] and hopefully increase my earnings to a level that matched what I believe the industry says a CM should earn. As raised by you last night the introduction of a minimum base salary I think is an ideal proposal.
Taking into consideration the profits we anticipate in the next financial year and beyond (and the sacrifices I am willing to continue to make as part of that long term financial gain), considering fuel hikes and cost of living increases, the fact I believe my role excluding bonus's is valued at $170k-180k I would like to propose a minimum salary of $150k inclusive of Super and Car Allowance, with my current salary and profit share to remain and the difference if required to be made up at end of financial year (including this year ending June 30 2007) should the combination of profit share and base salary not reach this figure. I think it is also important to note that these Salary assessment will need to exclude the profit share from the previous financial years as they are considered as last years earning despite being on the this years PAYG Summary.
One other item I would like to raise for your input regarding company finance management is my current holidays accrued. I currently have 5 weeks. With 4 more weeks to be accrued this year which I only anticipate using 2 weeks this year, come February 2008 I will have approximately 7 weeks accrued plus my Long Service Leave of 12 weeks. This will total 19 weeks. Obviously I am not going to take a 19 week holiday next year so as a means for you to manage the companies finances I think it may be wise to consider paying me out for some of my current and future holidays. This will obviously depend on the companies financial situation but I think it is important you are aware of it now rather than Feb next year.
Please confirm today that you are in acceptance of all of the above."
Mr Blazevic replied late on the evening of Friday 9 March 2007 that he could "commit to the details of your email but some things do need to be confirmed by the accountant i.e. super. His figures and your figures are different". Mr Bridges, the accountant, gave evidence in these proceedings, but said he had nothing to do with the failure to pay superannuation, which he dismissed as an "internal" issue.
Shortly afterwards, Mr Blazevic suggested that Mr Boyd become a director of the company. This was clearly to induce Mr Boyd to stay in his employ. At their meeting on 8 March Mr Boyd had told Mr Blazevic he had received two offers from other companies earning more than $170,000 per annum for a lesser role of project manager (affidavit, paragraph 40).
Mr Boyd was excited by this prospect. The discussions continued, and in May 2008 he was provided with directorship forms from the Department of Fair Trading by Lavert's financial controller requesting his signature. The financial controller also provided information regarding directorship and the requirements of the Corporations Act (Cth) (affidavit, paragraph 47). Mr Boyd asked Mr Blazevic for the percentage of ownership and how the profits would be distributed. He needed this information so he could accurately assess the value of the offer being made to him.
Despite further requests from Mr Boyd, Mr Blazevic never provided this information. Mr Boyd was very busy because staff numbers had increased from four up to twenty. Mr Blazevic was rarely in the office to discuss business, as he was caring full time for his son. Eventually, in April 2009 Mr Boyd asked for a meeting prior to 1 July 2009. At this meeting, he raised the issue of directorship. Mr Blazevic said that Mr Boyd would need to invest money if he wanted a directorship.
Mr Boyd said that this was contrary to his previous understanding that the directorship would be his reward for his many years of service to the Blazevic family. He says Mr Blazevic's reply was "that may have been the case, however if you want to become a director you will need to buy in, that's simple". The profit share currently owed could be used; Mr Blazevic said he would speak to his accountant to determine a suitable value. Mr Boyd said he then told Mr Blazevic that he and his wife were looking at buying a house and the profit share requested to be released was to be used for that purpose (affidavit, paragraph 52). Mr Blazevic asked Mr Boyd to provide an estimate of profit share so that he could issue it to his account to check. Mr Boyd gave this document to Mr Blazevic in late July 2009 but heard nothing further.
On 31 August 2009 Mr Boyd, who was still wanting to hear from Mr Blazevic, sent the following email:
"Are you able to start processing the bonus as discussed. EFT to kate [sic] and I is fine or if you would rather in a couple of cheque's. What ever is easy for you. I will have Kate draft an invoice.
Also I have a Reimbursement that's was submitted at the start of August that I still haven't received. valued $702.30.
Thanks mate."
Mr Blazevic replied on 1 September 2009 asking for further data about "your unit" so that he could check numbers against the superannuation and profit shares reconciliations. Mr Boyd replied on 1 September 2009 at 7:49am as follows:
"See attached excel docs as discussed.
Prop bonus Aug 09.xls has 3 sheets - prop bonus with updates on super and unit recs as requested. estimate on 08/09 profit share and super rec.
Wyanban rec actual.xls is summary of costs spent at my place.
When do you think you will be able forward the $. There are a few places we looked at on the weekend that go to Auction in a about a week and a half so would be great if you could sort this ASAP so we can bid if we want to.
I have invoice from Kate ready to go if you want it.
Let me know what you need."
About three weeks later, Mr Boyd received two cheques, one made out to him for $40,000 and the other made out to his wife for the same sum. The profit share released in those cheques was $10,000 less than the estimate that Mr Boyd had given to Mr Blazevic. No explanation for the calculation of this sum was provided.
Mr Boyd came to the realisation that he had no future in a company which did not pay his superannuation or profit share without these endless requests, and decided to resign from the company. As he was commencing formal negotiations on behalf of Lavert to sign three large government contracts, he thought it was important to tell Mr Blazevic about this immediately, so that Mr Blazevic could appropriately plan for these significant projects (affidavit, paragraph 60). It was in those circumstances he sent his letter of resignation, which started a chain of correspondence set out in more detail below.
Mr Blazevic's version of events
I now set out Mr Blazevic's version of events, taken from his affidavit and evidence.
Mr Blazevic denies all of the claims made by Mr Boyd. This includes denying that he made an agreement with Mr Boyd to come into the office one day a week following his son's accident to arrange for Mr Boyd to take over management of the office. He said that this was his own decision and that he did not, prior to making it, seek Mr Boyd's input into it. Mr Blazevic claimed that "I only informed Mr Boyd of my intention to do so as a matter of business practice."
It is obvious, even from Mr Blazevic's evidence, that Mr Boyd was running the office at this and at all relevant times over the years subsequent to Mr Blazevic's son's accident. Mr Blazevic continued this pattern of attending work one day a week for the rest of the time that Mr Boyd worked there, which was approximately five years. Not to have consulted Mr Boyd about such an alteration of work responsibility, and to have assumed that the business would run in his absence, would have made running the office very difficult.
This may seem like a very minor issue, but the difference in accounts, and the minimisation of Mr Boyd's role, are revealing of the personal traits of Mr Blazevic. It is these traits which make his evidence so unreliable, and at time knowingly dishonest. His anger against Mr Boyd for resigning, even three years after the event, was still palpable in the witness box. He was not prepared to give Mr Boyd credit for even such uncontroversial matters as obtaining his builders licence so that Mr Boyd could become a nominated supervisor (Mr Blazevic's affidavit of 14 March 2012, paragraph 17). This inability to be objective, or to retail events in a honest and straightforward manner, was apparent in most, if not all, of Mr Blazevic's evidence, and must materially undermine the value of the evidence he gave on all issues.
The same is the case in relation to his version of the circumstances in which Mr Boyd threatened to resign on 8 March 2007. According to Mr Blazevic, Mr Boyd said nothing about his outstanding superannuation, which is surprising in itself, given the prior correspondence attached to Mr Boyd's affidavit. According to Mr Blazevic, Mr Boyd was complaining that another employee, Angie Clements, was being paid the same wage. According to Mr Blazevic, when Mr Boyd threatened to resign, he just blurted this out, and Mr Blazevic said "Paul, we really should discuss this when everyone is gone for the day, they shouldn't see us fighting". Mr Blazevic acknowledges that the conversation "did touch on the issue of superannuation" (affidavit of 14 March 2012, paragraph 37) but claims that Mr Boyd was seeking an increase in salary so that he was paid more than Angie Clements.
Mr Blazevic's affidavit does not refer to the emails exchange between the parties on 9 March 2007, nor does he outline exactly what was mentioned when the issue of superannuation was "touched on". Mr Blazevic's account is inconsistent with the terms of the email (which make no reference to what Mr Blazevic says was the main topic of conversation, namely Angie Clements, and deals at length with superannuation issues).
The same is the case with the evidence in relation to the question of Mr Boyd becoming a director. Mr Blazevic denies making any statement regarding directorship for Mr Boyd being in recognition of what he had done for the Blazevic family following his son's injuries. He grudgingly recalled requesting that an employee Ms Clemente (another employee, not Ms Clements) provide direct ASIC directors information to Mr Boyd so that he could understand what being a director entailed, but "did not recall supplying them to Mr Boyd". He denied there was any discussion of shareholding and profit splitting (paragraph 47), or that Mr Boyd made requests for information.
Mr Blazevic asserted that shareholding was not discussed until July 2009 when Mr Boyd said "what about shareholding?" and Mr Blazevic said "our accountants will value the business and we can discuss what percentage you want to buy". He states that Mr Boyd then said that considering what he did for the business "I should get it for free" and Mr Blazevic said "they won't be free but we can talk about you paying off the shares over time with some portion of your profit".
Mr Blazevic admits there was a conversation on 28 August 2009, in which Mr Boyd raised the question of the accountant calculating profit share, but says that he replied "it is way too early for that yet". According to him, Mr Boyd said he was entitled to "getting somewhere around $100,000" and that he needed this amount of money for a deposit on a house.
Paragraph 57 of Mr Blazevic's affidavit refers to the material attached to Mr Boyd's affidavit for the purpose of showing an inaccuracy. He notes that the documents which are attached show they were created on 1 September 2009. However, Mr Boyd's affidavit states at paragraph 57 that he provided an earlier copy of these documents by hand in late July 2009. The fact that these documents were sent on 1 September 2009 does not mean that they did not exist prior to that time. All of the dates in the attached documents are July 2009, or prior to that date.
According to Mr Blazevic, he and Mr Boyd had a conversation on 16 September 2009 when Mr Boyd went to his office and said that he and his wife had found a house they wanted which was being auction that weekend, and that "I have to have money in my account".
Mr Blazevic said that he answered:
"Paul, I am trying to get my head around all this, you know we haven't ever sat down and reconciled everything from the beginning."
Mr Boyd said, according to Mr Blazevic, "come on mate, you know how important this is to me" and "Kate loves this place and we can afford it. You know what I have done for you". Mr Blazevic said that "you know that we need to wait until the accountant does the end of year".
According to Mr Blazevic, it was in these circumstances that, on 17 September 2009, he called Mr Boyd into his office and said "I am going to make a payment of $80,000 for your bonus payments. I will then check the figures with Michael. If we have short paid you, I'll pay the rest. If it's an overpayment then the amount in overpayment will be a loan from InVogue". He accordingly gave Mr Boyd two cheques later that day, one payable to Mr Boyd and one to his wife, each for $40,000. The second cheque had the recording "loan" beside it, according to paragraph 60 of Mr Blazevic's affidavit of 14 March 2012. This payment of $80,000 was for a sum less than that sought by Mr Boyd.
The next thing he knew, according to Mr Blazevic, was that Mr Boyd had come to his office and told him that he intended to resign (paragraph 62). Mr Blazevic noted that Mr Boyd became "teary-eyed" and walked out. Mr Blazevic said "I immediately logged onto the bank and saw that the cheques had been cleared then called the accountant".
I have set these differing versions of events out because, in determining what version of events to accept, I have had regard not only to the contemporaneous documents which have been provided principally by Mr Boyd, but also in relation to findings of credit that the parties have urged me to make. Both parties agree that this is a case where issues of credit are of great significance.
This brings me to the correspondence which followed the letter of resignation which was sent on 23 September 2009.
Correspondence following Mr Boyd's resignation
Mr Boyd's letter of resignation on 23 September 2009 was as follows:
"Ivan,
As per discussions this morning for varying reasons and ultimately in the best interest of myself and my family, I have decided to start my own business. As such please accept my resignation.
As discussed if we can collectively resolve the human resources items for Abigroup projects in the next week we can hopefully determine a period of "notice" that meets both yours and my needs. As discussed I want to ensure that my departure does not affect your business and as such I am open to discussion on the timing of my leaving.
Given I am the nominated supervisor for Lavert's Contractor Licence it may be appropriate to employ a PM or CM who has a builder licence. Food for thought.
Let me know on any request for timing of telling staff.
Hopefully we can continue to work together into the future in a business relationship rather than a employer/employee relationship.
Thank you for the past 12 or so years and for the opportunities you have given me. It really has been an enjoyable time for me."
On Thursday 8 October 2009 Mr Blazevic sent Mr Boyd a spreadsheet to which Mr Boyd replied the same day:
"Thanks Ivan.
As discussed June 09 missing.
I also picked up that super rec is based on the rec MJ's did which Michael had noted it was incorrect as it was based on wages when it should be based on the combination of wages and car allowance. Difference is some $7k. I have attached the reconciliation previously issued.
Other items not included are:
1. The LSL has been paid up to start of Feb 2008. I believe LSL will be owing on last year and 8 months on a pro rate basis of 0.8wks/annum - approx $2,500
2. Holidays owing - approx 4.5 weeks - approx $10,500
3. Accrued minimum bonus July, Aug & Sept 2009 for June 2010 Financial year - 3 of 12 mths at 20k = $5,000
Thanks."
There was further correspondence about credit card reconciliation but by Wednesday 28 October 2009 the atmosphere was still friendly as the following exchange of emails show:
"Hey Ivan,
Tried calling you the other day but no answer, assumed you were busy as I am sure you are.
So what ever happened to the drinks night last week?
Anyways hope all is travelling ok.
When are these jobs going to be ready to price?
Take care
Cheers
Boydy"
Mr Blazevic replied on the same day saying:
"Dude,
You made contact last Thursday and I had no number or email till then, so we went and had drinks anyway and we all said nice things about you. You would have enjoyed it especially the Fatagram I arranged.
In our emails of the 15th re your unit I can not see where you took up the $32k odd?
I really want to finish this up by Monday."
The tone of these emails is clearly being put on a deliberately friendly tone by Mr Boyd, to which Mr Blazevic is responding.
This correspondence continued through to October and early November 2009. A typical email is Mr Blazevic's email of Friday 30 October 2009:
"Paul,
I have gone over this and I believe it is now accurate.
I have confirmed with Michael that ASA stuff should be attributed to that financial year but I have included the agreed minimums (in bold) where sharing was below the $20k.
This is being treated completely separate from entitlements etc.
The important thing that I have had to get over is that the attached spreadsheet final figure is being treated as a loan and was made to you upon your request to assist in your purchase of a home. As I said the difficult thing for me was that a few days later you advised that you were leaving and that aspect has been difficult to resolve in my head.
Please let me know how you want to return the loan." [emphasis added]
However, the tone quickly changed with this email from Mr Blazevic suggesting for the first time that his payment of $80,000 had only been a "loan".
Mr Boyd replied on Tuesday 3 November 2009:
"Ivan,
Thanks for forwarding this.
Firstly we cannot consider this as a loan as you agreed to pay these funds on the basis my estimates in company profits were accurate. We left what we thought was 20 or 30k in profit share available for pay inaccuracies. If I have been overpaid then I will pay it back. No problems. This has been an agreement in place since you paid the profit share.
As per my previous email and our subsequent discussions, remaining holiday pay, LSL and 2010 accrued profit share still have not been included.
Holiday pay - 4.6 weeks (130k p/a = $2,500/wk) - $11,500
Remaining LSL - 1 year & 8 months (0.8 weeks p/a = 1.33 weeks @ $2,500/wk) - $3,325
Accrued profit share July 09 to June 10 - 3 months - $5,000
Total - $19,825
One thing you still have not provided despite my request is a reason why 2006 had minimal profits considering we had over $1.5mil in profit/overheads from the successful projects (construction only) of that year yet we only had a gross profit of $113k. At that time our overheads were no more than $1.1 or 1.2 mil with only 5 or 6 staff. From our last conversation you were going to provide me with figures to explain this. 2007 falls under the same category. Similarly I do not see how 2009 can be running at a loss considering the numbers I put together for end of year WIP.
One thing that I am struggling to swallow is that profit share was always discussed to not be based on what went to the tax man for the simple reason that it included your personal spends that you write off against the business. As agreed these are not true overheads and were to be removed. Like any business owner you write off as much as possible to reduce the company's debt in tax. We have discussed it, it happens in your business and every other business. I have no problem in you doing these things when it comes to tax. However I am finding it hard to consume that after 12 years of service plus the impact you say I have had on your family that you have moved the goal posts in relation to this since I resigned and you no longer benefit from my services. Over a 4 year period your family's expenses add up and I am the one losing out.
I have thought about this a lot over the past 3-4 days and to say I am disappointed would be an understatement. However not withstanding this or the above, I will be true to my word. I do not want this to drag out and I especially do not want my effort over 12 years to be thrown away and for this to turn ugly.
Please agree to the below summary in response email and I will drop off a bank cheque and my employment with InVogue will be considered closed.
InVogue Calculation - $53218.64
Less above noted items owed not included in your calculations - $19,825.00
Remaining - $33,393.64"
Mr Blazevic replied an hour later as follows:
"Paul,
The two items do need to be treated separately and like you I am happy to hand over a cheque for whatever the obligatory amount should be in relation to the termination of employment. The Accountants can only deal with those items in red and you and I will sort out remainder.
I do not need or expect a bank cheque and I do not want to really go over the email below but rather focus on making sure it is right. Can you refer me to the holiday rec or forward it to me please."
Also on Tuesday 3 November 2009, Mr Boyd sent an email saying that the unaccounted long service leave and bonus for 2010 should be included in the reconciliation as that formed part of the calculations and he said that he would send the holiday reconciliation the following day.
On 5 December 2009 Mr Blazevic sent the following email to Mr Boyd:
"Paul,
I have finally had an opportunity to go back and view a lot of the material that I sent you. In line with your consistency for accuracy it is important for this email and your correction of the reconciliations to be done thoroughly.
Long Service Leave:
Your employment was terminated by you and you went to the states where you were employed. Returning to InVogue was the intention but not a guarantee. The recent information sent to you clearly shows that a contract of employment was negotiated and once we agreed your employment contract starts from that date.
Long service leave is not attributable to your employment and subsequently needs to be deducted as it was incorrectly claimed by you and with all things in the past I took everything that you represented to me on face value and had no reason to question. The Long Service payment was made in good faith and it has been confirmed that you are not entitled to it.
Accrued Holidays:
Your employment was reconciled by you prior to leaving InVogue to go overseas for employment and there is no accrued holiday that you can use in your calculation prior to the new contract of employment upon your return.
Leave loading:
At the time of your original employment it was a government requirement that holiday pay attract 17.5% loading and this was paid and well monitored by you. Upon the new agreement being reached no government requirements existed for leave loading and notwithstanding this you still received the ongoing loading. I accept this and am not seeking to further disrupt anything but to inform you of additional benefits that you obtained whilst with InVogue. It was clearly my fault that you were paid the loading because I assumed it was still a requirement at the time.
Personal benefits
The refurbishment of your units was a significant financial benefit to you from contractors whom undertook the supply and installation of various goods and services at no cost to you only because of the ongoing work that they were given from this company. There was no wrong doing on anyone's part in that regard and I trusted you when you said nothing wrong was done but you personally gained many thousand dollars of benefit and I want you to keep clear both sides of the ledger when you think about the above contents.
The calculations are as per my reconciliations and your adjustments of the above.
Your preparations for opening your own business started well before the financial year and your claim for 2010 bonus is something that you need to reconsider honestly. This correspondence will not be received well and that is extremely disappointing but the fact is you have always received everything that was ever agreed. I want this finalised and monies returned this side of Christmas. I do not want to completely destroy any memory of our association through bullshit (yours and mine) ego crap and I have gone over this carefully and respectfully request the same."
On 11 December 2009 Mr Blazevic sent the following email to Mr Boyd:
"Hey Paul,
How are you going on the finalisation of monies owed?"
On 18 December 2009 Mr Blazevic sent a further email to Mr Boyd as follows:
"Paul,
As you will recall you specifically requested that I lend you the monies so that you ch:001318 ($40,000.00) and Kate ch:001319 ($40,000.00) can buy a house. As the calculations and recent correspondence show there is minimal funds owing to you that you could put against the loan to you and Kate.
You have recently stated that you have put on hold your search for a house as you are focusing on developing your business and this is completely contrary to the reasons given to me by you as to the need for the loan.
Please confirm that you can return the $55k-$65k before Christmas. I would be satisfied in getting $55k and the holiday reconciliation can be better considered by you based on recent data I sent you and I have more if you require it. I did not send the rest of it as you stated you already had it but I think it may help as the spreadsheets you compiled do not reflect completely.
You were also going to return the keys some 2 weeks ago.
Sorry Paul but I must have a clear arrangement regarding the loan to Kate and you to buy a house, sorted out and returned by Christmas.
I have tried calling you on your mobile but you are obviously and hopefully very busy, to take my call. You have recently repaid some of your other loans and I am concerned that I will need to protect this debt."
On 18 December 2009 Mr Boyd wrote to Mr Blazevic as follows:
"Ivan,
Your email is refuted in full.
The $80,000 paid was for profit share agreed by yourself and in no way was this ever a loan. Previous correspondence from yourself confirms this. This payment was for profit share that was well overdue. Previous agreements were that profit share would be paid within 6 months of the end of financial year. This was never maintained. It took you 12 months and my regular requests for these monies owed to be paid.
In regards to your email of 5th December regarding Long service leave payments, your claim my employment was terminated is also refuted in full. My leave was always agreed to be leave without pay. A return date and revised salary was negotiated and agreed prior to my leaving. During my leave without pay you even requested if it was possible if I was able to come back earlier. Your payment of Long Services Leave some 11 months ago is further proof you agreed it was leave without pay. You are clearly attempting to recoup funds previously agreed and paid.
Your continual fabrication of events like the above are very disheartening for me considering the importance my role at InVogue played in your ability to work an average of 1 day per week for almost 5 years whilst you cared for your family and more importantly Adrian.
What I am most disappointed with is that I believed you would never do this to me. Whether it be because of the trust I placed in you which was based on your comments like "I was like a little brother to you" and "I could create a list twice as long as you could as to what you have done for my family", or simply my naivety to your true character. However your actions post my leaving are typical to methods you have used in the past with a number of staff, subcontractors, suppliers and even direct family members. History shows that you are the one common denominator and I was silly to believe you would do the right thing by me.
My previous offer to return $25,003.58 included significant sacrifice on my part in relation to true profit share. This was offered for the sole purpose of maintaining our working and personal relationship. Your actions since this time as evident in your last two emails clearly illustrate that I was the only party who actually cared for the relationship.
As such these offers are formally retracted.
Clearly our business and personal relationship has been severed by your actions however for the sole purpose of closing this door I will consider a meeting with you to discuss a potential resolution.
It is not in yours or my best interest for this to drag out or require legal guidance however should we be unable to resolve to both of our satisfaction this side of Christmas I will not consider any further dealings in regards to this issue until such time as full copies of financial statements for each year I am due profit share are provided with complete breakdown on company expenditure v's your personal spends written off on the business. This was the clear agreement for which you confirmed you would have 2 separate financial statements provided by the accountant.
Despite your treatment of me I can feel comfortable that I have attempted to end our association respectfully and professionally by my previous offers of sacrificing significant profit share as a means to enable both sides to move on whilst maintaining our relationship. Unfortunately, despite your advice, you have never shared this desire or action."
Mr Blazevic replied to Mr Boyd's email as follows on 20 December 2009:
"I will not read the entire correspondence at this time.
I always told the truth and all information is correct.
You told me you were buying a house and on the day the funds cleared in your account, you resigned.
I know one thing I will be fucked if I will let you lie and bullshit your way through this.
Get a fucking lawyer because I am suing Kate and you.
Trust me I will wrap you up in legals to your fucking eye balls. "Unpaid leave" you actually believe that shit or you're a fucking liar?
Do you actually think I will give a flying fuck as to what I have to do to get back what is now as far as I am concerned Stolen.
I could not give a fuck that you have your own business or moved on or whatever. This is about complete betrayal as to whom I thought you were.
I will not keep quiet about this and you will pay a hell of a lot more than you are trying to lie your way out off now. You want to talk about accounting bullshit!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
I fuckin swear on my family you are fucking with the wrong man."
On 24 December 2009 Mr Blazevic sent an email saying "Your immediate attention is required" enclosing a letter of demand to Mrs Boyd as follows:
"Mrs. Boyd,
On the 17th of September 2009 I issued a cheque to you for the sum of $40,000.00 being for a loan so that you and Paul Boyd could buy a house. Considering our long history I had no concern about doing so but I had no idea that in fact your intentions were not completely honourable.
On the day that you cheques cleared, your Husband Paul resigned for our company and it appears used the loan to set up his new business and has been actively pursuing InVogue Projects Group Clients ever since.
The reason for this loan was very specific and the manner it was obtained has proven to be in the least, very disappointing.
I have attempted to work through this matter with Paul Boyd but regrettably he has confirmed my worse concerns.
You have seven (7) working days in which to remit a Bank Cheque for the amount of $40,000.00 made payable to InVogue Projects Group or transfer that amount into:
Name: InVogue Projects Group.
BSB: 302-100
Acc: 0844854
Should the funds not be returned by the end of the period we will commence all legal proceedings against you without notice."
On the same day, Ms Taylor of lexicon:legal on behalf of Mr and Mrs Boyd, replied saying:
"Dear Sir
Letter of Demand dated 24 December 2009
We advise that we act for Mr Paul Boyd and Mrs Kate Boyd on an interim basis in relation to the above matter.
We refer to your letter of Mrs Boyd dated 24 December 2009. Given the upcoming public holiday and ensuing Christmas break (during which time most professional businesses are closed until 4 January 2010) the timing of your demand is unreasonable.
We advise that Mr & Mrs Boyd will be retaining specialist employment lawyers to advise them in this matter in the week beginning 4 January 2010, and you will receive a formal response to your letter thereafter."
On 27 December 2009, Mr Boyd sent an email to Mr Blazevic as follows:
"Ivan,
At no stage have you provided any proof of debt. To the contrary you have provided written acceptance that monies paid to both Kate and I was for my profit share. Your claim this money was a loan is a fabrication and is rejected.
As per advice from Mrs Taylor you will receive a formal response from my legal representation in the week starting 4th January 2010.
I will not enter into any further correspondence in this matter until this time."
On 4 January 2010, Mr Blazevic sent another email to Mr Boyd:
"Paul,
I have made several requests for you to reconcile the accrued days so that we can finalise the statutory requirements for termination pay. As the manager of the Construction team you were charged with the responsibility of maintaining records of all construction employees, including yourself.
I have supplied to you copies of some of the information identifying discrepancies in the data submitted by you. I have clarified some of the records you kept and have requested several times that you finalise these reconciliations so that the Accountants can confirm and complete."
Mr Boyd replied on the same day saying the following:
"Ivan,
You have not made several requests. You issued one email regarding reconciliation of holidays and referred to an attachment that was not attached.
Until such time as you provide attachments I cannot respond. Like all other matters you continue to fabricate additional items in an attempt to recoup funds since my departure. Holiday reconciliations prepared by myself have been issued to you every year for some 3 or 4 years for which you have never disagreed until my resignation. As such these previous reconciliations issued to you are deemed agreed. Extra days and hours I provided you over and above a typical working week for the past 12 years will far out way [sic] any half days off for sickness, or need to have car repairs undertaken or anything personal.
As per previous correspondence you will receive a letter from my solicitor this week. All future correspondence regarding finalisation of profit share, long service leave, holiday pay and anything pertaining to my employment with InVogue Projects Group will be via my solicitor only.
Your actions and threatening tactics have broken any trust I had in you and as such I will no longer have any direct dealings with you in these matters. All I wanted, and still want, is for this to be reconciled fairly as per your obligations under law as an employer and the agreement in place pertaining to my annual salary and profit share. However your arrogance as depicted in your threatening emails and fabrication of apparent loans does not allow this. You are clearly not an honourably [sic] person and as such you have left me with no alternative.
Please refrain from corresponding directly with myself or my wife on any matter relating to my previous employment with InVogue Projects Group."
Mr Blazevic replied with the following email on the same day:
"Paul,
Further to my previous advice and your reference and alligation [sic] of account manipulation.
I have advised the Accountants to arrange for an audit and a report to the ATO.
You have obtained funds on fabricated data, knowing the level of trust that you enjoyed and are now making threats which only serve to confirm my concerns as to intent.
In light of the already instigated litigation and inevitable direction that you will be taking, I have requested statements from contractors to confirm that no one was asked by me to alter project related details. My personal Bank records, Company and Personal Tax lodgements will further disprove your assertions.
Likewise the same will apply to you.
The matter is in the Court and you should consider the full cost.
You can minimise significant expense by making payment as last requested. The balances can be mediated by our legal representatives.
The amounts being claimed through the Court do not include your holiday entitlements and I will address those, as soon as they are received from your representatives.
We will be relying on this correspondence as to costs, when the matter is before the Court."
The claims in this last email are untruthful. Mr Blazevic never arranged for his accountant to "arrange for an audit and a report to the ATO". As Mr Bridges, the plaintiff's accountant, stated in his evidence, the accounting firm could not do so for conflict of interest reasons. In addition, Mr Bridges was not a registered auditor. The company's records were never audited. There was no report to the ATO.
Credit issues in relation to Lavert and defendant
As Mr Bridges, the company accountant, acknowledged (T 195), the basis of the calculation of profit share depended upon the basis agreed upon by the parties. Each of Lavert and defendant asked me to make an adverse credit finding against the other in determining whose version to accept.
The credit of Mr Blazevic
As the factual background to these proceedings shows, there was a substantial failure by Lavert to pay superannuation to several of its employees, and not simply to Mr Boyd. Looking at the financial records tendered, it would appear that while Mr and Mrs Blazevic's own superannuation components were paid, other employees, including Mr Boyd, were not.
Non-compliance with statutory taxation obligations is a matter of great seriousness. The facts in this case are similar to O'Halloran v Legal Profession Complaints Committee [2013] WASCA 59 where, over a period of nearly three years, a solicitor did not pay superannuation for most of his employees. This was despite a member of staff alerting him to non-compliance (at [14]-[17]). That conduct was viewed seriously by the court. Failure to make such payments over a long period of time is an appropriate issue to take into account in relation to credit issues.
Mr Blazevic, however, minimised his failure to pay superannuation as follows:
"Q. You are aware of your obligations, aren't you, to pay your staff their entitlements?
A. Yes, I am.
Accordingly, noting that the defence of estoppel by representation persists as a potential separate defence to a claim for restitution of money paid out by mistake, I am of the view that such estoppel arises in this case. The inequality of bargaining power between Mr Boyd and his employer, in circumstances where significant sums had unconscionably been withheld from him for most of the period of time he had been employed in Lavert, warrant a finding that estoppel is made out.
I additionally note a reference during the hearing that the sum of $80,000 as having included superannuation elements. This is incorrect. Mr Blazevic's affidavit of 14 March 2012 makes clear in paragraph 59 that he made a payment of $80,000 "for your bonus payments". Accordingly, the question of the entitlement of a party to bring proceedings in the District Court to claim superannuation should play no part in the determination of the statement of claim.
Conclusions in relation to the sums claimed in the amended statement of claim
The plaintiff has failed to establish each of its claims in paragraphs 5, 6 and 7 of this pleading. Judgment will be entered for the defendant.
The cross-claim
The plaintiff has failed in all claims in the statement of claim. There is considerable factual overlap in terms of factual issues with the cross-claim, which may accordingly be dealt with more briefly.
The cross-claim contains the following claims:
(a) A claim for outstanding superannuation of $76,810.07. It is unclear to me (this document having been filed on 1 November 2011) if this allows for the payment of $32,050 made on 21 June 2011. This is one of a series of difficulties I have had with the submissions made on behalf of Mr Boyd concerning quantum.
(b) The claim for outstanding holiday pay of $11,500 (paragraph 16B of the cross-claim) is admitted.
(c) The claim for outstanding long service leave of $6,636 is challenged, on the basis that Mr Boyd was paid the sum claimed of $24,175 in full.
(d) The remaining claim consists of the profit share obligation, for which the balance outstanding is $81,607.51 (cross-claim, paragraph 16D).
Claim for unpaid entitlements of holiday pay, long service leave and leave loading
Lavert has admitted, in paragraph 12 of the defence to the cross-claim, that when Mr Boyd resigned on 23 September 2009, entitlement of superannuation, holiday pay and long service leave owing to Mr Boyd were outstanding and had not been reconciled. Calculations of outstanding entitlements were provided to Lavert's accountant by Mr Boyd. Lavert's accountant, Mr Bridges, was cross-examined as follows:
"Q. If you had been asked at any stage to operate the MYOB accounts and to print out all payments made by or on behalf of Mr Boyd by Lavert company, that's something which the MYOB accounts would produce relatively instantaneously.
A. Yes.
Q. From the MYOB accounts, had you been asked, would you have been able to, during the period of Mr Boyd's employment, print out the holiday pay which he had been paid?
A. Yes, normally that's correct, but we did have an issue between 2004 and 2006 where there wasn't - there was bookkeepers there and there wasn't bookkeepers there. Reconciliations were done only on a bank statement type situation.
Q. Yes. Subject to that qualification
A. That's correct.
Q. it would have been relatively straightforward to print out the holiday pay using those computerised accounts?
A. If the system was used correctly, but in that period of time it wasn't.
Q. Yes, 2004 to 2006 it wasn't. But for that limited period, 2004, 2006, had you been asked, it would have been possible by alternate means
A. Manually, yes.
Q. manually to have prepared those details relatively quickly and easily.
A. Yes.
Q. In relation to calculating the superannuation entitlements owing to any employee and in particular Mr Boyd during the course of his employment, would it have also been relatively simple and straightforward, using that accounting system, to print out the superannuation payments that had been paid for Mr Boyd?
A. Yes.
Q. And would it have been relatively simple and straightforward to calculate the superannuation which was owing to him?
A. That's correct, yes.
Q. Were you ever asked to do that?
A. I can't recall, no.
Q. In relation to long service leave, I think you prepared a balance owing for Mr Boyd at the request of Mr Blazevic.
A. Yes." (T 184-185)
The first of these is holiday pay.
Holiday pay
In cross-examination Mr Blazevic agreed the amount owing and unpaid to Mr Boyd as at the date of resignation was $11,500:
"Q. Mr Blazevic, you just said if he told you the number of days you would pay immediately. He's particularised 4.6 weeks at two and a half dollars a week, $11,500. He's done what you asked.
A. That was in 2011, I think, was it? I asked Mr Boyd up to the Christmas period just to confirm what it is. I would be more than happy to pay whatever the days were. I had no issue in doing that.
Q. All right.
A. The crossclaim came in November and all of that was then handled by the whole legal system.
Q. Well, bearing in mind that he's now told you it's 4.6 weeks, do you accept that you owe him 4.6 weeks of holiday pay?
A. I'd be more than happy for
Q. Is that a yes or a no?
A. Yes.
HER HONOUR: All right, so how much is that?
RICH: It's 11 and a half thousand dollars.
HER HONOUR: All right. So you agree you owe him 11 and a half thousand dollars for?
RICH: The holiday pay.
HER HONOUR: The holiday pay; that's agreed? All right. Yes, please continue." (T 75 lines 20-47)
Mr Boyd is entitled to payment of this sum.
Calculation of unpaid long service leave
Mr Boyd has set this claim out in his affidavit (Exhibit 2, at p 112-129). I note the correction of a mathematical error in the written submissions provided on Mr Boyd's behalf showing the balance outstanding as being $8,641 plus interest from the date of resignation (16 September 2009). The written submissions provided on behalf of Mr Boyd (at page 17) state that this amount has been confirmed and calculated by Lavert's financial controller, Mr Edwards.
This is calculated at employment for 11 years and 8 months from 16 February 1998 to 16 October 2009. During the hearing, there was some dispute about Mr Boyd resigning and going on a long holiday in 2002. This is not referred to in the submissions from the plaintiff; all that is stated is that Mr Boyd had in fact been paid $24,675 gross in respect to long service leave (see the affidavit of Mr Blazevic, exhibit 1, at p 26). In the absence of any challenge to the entitlement of long service leave over this particular period, I propose to accept the calculations of Mr Rich as set out at page 17 of his written submissions. The explanation for the payment is that this spreadsheet prepared in 2007 mistakenly referred to long service leave owing as $4,530. A net amount of $3,530 was paid by Lavert, but the reference to "long service leave" was wrong and it is in fact "leave loading". This leave loading was paid, but long service leave was not paid.
Mr Boyd was cross-examined on the basis that this was a recent invention, and gave the following evidence at T 291-292.
There is an unfortunate history of changes of position by the plaintiff in the pleadings in relation to long service leave. Initially, the plaintiff pleaded that no long service leave was payable, and a statement which was withdrawn in the amended statement of claim filed in July 2012. The plaintiff's plea that the amount of $15,714 paid on 6 February 2009 represents the net amount is, as Mr Rich notes in his submissions, unsupported by accounting records, payroll certificates or other evidence. Mr Rich notes that the financial controller/bookkeeper was not called (written submissions, p 18).
Doing the best I can with this inadequately pleaded and particularised claim, and the unsatisfactoriness of the explanation relating to events in 2007, my finding is that the cross-claimant has not discharged the onus of proof in relation to the claim for unpaid long service leave. Accordingly, I do not propose to make any allowance for this sum.
This brings me to the issue which dominated the proceedings, namely the claim for superannuation.
Superannuation
On 21 June 2011 Lavert made an "arbitrary" (Mr Rich's written submissions, paragraph 8) payment of $32,050 towards unpaid superannuation. Neither party enlightened me as to how this was to be applied in relation to the claim made by the cross-claimant for unpaid superannuation. However, this was only the first of many problems which I had in relation to this issue.
The jurisdictional claim in relation to superannuation
Paragraph 16 of the cross-claim sets out the claim for outstanding superannuation in the sum of $76,810.07, as well as outstanding holiday pay, long service leave and profit share.
The defence consists of a mere denial.
The first notice that Mr Boyd, or the court, had that there was any other basis for refusal to pay superannuation occurred at T 63 when Mr Saunders said:
"SAUNDERS: Your Honour, can I just say at this point, and your Honour should be aware of this, that there are two answers we say to this point about superannuation. The first is we say it's been paid, and there's a factual dispute about that. The second answer is there's no jurisdiction in this Court to make an order in respect of superannuation. I've developed that further in submissions, but I just want your Honour to be aware of that.
HER HONOUR: What's your authority for that?
SAUNDERS: There's a decision of the Supreme Court of his Honour Davies J." (T 63-64)
Mr Saunders went on to say that this issue had not been raised in the defence because "if the Court doesn't have jurisdiction it doesn't have jurisdiction" (T 64). It was in those circumstances unnecessary to plead the matter in the defence. Mr Saunders continued at T 65:
"SAUNDERS: The way in which the superannuation legislation works is this, an employer is obliged under the superannuation legislation to make payments in respect of superannuation to employees. If it does not do so, the Australian Taxation Office can levy a charge against the employer. The employer then pays that charge to the ATO. The ATO then puts the money paid by the employee into the employee's account. If the employer refuses to pay the ATO, the ATO takes proceedings against the employer--"
The obligation of a defendant (or cross-defendant) to plead relevant issues so as not to take an opponent by surprise was explained by the Court of Appeal in Kirby v Sanderson Motors Pty Ltd (2001) 54 NSWLR 135 as follows (at [18]-[21]):
"[18] In my opinion, the case does raise a question of some general importance, namely the extent to which a cause of action must be spelt out in District Court pleadings.
[19] Quite apart from Pt 5 r 6A, to which Mr Holmes referred, and which does not have any equivalent in the Supreme Court rules, there are relevant District Court rules which do have equivalents in the Supreme Court rules. Firstly, in District Court rule Pt 9 r 3(1), it is provided that "a pleading of a party shall contain, and contain only, a statement in a summary form of the material facts on which he relies ...". This is similar to Supreme Court rule Pt 15 r 7(1). District Court rule Pt 9 r 9(1) provides that "Lavert shall, in his originating process, plead specifically any matter which, if not pleaded specifically, may take Mr Boyd by surprise". There is a similar provision in Supreme Court rule Pt 15 r 13(1).
[20] It might appear that these rules do not require that causes of action be stated in pleadings: the requirement is to have a statement of material facts, and indeed to have only such a statement. However, in my opinion -
(1) "Material" means material to the claim, that is, to the cause or causes of action which are relied on.
(2) The requirement of a statement of material facts does not exclude the allegation of legal categories, such as duty of care, fiduciary duty, trust and contract.
(3) The general requirement to avoid surprise means that material facts must be stated in such a way that a defendant can understand the materiality of the facts, that is, how they are material to a cause of action.
[21] Accordingly, even on the basis of these rules which are common to the District Court and the Supreme Court, I do not take cases such as Konskier as establishing that there is never any requirement to do more than set out facts. Where there is a danger of surprise, which arises particularly where there is lack of precision and clarity in the pleading, it may well be appropriate to require a plaintiff, either in a statement of claim or in particulars, to explicitly relate the facts it pleads to specified causes of action."
The obligation of a party to plead with precision was dealt with most recently in Watson v Meyer [2013] NSWCA 243 at [81]:
"Dr Morrison contends it was impermissible for her Honour to entertain the unpleaded statutory defence under ss 5F and 5G. I agree. Although Mr Menzies relies on the fact that the issues relating to the relevant Civil Liability Act sections were before her Honour "and dealt with by the parties", that was in the context of the common law defence that was pleaded. Cases are to be determined on the issues raised in the pleadings. In circumstances where there was objection taken to the pleading, and no application to amend the pleading, Mr Meyer should have been held to his pleaded case. It could not be said that Ms Watson had acquiesced in a departure from the pleadings in the sense considered in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2008] NSWCA 206. I accept that it does not appear that Ms Watson pointed at the hearing to any particular prejudice that would be suffered at that stage by a consideration of the unpleaded statutory defence. Nor was any such prejudice identified on the appeal. Nevertheless, on the pleadings the defence was not open. Insofar as a formal amendment was required, Mr Menzies indicated that Mr Meyer sought leave to do so. Ultimately, whether any such leave is granted for such an amendment is a matter for consideration on the remitter."
All of the above decisions demonstrate that a party who raises unpleaded defences at a trial does so at their own risk. This is particularly the case where the matter which is neither pleaded nor particularised raises an issue which, if accepted by the court, would have ramifications of the utmost significance for conduct of litigation, but only by the parties in these proceedings, but by parties in any proceedings in Australia where a claim is made for superannuation.
Having noted these matters, which I view with concern, I now turn to a consideration of the decision in Akmeemana v Murray [2009] NSWSC 979.
The decision in Akmeemana v Murray [2009] NSWSC 979
The decision of Davies J in Akmeemana v Murray, supra, which was asserted to be authority for this proposition, stops well short of saying that an employee, whose superannuation has been unpaid, has no standing to commence proceedings for recovery of unpaid superannuation.
The claim brought in Akmeemana v Murray, supra, related to breaches of contract by way of failure to pay superannuation and failure to pay certain commissions. Mr Saunders, who was counsel for Lavert in these proceedings, appeared before the Magistrate and persuaded the Magistrate (at [32]) that the court was without jurisdiction in respect to the claims for superannuation. The Magistrate found that the court could not order Mr Akmeemana's employers to pay the damages, but held that there is a liability to pay superannuation with respect to commissions earned by Mr Akmeemana.
Davies J said at [35]-[38]:
"[35] Although there was a failure to pay superannuation on the commission expressed in cl 4 of the Agreement to be payable for the months of May and June 2007 it does not seem to me that the Plaintiff is entitled to damages for that failure. The obligation on the employer to pay contributions to the superannuation fund was an obligation imposed by law. In that way, a breach of the obligation did not give rise to a claim for damages on the part of the Plaintiff: Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 421-422. Nor does the fact that the obligation imposed by law was reproduced as cl 8 of the contract convert the obligation as one arising by agreement rather than retaining its character as a right imposed by law: Byrne at 420; Amalgamated Collieries of WA Ltd v True (1938) 59 CLR 417 at 423.
[36] Further, the Plaintiff suffers no loss for which compensation is payable now as a result of any failure to make the contribution to the superannuation fund. The Plaintiff has not identified any basis on which he would currently be able to access his superannuation. I was informed by Mr Saunders for Geller & Associates, and without any dissent from Mr Sleight, that if an employer fails to make a superannuation contribution at the appropriate level the Australian Taxation Office administers or imposes a superannuation guarantee charge on the employer. That charge is collected from the employer and paid into the employee's superannuation fund. This might happen simply through random auditing on the Australian Taxation Office's part or might happen as a result of a complaint made by an employee who ascertains that an employer has not made the appropriate superannuation contribution. If this happens in the present case, the Plaintiff will receive the full benefit from the superannuation contributions exacted under this scheme.
[37] If the Plaintiff were to be awarded damages in respect of the failure to make the May and June 2007 payments he would, first, receive more than his entitlements because the money would be paid now rather than when he legitimately became entitled to his superannuation and, secondly, might result in him being compensated twice if the employer was obliged under the superannuation guarantee charge to make the contribution at any time between now and when the Plaintiff became entitled to access his superannuation.
[38] In my opinion, the Magistrate was correct in saying (in para [19]) that he could not order Geller & Associates to pay a certain sum in damages in respect of that superannuation. The Magistrate expressed it in terms of its being a consequence of a breach of contract, but for the reasons I have given, that explanation was not correct.
[39] Geller & Associates also argues that the Plaintiff might already have been overpaid in relation to the May and June contributions on the basis that the amount of commission paid to him in those months ought to have been reduced by the 9% contribution required to be made by the employer. This argument relates to the principal argument put by Geller & Associates in relation to the remainder of the claim for superannuation. The argument is that as a matter of proper construction of the Employment Contract the Plaintiff was only entitled to net commission after deduction of any superannuation which in fact was payable on the commission. Geller & Associates points to the difference in the first part of cl 4 where it is said that superannuation was payable "additional to your base salary" but no such term was stipulated in relation to commission."
Mr Boyd's right to have superannuation contributions placed in his fund arise under the Superannuation Guarantee (Administration) Act 1992 (Cth) and the Superannuation Guarantee Charge Act 1992 (Cth). While Mr Boyd does not have a separate contractual right to be paid superannuation, does that mean that this court has no jurisdiction to hear such a claim, or that Mr Boyd has no standing to bring it, or both?
Submissions concerning jurisdictions, or lack thereof, of the District Court in relation to unpaid superannuation
The statements by Davies J in Akmeemana v Murray, supra, are obiter; he did not determine the issue on the basis of jurisdiction, but by reason of consequence of a breach of contract (at [38]).
No case prior to Akmeemana v Murray, supra, had entertained similar submissions. More importantly, no case has done so since that time. Claims by a plaintiff for unpaid salary and superannuation are routinely determined without any issue of jurisdiction, or lack thereof, being submitted. I have not conducted any extensive research, but two recent decisions are:
(1) In Waddell v mathematics.com.au Pty Ltd (No 2) [2013] NSWSC 988, an action for recovery of unpaid salary and other entitlements including superannuation, Rothman J awarded damages to Mr Waddell for breach of contract, being non-payment of wages and unpaid leave, which included unpaid superannuation, calculated at 9% of the gross wage, payable under the employment contract (at [16] and [21]) together with interest.
(2) In Ware v Amaral Pastoral Pty Ltd (No 5) [2012] NSWSC 1550, an action for recovery of unpaid entitlements by an employee following termination of his employment, Beech-Jones J awarded outstanding wages and superannuation for an 18-month period plus interest (at [46], [49], [51] and [227]).
The same is the case in the Court of Appeal. In McGrath v Sturesteps; Sturesteps v HIH Overseas Holdings Ltd (in liq) (2011) 81 NSWLR 690, orders were made for the payment of an employee which included (order 4(b)) an order for $18,493.31 for "unpaid superannuation".
The concern expressed by Davies J in [36] of Akmeemana v Murray, supra, that payment to any source other than the superannuation fund might result in a double levy should not be a concern which troubles the court. Payments are routinely made to plaintiffs in personal injury litigation which include a component for superannuation. This includes not only past, but future, superannuation. This is because the superannuation component of the past and future wages represents a portion of the salary of an employee.
The principal basis upon which Mr Saunders challenges the claim of lack of jurisdiction in relation to superannuation is that this has not been pleaded (paragraph 12 of the outline of submissions of 29 October 2012; paragraph 12 of the submissions of 11 February 2013). The dismissive way in which the complaints about failure to plead should be seen in context of:
(a) The circumstances in which the first hearing was vacated by reason of the plaintiff's unreadiness to proceed;
(b) The circumstances in which the pleading handed up in court on 26 March 2012 was amended again on 17 July 2012;
(c) The failure to refer, in either of these pleadings, to the payment of $32,050 made on 21 June 2011 in relation to superannuation;
(d) The long history of Lavert having failed to pay the superannuation not only for Mr Boyd but for other employees; and,
(e) The failure of Mr Blazevic to make good his promise to have the accounts of the plaintiff audited.
In Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116 the New South Wales Court of Appeal warned litigants in the District Court not to conduct trial by ambush. The history of these proceedings shows that Lavert has ignored these warnings.
Courts should not encourage the bringing of novel and untested claims, particularly at the District Court level, where those claims, if accepted, could result in significant changes to the conduct of litigation. Claims made by Lavert, in relation to superannuation, are not only unpleaded and unparticularised, but the nature and extent of what order should be made in this claim were never explained. Does Lavert, for example, ask for the return of the $32,050 which it arbitrarily paid to Mr Boyd on 21 June 2011? This was never made clear.
The finding I make in relation to superannuation is that by reason of the failure of Lavert to plead and particularise any issue relating to jurisdiction, this claim should not be entertained. In the event that I have erred in so finding, I have set out the basis upon which I am satisfied that courts entertaining claims of this nature, namely claims for unpaid wages, are entitled to make orders which include payment of unpaid superannuation.
The submissions of the ATO
The submissions of the parties in these proceedings have been provided to the ATO. I am indebted to the ATO for its response to two questions posed by the court on 13 November 2012 as follows:
(1) Does the collection mechanism administered by the Australian Taxation Office to obtain superannuation on behalf of employees who claim superannuation payments have not been made by their employer "cover the field" or is a superannuant entitled to bring proceedings for recovery of unpaid superannuation in a court?
(2) If the superannuant is entitled to claim superannuation in civil proceedings in a court, should the court pay these sums to him/her directly (in the manner commonly adopted in personal injury actions), or to an appropriate superannuation body?
The submissions made by the ATO are expressly limited as being a comment upon the interpretation of legislation for which the Assistant Commissioner has general administration (Commissioner's submissions, paragraph 2(b)). However, the Assistant Commissioner accepts that proceedings can be brought for the recovery of unpaid superannuation pursuant to the Fair Work Act 2009 (Cth) or otherwise. The Assistant Commissioner made no submission that recovery rights in relation to unpaid superannuation were exclusive to either:
(a) The administrative regime established by the Superannuation Guarantee (Administration) Act 1992 (Cth). The remedies under the Fair Work Act made it clear that this is not the case; or
(b) the Fair Work Act 2009 (Cth).
Counsel for the defendant/cross-claimant draws to my attention that the plaintiff in its reply has accepted that an employee may be entitled to bring separate proceedings for recovery in a court.
Mr Boyd has both a statutory right to payment of superannuation and a contractual entitlement to profit share, long service leave and other work related entitlements. Section 548 Fair Work Act 2009 (Cth) makes it clear that the Superannuation Guarantee (Administration) Act 1992 (Cth) does not confer exclusive administrative jurisdiction for recovering unpaid superannuation on a particular court. The remedy under that Act is an action in a Magistrates court or a Federal Magistrates court for unpaid superannuation arising under that Act. The Fair Work Act 2009 (Cth) applies only to national system employee in respect to the terms of a national award and is not relevant to the right of recovery and enforcement of entitlements pursuant to contracts of employment made outside its provisions, as the Fair Work Act 2009 (Cth) makes clear in ss 26-27, where the Act clearly acknowledges and preserves additional remedies.
Nor is there an issue of a hypothetical possibility of being compensated twice. Superannuation is commonly awarded in a range of judgments, most particularly in personal injury matters, but in many other actions involving employment related loss. Any issue in relation to the liability of the employer when a party becomes entitled to access his or her superannuation can readily be resolved by reference to the court finding or judgment in question and, in any event, is not material, as is made clear by the existence of s 548 Fair Work Act 2009 (Cth).
These answers to these questions were not accepted by Lavert and a further two questions were posed by the court as follows:
(1) The plaintiff says the ATO has conceded that only a "narrow class" of persons can bring an action in a court, namely, those eligible to bring proceedings under the Industrial Relations Act 1996 (NSW) or the Fair Work Act 2009 (Cth), and that this court must be the Local Court if it is a Fair Work claim. As the plaintiff's claim is for superannuation under the 1992 legislation, and he does not fall within the limited class of employees, this means that he can only recover these sums if the ATO brings the claim. Is this a correct analysis of your submissions?
(2) It would assist both the parties and the court if you could confirm whether "a court" in Question 1 means "only a Local Court, but only if it is under the Industrial Relations or Fair Work legislation".
In relation to Question (1), the ATO submits:
(a) This is no a correct analysis of the Commissioner's written response. The Commissioner's response at paragraph 1(d) refers to employees that may be entitled to bring separate proceedings for recovery of unpaid superannuation in a court pursuant to legislation other than the Superannuation Guarantee (Administration) Act 1992. The Fair Work Act 2009 (Cth) is provided as one example of another relevant Act.
(b) The Commissioner is not in a position to, nor does he make any comment as to whether the class of employees who may be entitled to bring an action pursuant to other legislation is narrow or otherwise. The Commissioner is not a party to these proceedings and is unable to comment on whether the defendant falls within this category of employees.
(c) As the ATO does not administer the Fair Work Act 2009 (Cth) or the Industrial Relations Act 1996 (NSW), it is outside the ambit of the ATO to comment on how and in what circumstances proceedings pursuant to this legislation may be brought. Paragraphs 1(e)-(f) of the Commissioner's response provided examples of provisions of the Fair Work Act 2009 (Cth) that relate to bringing claims under this legislation, however, as stated at paragraph 1(g), this is the extent to which the Commissioner is able to assist on this point. Further information may be sought from Fair Work Australia and/or the Fair Work Ombudsman.
In relation to Question (2), the ATO submits:
(a) As noted in paragraph 1(b) above, as the ATO is not responsible for administering the Fair Work Act 2009 (Cth) or the Industrial Relations Act 1996 (NSW), it is outside the ATO's ambit to comment on where proceedings pursuant to other legislation should be brought.
The submissions of the parties concerning superannuation
The principal basis upon which the defendant/cross-claimant challenges the raising of these issues is that this issue is not pleaded in the defence to the cross-claim and the plaintiff/cross-defendant should not be permitted to rely upon this alleged defence (paragraph 12, written submissions provided on 18 April 2013). I accept that submission.
However, if I have erred in so doing, I am satisfied that this court has jurisdiction for the reasons set out above.
This brings me to the problem of how to calculate the outstanding superannuation. The sum set out in the cross-claim was as follows (at paragraph 16):
Outstanding superannuation
Particulars
Superannuation owing as at June 2007
$37,501.53
Superannuation owing June 2007 - June 2010
$4,438.79
Interest to June 2007
$25,473.63
Interest 6/07 - 6/08
$11,216.68
Interest 6/08 to 6/09
$14,127.10
Interest 6/09 to 6/10
$16,696.39
Balance
$109,454.11
Less unit renovations
$32,644.04
Total superannuation outstanding
$76,810.07
This calculation has many defects, none of which had been answered in counsel for the defendant's written submissions. The first of these is that the sum of $32,050 was paid after this litigation was commenced, and this does not appear to be reflected in this sum. Secondly, the basis upon which interest was claimed has never been explained. I have no details whatever about the calculation of these amounts in the written submissions provided, and I was not addressed orally on the subject.
It would appear that the amount claimed for superannuation owing as at June 2007 ($37,501.53) together with superannuation which was unpaid between June 2007 and June 2010 ($4,438.79) would be claimable, but that from this sum the amount of $32,050 should be deducted. That amount is $9,890.32. The figure come to by the plaintiff/cross-defendant was $9,889.42. That figure is mathematically correct. Interest at court rates would be available on this sum. To award additional interest in the manner set out in paragraph 16 of the cross-claim would be surplusage. I note the submissions of the plaintiff/cross-defendant in relation to the issue of interest as set out in paragraphs 50-51.
Since I have not been addressed by either the defendant/cross-claimant on the precise sum quantified, I have granted the parties liberty to provide short minutes of order reflecting the mathematically agreed sum including interest.
I have not made allowance for the tax issues arising from the lump sum payment of $32,050 in one year. Leaving aside the issue of the defendant/cross-claimant's failure to calculate this sum, this is one of the consequences of having to bring proceedings for unpaid superannuation (as occurs in actions for personal injury or breach of contract of employment).
The claim for profit share
The claim for profit share is set out in paragraph 16(d) of the cross-claim as follows:
Outstanding profit share for years ending 30 June 2006 - 30 June 2009
Particulars
Total Profit Share Obligation
$255,532.03
Less payments made
$173,924.52
Balance outstanding
$81,607.51
As I have indicated above, where there is inconsistencies between the evidence of Mr Blazevic and Mr Bridges with the evidence of Mr Boyd, I prefer to accept the evidence of Mr Boyd. The agreed basis of the profit share payment was:
(a) 7% up to $1 million;
(b) 10% over $1 million;
(c) a minimum amount of $20,000.
It is the basis and quantification of the applicable accounts to which profit share is an issue which was in dispute.
Mr Blazevic said in his evidence (T 145-146) that there was no agreement as to whether it was to be on a cash or accrual basis, and that in fact the taxation financial statements were never provided or relied upon for payments made, and were often prepared after the event.
I accept the submissions of counsel for the defendant/cross-claimant that the end of year financial taxation statements were inappropriate because they did not distinguish between the construction work carried out in the Sydney office and in other parts of InVogue, in circumstance where there was clear agreement between the parties that the calculations would exclude residential developments, design costs relating to the design section of InVogue, residential works and projects not completed by the Sydney construction office and the costs and financial components relating to Blazae Pty Ltd. In addition, as Mr Boyd noted in his contemporaneous correspondence, the personal expenses for Mr Blazevic and his family were items which should come out of the profits after the profit share was calculated.
Mr Saunders also draws my attention to paragraph 31 of Mr Blazevic's affidavit of 14 March 2012 and to the fact that the annual financial statements were never relied upon by the parties or even provided to the defendant until after he resigned. They clearly could not be the basis for calculation of the profit share.
I received no submissions from the cross-defendant as to quantum. The cross-defendant's quantum rely solely upon the onus of Mr Boyd to prove his claim in circumstances where the calculations for profit were "made on the basis of draft interim financial statements" (written submissions, paragraph 41), and upon my accepting the method of calculation the plaintiff put forward. Both parties ran their case on an "all or nothing" basis; the court would either accept or reject their respective approaches to the calculation of profit share. The principal matter raised was that Mr Boyd did not lead any evidence to establish what he assert was the actual profit figures for each of the relevant years, such as audited figures for the plaintiff, and that Mr Bridges' figures and method of calculation was to be preferred.
I have not accepted Mr Blazevic or Mr Bridges as witnesses of credit, and I do not accept that Mr Bridges has the expertise of an auditor. I also reject Mr Blazevic's explanation of not having had an audit carried out because of the expense. This was not a step that Mr Boyd could have embarked upon.
In the absence of any specific challenge to the mathematical quantum of the cross-claim, apart from the challenges to the calculation method (which I have rejected), I accord the full sum claimed by the cross-claimant. The parties may bring in Short Minutes of Order reflecting the mathematically agreed calculation in relation to interest, with liberty to restore.
I thank the ATO for their assistance in answering the questions formulated in relation to the issue of superannuation, and Ms Foda and her instructing solicitor, Ms Hobart, for their invaluable assistance.
Orders
(1) Judgment for the defendant against the plaintiff.
(2) Judgment for the cross-claimant against the cross-defendant.
(3) Liberty to the cross-claimant to bring in Short Minutes of Order reflecting the mathematically agreed sum, inclusive of interest, in relation to the cross-claim.
(4) Plaintiff/Cross-defendant pay defendant/cross-claimant's costs.
(5) Liberty to restore in relation to costs and interest.
(6) Exhibits retained for 28 days.
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Decision last updated: 02 July 2014
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