Manchee v BTIG Australia Limited
[2022] FedCFamC2G 813
Federal Circuit and Family Court of Australia
(DIVISION 2)
Manchee v BTIG Australia Limited [2022] FedCFamC2G 813
File number(s): SYG 2318 of 2021 Judgment of: JUDGE CAMERON Date of judgment: 6 October 2022 Catchwords: INDUSTRIAL LAW – set-off – whether payments for specific purposes can be treated as satisfying award obligations
INDUSTRIAL LAW – Fair Work Act 2009 (Cth) – compensation for loss under s.545 of the Fair Work Act
Legislation: Fair Work Act 2009 (Cth) ss. 44, 45, 87, 90, 545 Cases cited: WorkPac Pty Ltd v Rossato (2020) 296 IR 38
ANZ Banking Group Ltd v Finance Sector Union of Australia (2001) 111 IR 227
James Turner Roofing v Peters (2003) 132 IR 122
Poletti v Ecob (No 2) (1989) 31 IR 321
Moree Plains Shire Council v Goater (2016) 14 ABC(NS) 255
Ray v Radano [1967] AR (NSW) 471
Fair Work Ombudsman v Transpetrol TM AS [2019] FCA 400
Linkhill Pty Ltd v Director, Office of the Fair Work Building Industry Inspectorate (2015) 252 IR 69
Byrne v Australian Airlines Ltd (1995) 185 CLR 410
Jemena Asset Management (3) Pty Ltd v Coinvest Ltd (2011) 244 CLR 508
Bell v Gillen Motors Pty Limited (1989) 24 FCR 77
Dafallah v Fair Work Commission (2014) 225 FCR 559
Leggett v Hawkesbury Race Club Limited (No 4) [2022] FCA 622
Division: Fair Work Division Number of paragraphs: 65 Dates of hearing: 24, 25 August 2022 Place: Sydney Counsel for the Applicant: Mr R. Millar Solicitors for the Applicant: Opus Legal Counsel for the Respondent: Mr M. Seck Solicitors for the Respondent: McArdle Legal ORDERS
SYG 2318 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: ANDREW MANCHEE
Applicant
AND: BTIG AUSTRALIA LIMITED ACN 128 554 601
Respondent
order made by:
JUDGE CAMERON
DATE OF ORDER:
6 October 2022
THE COURT ORDERS THAT:
1.The application be dismissed to the extent that it sought compensation under s.545 of the Fair Work Act 2009 (Cth).
2.The application stand over for further directions to the extent that it sought pecuniary penalties under s.546 of the Fair Work Act 2009 (Cth).
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE CAMERON
Introduction
The applicant, Mr Manchee, was employed as a “sales trader” by the respondent, BTIG Australia (“BTIG”) from 3 December 2012 until 13 April 2021. He alleged that BTIG had breached the Banking, Finance and Insurance Award 2010 (“2010 Award”) and the Fair Work Act 2009 (Cth) (“FW Act”) by failing to provide him with paid annual leave, annual leave loading and minimum wages because, instead of paying him a wage or salary, it had paid him a commission on trades. The parties agreed that the 2010 Award was replaced by the Banking, Finance and Insurance Award 2020 (“2020 Award”) with effect from 4 February 2020, and it was admitted that Mr Manchee’s award classification had been “Level 6”. As there was no relevant and material difference in the terms of the two awards, in these reasons they will generally be referred to collectively as the “Award”.
APPLICANT’s PLEADINGS
In his statement of claim filed 16 December 2021, Mr Manchee alleged that from 3 December 2012 to 26 August 2020 he had been employed by BTIG pursuant to one contract (“2012 Agreement”) and then from 27 August 2020 to 13 April 2021 pursuant to another contract (“2020 Agreement”). He alleged that under the 2012 Agreement he was paid a commission on brokerage earned for BTIG and that under the 2020 Agreement he was paid a salary of $150,000 pa.
Primary Pleading - Employment under the Award
Underpayment of Minimum Wage
Mr Manchee alleged that during the 2012 Agreement, he had been entitled under the Award to a minimum wage paid at the following rates:
Period Weekly rate 3 December 2012 to 30 June 2013 $912.76 1 July 2013 to 30 June 2014 $936.70 1 July 2014 to 30 June 2015 $964.70 1 July 2015 to 30 June 2016 $988.80 1 July 2016 to 30 June 2017 $1,012.50 1 July 2017 to 30 June 2018 $1,045.90 1 July 2018 to 30 June 2019 $1,082.50 1 July 2019 to 30 June 2020 $1,115.00 1 July 2020 to 26 August 2020 $1,134.50
He alleged that by reason of BTIG’s failure to pay him at those rates during the 2012 Agreement, he had been underpaid the following amounts:
Period Weekly rate Weeks Amount 16 December 2015 to 30 June 2016 $988.80 28 $27,686.40 1 July 2016 to 30 June 2017 $1,012.50 52 $52,650.00 1 July 2017 to 30 June 2018 $1,045.90 52 $54,386.80 1 July 2018 to 30 June 2019 $1,082.50 52 $56,290.00 1 July 2019 to 30 June 2020 $1,115.00 52 $57,980.00 1 July 2020 to 26 August 2020 $1,134.50 8 $9,076.00 Total $258,069.20
and that BTIG had therefore contravened s.45 of the FW Act.
Annual leave entitlements
Mr Manchee alleged that pursuant to s.87(1) of the FW Act he had been entitled to accrue four weeks of paid annual leave each year and that, in contravention of s.44 of the FW Act, during the 2012 Agreement BTIG failed to provide him with that leave as required by s.90 of the FW Act. He deposed that any periods of leave he took were unpaid because, while on leave, he was only paid commission that had already accrued from work undertaken before that leave.
Mr Manchee further alleged that upon termination of his employment BTIG failed to pay him out his accrued annual leave entitlement and therefore contravened s.44 of FW Act again. He alleged that BTIG owed him $93,166.30 or, in the alternative $34,656.98, calculated as follows:
Period of employment 8.358 years Entitlement to paid leave @ 4 weeks per annum 33.431 weeks
Payable at the 2020 Agreement rate of $150,000 per annum
Entitlement on termination @ $150,000 per annum $96,437.58 Less payment received on termination $3,271.28 Net underpayment $93,166.30
In the alternative, at the rate specified in the Award of $1,134.50 per week:
Entitlement on termination @ $1,134.50 per week $37,928.26 Less payment received on termination $3,271.28 Net underpayment $34,656.98
Annual leave loading
Mr Manchee alleged that under the Award he was entitled to a 17.5% loading on his annual leave entitlements, which BTIG failed to pay in contravention of cl.24.3 of the Award and s.45 of the FW Act.
Alternate Pleading – Employment not governed by the award
Mr Manchee also alleged in the alternative that he had rights as an award free employee, but those allegations were rendered otiose by BTIG’s admission in its defence that the Award covered him, and were not canvassed at the trial.
Relief sought
Mr Manchee sought:
(a)a declaration that BTIG had underpaid his minimum wages, annual leave, and annual leave loading entitlements;
(b)compensation;
(c)the imposition of pecuniary penalties, payable to him; and
(d)costs.
RESPONDENT’S PLEADINGS
Employment
BTIG admitted that it employed Mr Manchee as a sales trader from 3 December 2012 to 26 August 2020 pursuant to the 2012 Agreement and from 27 August 2020 to 13 April 2021 pursuant to the 2020 Agreement. It admitted that his employment had been covered by the Award.
BTIG denied Mr Manchee’s allegation that under the 2012 Agreement he was only paid commission, alleging that:
(a)he was paid a regular and stable salary for all hours worked during his employment, without reference to commission on sales made and irrespective of whether or not he met agreed or otherwise determined revenue targets;
(b)regular and stable salary was paid during periods of leave; and
(c)from time to time he was paid extra amounts for exceeding targets or as commission on sales.
Allegation of underpayment of minimum wage
BTIG admitted that, pursuant to the Award, Mr Manchee had been entitled to a minimum wage but denied that it had contravened s.45 of the FW Act. It alleged that at all times during the limitation period it had paid him a regular and stable salary which exceeded the minimum wage amount under the Award by $599,957.61 as follows:
Period Minimum Weekly Award Rate Salary per Week Total Payment in excess of minimum per period 16 December 2015 to 30 June 2016 $988.80 $2,318.35 $37,227.33 1 July 2016 to 30 June 2017 $1,012.50 $3,166.49 $112,007.40 1 July 2017 to 30 June 2018 $1,045.90 $3,250.29 $114,628.06 1 July 2018 to 30 June 2019 $1,082.50 $2,982.60 $98,805.40 1 July 2019 to 30 June 2020 $1,115.00 $2,941.33 $94,968.92 1 July 2020 to 13 April 2021 $1,134.50 $5,032.86 $142,320.51
BTIG admitted Mr Manchee had been entitled to paid annual leave but alleged that claims accruing prior to 16 December 2015 were statute-barred. It alleged that Mr Manchee took paid leave throughout his employment and was paid his regular and stable salary as well as commission and extra amounts for exceeding targets.
BTIG denied that on termination it failed to pay Mr Manchee his accrued annual leave entitlements and alleged that he had been paid $3,271.28 in that connection when his employment was terminated.
BTIG admitted that Mr Manchee had been entitled to annual leave loading which it had not paid at the time leave was taken, but which it alleged it had paid 7 months prior to the commencement of this proceeding.
LEGISLATION AND AWARD
The FW Act relevantly provides:
44 Contravening the National Employment Standards
(1)An employer must not contravene a provision of the National Employment Standards.
45 Contravening a modern award
A person must not contravene a term of a modern award.
…
87 Entitlement to annual leave
Amount of leave
(1)For each year of service with an employer (other than periods of employment as a casual employee of the employer), an employee is entitled to:
(a) 4 weeks of paid annual leave; …
…
90 Payment for annual leave
(1)If, in accordance with this Division, an employee takes a period of paid annual leave, the employer must pay the employee at the employee's base rate of pay for the employee's ordinary hours of work in the period.
(2)If, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave.
…
Sections 87 and 90 are provisions of the National Employment Standards.
Clause 13 and cls.21 and later 22 of the 2010 Award provided for minimum wages based on 38 ordinary hours of work per week and calculated according to job classifications. The 2020 Award made similar provision in its cls.13 and 15.
First cl.23.3 and then cl.24.3 of the 2010 Award and cl.22.3 of the 2020 Award both provided for annual leave loading of 17.5%.
APPLICANT’S EVIDENCE
Mr Manchee
In his affidavit affirmed on 14 June 2022, Mr Manchee deposed that on 27 November 2012 he accepted BTIG’s offer of employment by signing an offer letter (“Letter”) which stated, amongst other things:
2.Your remuneration for this position is based on commissions. You will receive an annual draw of A$110,000 per annum against commissions.
(a) Commission will be calculated according to the standard BTIG institutional payout model as outlined in Table 1 attached to this letter.
(b) Commissions will be paid monthly, on a 30 day trailing basis.
3.It is a condition of your employment that you participate in an approved Superannuation Fund. Your remuneration rate outlined above is exclusive of the employer superannuation contributions (up to the statutory maximum amount) made on your behalf by BTIG in accordance with the obligations imposed under the Superannuation Guarantee (Administration) Act and will be based on the annual draw.
4.You will be entitled to four weeks' annual leave for every 12 months of completed service which will be paid at your annual draw rate. Annual leave will accrue from year to year …
5.Long service leave will be provided in accordance with relevant legislation in the State in which you reside. ... Long service leave will be paid based on your annual draw.
Mr Manchee deposed that from 3 December 2012 to 1 August 2020 his remuneration was based on the commissions he earned. He described the method of its calculation in the following terms:
I would do trades with my clients, generating commission for BTIG. BTIG would then take their split (60% initially and then 63% after a few years) - leaving the balance of 40% (then 37% after a few years) ‘attributable’ to myself, less other expenses they deemed fit.
Mr Manchee deposed that he was paid a fixed monthly draw of $9,167 and no additional payments or offsets were ever made in respect of salary, annual leave or carer’s leave. If, at the end of a month, his “attributable” commission earnings were below the $9,167 draw, he would receive his fixed monthly draw nonetheless but BTIG would carry the deficiency forward to the following month when it would be deducted from any attributable commission earned in that month. He deposed that when he was on leave, he would still be paid the standard monthly draw but, because he was not working, it often resulted in a deficit that carried over to future months. He deposed that in effect during his leave he received a loan against future commission which then had to be paid back in the months that followed.
Annexed to Mr Manchee’s affidavit of 14 June 2022 were documents entitled “Commission Worksheet for Andrew Manchee” which recorded payments made to him by BTIG over three months during the term of the 2012 Agreement. They made clear that payments made to him were unrelated to the number of hours or days he worked and were calculated solely by reference to the commission he earned, less associated expenses. They showed that if the commission he had generated for himself did not exceed his minimum monthly draw, he was nevertheless paid the draw, but the shortfall was carried forward to the next month when it was deducted from the commission he earned in that month. He would receive a payment in addition to the minimum monthly draw if, after clearing any carried forward deficit, his commission after associated expenses for the month exceeded the minimum draw payment for that month.
In contrast, the 2020 Agreement provided for a salary of $150,000 per annum and 4 weeks of paid leave per annum. In cross-examination Mr Manchee said that he had not been asked to repay the then-existing deficit in his commission account when he transferred to salary-based pay in August 2020.
Mr Manchee’s employment was terminated on 13 April 2021, at which time he received a $3,271.28 payment for accrued annual leave. He deposed that it did not include any annual leave loading or any payment for annual leave untaken under the 2012 Agreement.
Mr Willis
Samuel Willis worked at BTIG from 2011 to 2021, first as a sales trader and then as joint managing director of the Australian office with Mark Prideaux. He said that his original remuneration had been a draw of $110,000 plus commission. He described the draw arrangement as follows:
… they basically lend you the money up front so you can live your life, and then you generate commission, and then at the end of the day, you pay back the draw amount and then you get given the balance of the commission …
Mr Willis said that if there was a deficit for the month, in the sense that the commission earned was insufficient to cover the draw, one’s account went into arrears until enough commission was earned to cover it. The deficit could carry over for some months.
RESPONDENT’S EVIDENCE
Mark Prideaux
Mr Prideaux was employed by BTIG, originally as a sales trader and latterly as Co-Head of the Sales Trading Group of which part Mr Manchee had been a member. He deposed that if the commission earned by a BTIG sales trader exceeded their monthly draw, the agreed share of the commission exceeding the draw was paid to the employee as additional remuneration. If the commission generated fell short of the draw, the draw was not reduced but the deficit “carried over” so that commission above the draw was not paid the following month unless the commission generated exceeded that month’s draw and the carried over deficit. Mr Prideaux deposed that the minimum draw was the payment of commission earnings in monthly instalments and, in effect, guaranteed earnings because it was paid whether or not an employee generated commission sufficient to cover it. Mr Prideaux deposed that to his knowledge:
(a)no person who resigned or was dismissed had had their termination pay reduced because of a commission deficit;
(b)no person had had their minimum draw reduced during their employment or upon termination; and
(c)commission deficits were not recovered.
His evidence was that when an employee was on leave they received the minimum draw plus any commission above the minimum draw generated during the leave period.He said that it was possible for Mr Manchee to earn commission above the draw while on leave if a colleague assisted with his clients while he was away.
In response to Mr Manchee’s affidavit evidence in chief, Mr Prideaux deposed that:
(a)Mr Manchee never received less than the minimum draw;
(b)the draw was not a “loan” and was never referred to as such; and
(c)Mr Manchee always received the minimum draw or the minimum draw plus any commission generated, including when on annual leave. No amounts were ever “deducted” and he never had to “pay back” his earnings.
Mr Prideaux deposed that upon termination Mr Manchee was paid his untaken leave entitlements based on the minimum draw, as was standard practice with all members of the Sales Trading Group on termination, and later the applicable annual leave loading.
Submissions
Applicant
Mr Manchee’s case was that although during the 2012 Agreement, regardless of whether he was at work or on leave, he received his fixed monthly draw of $9,166.67 regularly and without fail, it was not a salary. He said that, depending on his commission earnings in a particular period, those payments were variously drawings from commissions already earned and credited, or advances on commissions to be earned and credited. He said that although he had received those commission-related payments, he had also had statutory and award based entitlements that had not been paid.
Mr Manchee’s point was that what he had been paid as a matter of fact was irrelevant because no payment had been made by reference to his statutory and award entitlements. His argument was that a payment made for one purpose could not be applied to meet another, in this case BTIG’s minimum statutory and award obligations, and making draws on commission regular and predictable payments did not change their character and make them wage or salary payments.
It was further submitted by Mr Manchee that the annual leave he had taken under the 2012 Agreement was in effect unpaid because, to the extent that he earned less or no commission during such periods, he had had to make up the deficiency against budget before he would again be paid commission above his monthly draws. He also contended that he was entitled to leave loading on annual leave payments already paid and on any outstanding annual leave payments to which he was presently entitled.
Respondent
BTIG’s case was that a payment under a contract that is directed to the same purpose as, or has a close correlation to, a statutory obligation may satisfy that statutory obligation. It referred in that regard to what Wheelahan J had said in WorkPac Pty Ltd v Rossato (2020) 296 IR 38 at 240 [1008], drawing on what had been said in ANZ Banking Group Ltd v Finance Sector Union of Australia (2001) 111 IR 227 at 239 [50]-[54]:
If the payments under the contracts were directed to the same purpose as, or at least had a close correlation to, an obligation under the Fair Work Act to make a payment, then they may be taken into account in satisfying the statutory obligations …
BTIG submitted that to determine whether a contract’s terms should be construed such that satisfaction of the agreement’s payment obligations also satisfied other, award-based payment obligations under an award made pursuant to statute, it was necessary to ascertain what a reasonable person would have understood by the contract’s terms having regard to the objective purpose of the contractual payments set against the surrounding statutory framework and the circumstances known to the parties: WorkPac v Rossato at 239 [1007] per Wheelahan J. BTIG said that the relevant issue was whether there had been an agreed contractual purpose, identifiable from the contract’s express or implied terms, that payments to Mr Manchee satisfied monetary award entitlements. On that basis, it was argued that the way a payment is described has no legal significance, need not have been intended to satisfy a particular statutory entitlement and might even have been paid in ignorance of the statutory requirement.
It was submitted that the first step in that analysis was to determine whether the payments for work that were in fact made might satisfy all the award-based payment obligations concerning that work. In that regard BTIG submitted that it did not matter that the 2012 Agreement referred Mr Manchee’s income as a draw against commissions rather than as salary or by another label because:
The objective context supports the construction of the expression "annual draw against commission" being a reference to “non-recoverable draw” that guarantees that the Applicant receives a minimum amount each pay period. …
It characterised the situation in the following way:
… the minimum draw, and the minimum rates under the BFI Award, were both:
a. guaranteed non-recoverable payments;
b.amounts paid for work performed by the Applicant (and not dependent on achieving commission), and
c.not assigned for any particular distinct statutory obligation.
Accordingly, a simple application of the principles set out above makes clear the minimum draw payments were directed to the same purpose as, or had a close correlation to, and therefore could be applied to satisfy, the obligation to pay minimum rates under the BFI Award.
The same logic was applied to draws paid to Mr Manchee when he was on annual leave, on the basis that:
… the objective purpose of these minimum, guaranteed and non-recoverable payments to the Applicant during periods of annual leave were the same as the purpose of the payment of base pay plus loading on annual leave under s.90(1) of the FW Act and the BFI Award.
Finally, BTIG argued that, in any event, the Court’s discretion to order compensation in this case was not engaged because Mr Manchee had not suffered a loss caused by a contravention of the FW Act as the payments he had received were more than he had been entitled to under the Award.
Consideration
I do not doubt that the witnesses’ evidence was the truth as they saw it. To the extent that there were differences between them, those differences have not been relevant to the outcome of this dispute except in relation to the payment of annual leave loading in 2021 which will be addressed later in these reasons.
As recorded earlier, the basis on which Mr Manchee was employed by BTIG in 2012 was set out in the Letter. His contract provided that his remuneration was based on commission although he would receive a monthly draw regardless of how little commission he earned. How long Mr Manchee would have been allowed to remain if he had not earned reasonable brokerage income for BTIG might be speculated upon, but that appears not to have been an issue for him. That his earnings were in fact paid in satisfaction of his contractual entitlement to his share of the brokerage commission he earned for BTIG is recorded in his monthly commission worksheets, which were not calculated by reference to the number of hours he worked or to hourly or weekly pay rates but by reference to commissions earned and expenses incurred. They recorded two sorts of payment to Mr Manchee, a “Draw Deduction” of $9,166.67 that was paid every month and a “Grand Total Due Sales Person” which, I conclude, was only paid when commissions earned exceeded the total of the “Draw Deduction” and any debit balance carried forward from the previous month.
But regardless of those matters, the only material evidence as to the agreement struck between Mr Manchee and BTIG in 2012 is what is found in the Letter, and its terms admit of no understanding other than that it was agreed that Mr Manchee was to be paid a share of the brokerage commission he earned for BTIG. The Letter makes no reference to the Award and it was not suggested that the Award had been discussed by the parties before Mr Manchee’s recruitment.
The 2020 Agreement provided more conventionally for a salary with related entitlements.
As the figures quoted earlier disclose, the wage that Mr Manchee was entitled to under the Award were significantly less than the payments he in fact received. The question is therefore whether, notwithstanding that the payments to Mr Manchee were paid in satisfaction of BTIG’s contractual obligations under the 2012 Agreement based on the brokerage commission he earned for it, and under the 2020 Agreement in payment of his contracted salary, and were not expressed to be referable to Award entitlements, they might nevertheless be set off against BTIG’s payment obligations under the Award.
Set-off
If an employer, in satisfaction of the undifferentiated entirety of its obligations under a contract to make monetary payment for hours worked, makes a wage payment that equals or exceeds the totality of its statutory obligations to pay for time worked (e.g. ordinary time, overtime penalty rates), that payment may be applied to the satisfaction of those various obligations: ANZ v FSU at 239 [51]; James Turner Roofing v Peters (2003) 132 IR 122 at 132-133 [43]-[45]; 134 [52]; 136 [68]. However, if such an undifferentiated payment does not equal or exceed the totality of the employer’s statutory obligations, the employee is free to appropriate it to the discharge of whichever obligation or obligations he or she wishes: Poletti v Ecob (No 2) (1989) 31 IR 321 at 333; Moree Plains Shire Council v Goater (2016) 14 ABC(NS) 255 at 269 [59]. Implicitly, in that case one or more particular liabilities is not discharged fully or at all.
In contrast, if an employer pays an amount to an employee for a particular purpose or in satisfaction of a particular obligation, that amount may not be applied instead to another purpose or obligation. For instance, if a sum paid to an employee for time worked is assigned by the employer to a purpose that is above, extraneous to or distinct from the employee’s award entitlements, the sum paid may not later be said to have satisfied those award entitlements. As Sheldon J said in Ray v Radano [1967] AR (NSW) 471:
… the employer cannot allocate to one subject matter what he has already paid in pursuance of a promise related to another subject matter. That would be approbating and reprobating. (at 478-479)
The detail of his Honour’s reasoning was explained and applied in Poletti v Ecob, the Full Court of the Federal Court saying:
It is to be noted that there are two separate situations dealt with in the passage from the judgment of Sheldon J … and in the reasoning of the Commission in Pacific Publications. The first situation is that in which the parties to a contract of employment have agreed that a sum or sums of money will be paid and received for specific purposes, over and above or extraneous to award entitlements. In that situation, the contract between the parties prevents the employer afterwards claiming that payments made pursuant to the contractual obligation can be relied on in satisfaction of award entitlements arising outside the agreed purpose of the payments. The second situation is that in which there are outstanding award entitlements, and a sum of money is paid by the employer to the employee. If that sum is designated by the employer as being for a purpose other than the satisfaction of the award entitlements, the employer cannot afterwards claim to have satisfied the award entitlements by means of the payment. The former situation is a question of contract. The latter situation is an application of the common law rules governing payments by a debtor to a creditor. In the absence of a contractual obligation to pay and apply moneys to a particular obligation, where a debtor has more than one obligation to a creditor, it is open to the debtor, either before or at the time of making a payment, to appropriate it to a particular obligation. If no such appropriation is made, then the creditor may apply the payment to whichever obligation or obligations he or she wishes. (at 332-333)
In Fair Work Ombudsman v Transpetrol TM AS [2019] FCA 400, Rares J described that passage from Poletti v Ecob in the following terms:
… the Full Court held that when a contract of employment provided that a sum of money was payable to and receivable by an employee for a specific purpose, over and above, or extraneous to, an entitlement under an award made pursuant to statute, the employer could not rely on the payment of that sum (due under the specific contractual provision) in satisfaction of its liability under the award. Similarly, their Honours held that, if an employer (as debtor) designated or appropriated a payment to the employee (as creditor) to satisfy a particular debt or liability, the employer could not later resile from that designation or appropriation in order to claim that the payment should be treated as satisfying a different debt or liability due to the employee under an award. … (at [110])
As was said in Linkhill Pty Ltd v Director, Office of the Fair Work Building Industry Inspectorate (2015) 252 IR 69:
… the set-off question depends either on the terms of the agreement between the parties or, absent such agreement, on an appropriation of the payment by the employer, or, in default, by the employee. These matters depend on the facts of each case. (at 90 [84] per North and Bromberg JJ)
Same purpose or close correlation
Although BTIG attributed its payments to Mr Manchee to purposes other than the satisfaction of its Award-based obligations, the latter may nevertheless be set off against the former if the payments were directed to the same purpose as, or had a close correlation to, the Award obligations: ANZ v FSU at 239 [50]-[54]. Justice Anderson provided a summary of ANZ v FSU in James Turner Roofing Pty Ltd v Peters at 132 [42]:
... The Full Court held that because the payment under the scheme was itself and in reality a payment in respect of untaken or unused long service leave it could be set off against the liability under the award to make a payment on that account. The Court held that whilst there must be a close correlation between the nature of the contractual obligation and the nature of the award obligation before one could be off set against the other it was a matter of looking to see whether both the award entitlement and the contractual payment arose out of the same agreed purpose.
2012 Agreement
BTIG argued in relation to the 2012 Agreement that Mr Manchee’s minimum draw and the minimum rates under the Award were both concerned with work performed, but that characterisation is not correct to the extent that it concerns the draws. The 2012 Agreement did not provide for Mr Manchee to be paid for the work he performed but, rather, to receive a share of the brokerage commission he earned for BTIG, less expenses. Although personal exertion underlies both forms of remuneration, what was being rewarded is quite different in each case.
BTIG also argued that neither the minimum draw nor the minimum rates under the Award were “assigned for any particular distinct statutory obligation”. While that submission can be accepted as accurate in relation to the contractual terms providing for Mr Manchee’s minimum draw payments, it was not clear what it meant in relation to award rates, which are the product of a legislative function performed by the Fair Work Commission, are creatures of statute and have the effect of law: Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 420, 421, 425, 455; Jemena Asset Management (3) Pty Ltd v Coinvest Ltd (2011) 244 CLR 508 at 516 [11]; Bell v Gillen Motors Pty Limited (1989) 24 FCR 77 at 84. Unlike the contract’s provision for draws, the minimum rates under the Award themselves were, or at least amounted in combination with the FW Act to, a distinct statutory obligation with the consequence that the two obligations were not the same, as was contended. Alternatively, this submission may relate to payments that were in fact made to Mr Manchee. If so, nothing suggested that those payments were assigned to any purpose other than the satisfaction of the obligation expressly created by the 2012 Agreement.
BTIG’s contention that its payments under the 2012 Agreement could be set off against its Award obligations therefore ultimately depended on both the draw payments and any Award-based entitlements not being recoverable by BTIG. While it can be accepted that the draw payments were not recoverable by BTIG and that correctly paid wages or salary are also not recoverable by employers, that characteristic is generally shared by other payments made in satisfaction of obligations. The irrecoverability of wage and salary payments is hardly exceptional or something that would, without more, suggest that a party’s obligation to pay wages or salary might be satisfied by a payment for some other purpose.
In this case, there was no close correlation between the subject matter of the obligations under the 2012 Agreement in respect of which payment to Mr Manchee was made and the obligations in the Award said to be discharged by those payments which would justify the set-off advocated by BTIG: Linkhill at 92 [98] per North and Bromberg JJ; ANZ v FSU at 239 [52]. Nor were they directed to the same purpose. One concerned a share of revenue and the other concerned wages paid by reference to hours worked. The 2012 Agreement made no reference to anything that might be characterised as work or labour as commonly conceived and instead prescribed a laissez-faire alternative to the conventional approach to remuneration. If BTIG had at least attempted to pay Mr Manchee by reference to his work rather than solely by reference to his profitability then a sufficient correlation between the two obligations might have been discernible and a set-off available.
2020 Agreement
The 2020 Agreement was expressed to supersede the 2012 Agreement. It provided for a 38 hour week, an annual salary of $150,000 and said:
… You acknowledge that your remuneration has been established on a basis that takes account of the need for you to work such additional hours as necessary to meet the requirements of your role. Therefore, no additional overtime pay or penalty applies.
It also made specific provision for 4 weeks’ annual leave paid at Mr Manchee’s ordinary salary rate.
Plainly, the 2020 Agreement was a conventional agreement by which Mr Manchee was remunerated for the work he performed and is distinguishable on that basis from the 2012 Agreement.
Annual leave
The leave records that were ex.A2 satisfy me that, during his employment with BTIG, Mr Manchee took all the leave that accrued to him with the exception of 5.83 days which I find was paid out to him upon termination by payment of the $3,271.28 referred to at para.18 of his affidavit in chief and pleaded at para.14 of BTIG’s defence. The leave records indicate that:
(a)during the life of the 2012 Agreement Mr Manchee took leave sufficient to exhaust his statutory entitlement accruing during that period; and
(b)during the life of the 2020 Agreement Mr Manchee took annual leave on 31 August, 1-4 September, 6-9 October, 4 November and 29-31 December 2020, and on 4-8 January and 9 April 2021. I infer that those absences were paid in accordance with the terms of the 2020 Agreement.
Mr Manchee alleged that he was due “payment of his accrued untaken paid annual leave, pursuant to section 90(2) of the FW Act”. The argument was that although leave was taken under the 2012 Agreement, it was unpaid for the purposes of the FW Act and so should be treated on termination as “untaken paid annual leave” for the purposes of s.90(2). The point was not argued in detail and does not take account of the entitlement under s.90(1) to be paid for leave once it is taken. That was the relevant entitlement and so, to the extent that leave taken during the 2012 Agreement was unpaid for the purposes of the FW Act, any entitlement to compensation arises under s.90(1) of that Act, not s.90(2). Similar reasoning applies to annual leave loading, in that the entitlement to any such payment accrued when the leave was taken and not for a second time on termination, in the different guise of an accrued unpaid entitlement.
For the reasons given in relation to Mr Manchee’s principal remuneration, I find that such payments as Mr Manchee received under the 2012 Agreement in respect of periods when he was taking annual leave were not payments that could be set-off against BTIG’s statutory obligation to provide paid annual leave or its Award based obligation to pay leave loading.
Mr Manchee says that he was not paid any leave loading at all but Mr Prideaux’s hearsay evidence was that leave loading was paid some time after Mr Manchee’s employment concluded. The evidence does not permit a confident conclusion as to whether leave loading was in fact paid as alleged in some detail in the defence. Even so, it is sufficiently clear in relation to the 2020 Agreement that the amounts paid to Mr Manchee in respect of his periods of annual leave taken under it exceeded his statutory and Award based entitlements to paid annual leave and leave loading. It is also apparent that the payments made had a sufficiently close correlation to those entitlements to be set-off against them with the effect that there was no breach of s.90(1) or (2) in relation to them.
CONTRAVENTIONS
The findings that BTIG’s payments to Mr Manchee under the 2012 Agreement were made in satisfaction of its contractual obligations based on the brokerage commission he earned for it, and may not be set off against its Award-based obligations require, as their corollary, findings that BTIG contravened:
(a)s.45 of the FW Act by contravening cl.13 of the Award (minimum wages);
(b)s.44 of the FW Act by contravening s.90(1) of the FW Act (annual leave); and
(c)s.45 of the FW Act by contravening cl.24.3 of the Award (17.5% leave loading).
I make those findings.
COMPENSATION
Section 545 of the FW Act relevantly provides:
545 Orders that can be made by particular courts
Federal Court and Federal Circuit and Family Court of Australia (Division 2)
(1)The Federal Court or the Federal Circuit and Family Court of Australia (Division 2) may make any order the court considers appropriate if the court is satisfied that a person has contravened, or proposes to contravene, a civil remedy provision.
(2)Without limiting subsection (1), orders the Federal Court or Federal Circuit and Family Court of Australia (Division 2) may make include the following:
…
(b)an order awarding compensation for loss that a person has suffered because of the contravention;
…
It is to be noted that compensation may not be ordered unless a person has contravened, or proposes to contravene, a civil remedy provision. As that criterion has been satisfied, compensation may be awarded if the Court “considers [that to be] appropriate”. However, as recorded earlier, BTIG submitted that discretion conferred on the Court by s.545(1) was not engaged because Mr Manchee had been remunerated well in excess of his entitlements under the Award and so had suffered no loss compensable under s.545(2)(b) of the FW Act.
As to the existence of a compensable loss, in Dafallah v Fair Work Commission (2014) 225 FCR 559 Mortimer J said at 596 [158]:
While by no means operating as a mandatory approach to a discretion such as that conferred by s 545(1), with respect I adopt the remarks of Lee J in Aitken v Construction, Mining, Energy, Timberyards, Sawmills and Woodworkers Union of Australia (WA Branch) (1995) 63 IR 1 considering factors relevant to an award of compensation under s 170EE of the then Industrial Relations Act 1988 (Cth). His Honour said (at 9), that the Court will:
have regard to what is reasonable in the circumstances and will look at what would have been likely to occur had the Act not been contravened … The Court will consider the detriment occasioned to the employee by the employer’s contravention of the Act, and the extent to which it is reasonable to compensate the employee for such consequences.
Her Honour went on to observe at 597 [164] that the burden remained on the applicant to prove their loss.
To similar effect, in Leggett v Hawkesbury Race Club Limited (No 4) [2022] FCA 622, Rares J said:
The expressions used in s 545(2)(b) “compensation” and “loss that a person has suffered” are not defined in the Fair Work Act. But the provision creates a causal link that the loss for which compensation may be awarded must arise “because of the contravention” of that Act. …
Any award under s 545(2)(b) is not made at common law. Rather, it is a form of statutory compensation for loss in supplementation of the more general power in s 545(1) to make “any order the court considers appropriate” if satisfied that a person has contravened a civil remedy provision. And, the relevant causal nexus between the entitlement to an order for compensation is that the person suffered the loss “because of the contravention”.
…
[The applicant’s] loss, to which the compensation payable under s 545(2)(b) applies, is to be measured by comparing her position as it is against what it would have been but for the Club’s contravention of the Fair Work Act. (at [31], [51] and [56])
In that case, the figure his Honour awarded as compensation was calculated to take account of compensation already ordered under the Workers Compensation Act 1987 (NSW) for a related claim.
In this case, it is clear that if during the 2012 Agreement BTIG had had regard to its obligations under the Award, Mr Manchee would not have been paid more than in fact he was, whether in respect of salary or annual leave entitlements with loading. I have made a similar finding in relation to annual leave loading during the 2020 Agreement. It has therefore not been demonstrated that Mr Manchee suffered the sort of loss for which s.545(2)(b) of the FW Act may provide compensation. That aspect of his claim will be dismissed.
CONCLUSION
Although Mr Manchee has been unsuccessful in demonstrating an entitlement to compensation, he has demonstrated that BTIG contravened the Award and the FW Act in a number of respects.
Consequently, the matter will be listed for further directions at which time a timetable will be set for a penalty hearing.
I certify that the preceding sixty-five (65) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Cameron. Associate:
Dated: 6 October 2022
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