Meyer v Worrell
[2001] QSC 402
•29 October 2001
SUPREME COURT OF QUEENSLAND
CITATION: Meyer & Ors v Worrell & Anor [2001] QSC 402 PARTIES: IN THE MATTER OF FAIRFIELD MINES PTY LTD
(IN LIQUIDATION) ACN 070 546 913GEORGE JURY MEYER
(first applicant)
ELIZABETH MEYER
(second applicant)
ADAM JAMES MEYER
(third applicant)
SAMANTHA MEYER
(fourth applicant)
ANTHONY BEDE CORBOY
(fifth applicant)
v
IVOR WORRELL
(first respondent)
RAJENDRA KUMAR KHATRI
(second respondent)
AS LIQUIDATORS OF FAIRFIELD MINES PTY LTD (IN LIQUIDATION)FILE NO: S 1361 of 2001 DIVISION: Trial Division PROCEEDING: Originating Application DELIVERED ON: 29 October 2001 DELIVERED AT: Brisbane HEARING DATE: 15 October 2001 JUDGE: Wilson J ORDERS: 1. That Bruce Eastwood be removed as an applicant from the application.
2. That there be no order as to the costs of Bruce Eastwood’s participation in the matter as an applicant.
3. That Anthony Bede Corboy be joined as an applicant.
4. Appeal dismissed.
CATCHWORDS: CORPORATIONS – WINDING UP – LIQUIDATORS – APPEAL FROM LIQUIDATOR’S DECISION – appeal from liquidator’s rejection of proofs of debt – whether the applicants were employees of the company in liquidation or the employees of associated company
Corporations Act 2001 (Cth), s 1321
Jones v Dunkel (1959) 101 CLR 298, referred to.
Payne v Parker [1976] 1 NSWLR 191, referred to.
Tanning Research Laboratories Inc v O’Brien (1989-90) 169 CLR 332 at 340-341, applied.COUNSEL: G J Meyer (not of counsel) appeared in person and, by leave, on behalf of the other applicants
P Looney for the respondentsSOLICITORS: The applicants were not represented by solicitors
Raj Lawyers for the respondent
WILSON J: This is an appeal against the decision of the respondents, who are the liquidators of Fairfield Mines Pty Ltd ACN 070 546 913 (‘Fairfield’), to reject certain proofs of debt. It is brought pursuant to s 1321 of the Corporations Act 2001. It is an originating proceeding which the Court heard de novo: Tanning Research Laboratories Inc v O’Brien (1989-90) 169 CLR 332 at 340-341.
At the commencement of the hearing, I ordered that Bruce Eastwood be removed as an applicant and that there be no order as to the costs of his participation in the proceeding as an applicant. I ordered further that Anthony Bede Corboy be joined as an applicant.
One of the applicants, George Jury Meyer, who is not a lawyer, appeared on his own behalf, and by leave of the Court on behalf of the other applicants. The respondents were represented by counsel.
Evidence
Under oath, Mr Meyer informed the Court that the only evidence he relied on consisted of -
(a)minutes of a meeting of the directors of Fairfield held on 14 January 1997 (exhibit ML 5 to the affidavit of Morgan Gerard James Lane filed on 25 September 2001);
(b)paragraph 16 of the affidavit of Morgan Gerard James Lane filed on 25 September 2001;
(c)minutes of a special meeting of the directors of Fairfield held on 13 December 1996 (exhibit GJMR 1 to the affidavit of George Jury Meyer filed on 11 October 2001);
(d)paragraph 8 of the affidavit of George Jury Meyer filed on 11 October 2001.
Counsel for the respondents read the following affidavits –
(a)Morgan Gerard James Lane filed on 25 September 2001;
(b)Michael John Grey filed by leave on 15 October 2001;
(c)further affidavit of Michael John Grey filed by leave on 15 October 2001;
(d)Rex Hurst filed by leave on 15 October 2001; and
(e)Morgan Gerard James Lane filed by leave on 15 October 2001;
and his cross-examination of Mr Meyer.
Background
Fairfield was a mining company, which held a mining lease with respect to copper ore near Cloncurry. It had four directors - Mr Meyer, his wife Elizabeth Meyer, Rex Hurst and Anthony Corboy. Adam James Meyer and Samantha Meyer are young adult children of Mr and Mrs Meyer. Bruce Eastwood was the company’s accountant. Work on the construction phase of the mine commenced in about October 1996.
The respondents were appointed as joint and several administrators of the company on 9 June 1999 and as its liquidators on 6 July 1999.
Meyer Industries Pty Ltd was at all material times the trustee of the GJ Meyer Family Trust. It has no assets.
Proofs of Debt
When the respondents were appointed as administrators, the applicants and Meyer Industries Pty Ltd lodged proofs of debt. The applicants lodged further proofs (in the same amounts) after the company went into liquidation, but Meyer Industries Pty Ltd did not lodge a proof in the liquidation.
The applicants’ proofs were for wages claims (excluding superannuation) as follows –
George Meyer 23.10.98 - 08.06.99 $ 48,000-00
Elizabeth Meyer 23.10.98 - 08.06.99 $ 32,000-00
Anthony Corboy 23.10.98 - 08.06.99 $ 32,000-00
Samantha Meyer 23.10.98 - 25.01.99 $ 7,800-00
Adam Meyer 23.10.98 - 03.12.98
09.03.99 - 08.06.99 $11,300-00.
In essence, the respondents were not satisfied that the applicants were employees of Fairfield over the periods in question. The respondents considered that they were employees of Meyer Industries Pty Ltd and rejected the applicants’ proofs by notices dated 15 December 2000.
At the hearing on 15 October 2001 Mr Meyer maintained –
(a) that the applicants were always employees of Fairfield;
(b) that wages owing to them as at 23 October 1998 were, with their consent, “fully paid out” by the issue of shares in Meyer Industries Pty Ltd; and
(c)that thereafter they continued to be employed by Fairfield until the appointment of the respondents as administrators.
The respondents countered that this was contrary to the documentary evidence, including previous assertions by Mr Meyer that they had been employed by Meyer Industries Pty Ltd to 23 October 1998, and thereafter by Fairfield.
Mr Meyer relied on the minutes of directors’ meetings on 13 December 1996 and 14 January 1997.
The meeting in December 1996 was attended by Mr and Mrs Meyer and Leon Cresswell, who was then a director. It was recorded in the minutes that $330,889-67 had been expended by Meyer Industries Pty Ltd on behalf of Fairfield for property, equipment and services – for which Fairfield should receive clear title upon the issue of fully paid shares to that value. At the time Fairfield had no banking facilities. Those minutes throw little light on the question before me. Perhaps the fact that Fairfield then had no bank account has some faint relevance to why the applicants might have been treated as employees of Meyer Industries Pty Ltd and not Fairfield.
By the time of the meeting on 14 January 1997, Fairfield had its own bank account. That meeting was attended by Mr and Mrs Meyer. Mr Bruce Eastwood, the company’s accountant, was in attendance by telephone, and he prepared the minutes, which recorded –
“LABOUR, ADMINISTRATION
AND TECHNOLOGY: It was resolved that:
âMeyer Industries Pty. Ltd. will be reimbursed by Fairfield Mines Pty Ltd. Ltd. for labour and administration;
âAll technology, developed by Meyer Industries Pty. Ltd., will remain the property of Meyer Industries Pty. Ltd.;
ÂThe equipment built with this technology will become the property of Fairfield Mines Pty. Ltd. as and when Meyer Industries Pty. Ltd. has been fully reimbursed for the total labour charges accrued by Fairfield Mines Pty. Ltd.
SALARIES AND WAGES -
MINE EMPLOYEES: It was resolved that the employees on the mine site of Fairfield Mines Pty. Ltd. would be remunerated at the following minimum rates:
âAnthony Corboy $50,000.00 per annum
âElizabeth Meyer $52,000.00 per annum
âGeorge Meyer $52,000.00 per annum
âWith any other member of the Meyer family to be remunerated at a rate to be negotiated.
It was further resolved that:
âAny amounts due and payable at the above agreed rate which, at this time or from time to time, have not been paid to an employee or employees of Fairfield Mines Pty. Ltd., will be accrued in the books and records of the Company and clearly shown to be Wages and Salaries Payable.
âThe costs of provisions (e.g. food and necessities) will be deducted from the Meyer Industries Pty. Ltd. Labour Accrual Account”
The labour referred to in the resolution that Meyer Industries Pty Ltd would be reimbursed by Fairfield for labour and administration may, as Mr Meyer submitted, have been contract labour (and not that of the applicants). The rates of remuneration were stated to be for “the employees on the mine site of Fairfield Mines Pty Ltd” rather than for “employees of Fairfield on the mine site”. This is ambiguous. It may refer to persons who were employees of Fairfield, or it may refer to persons working on the mine site, but employed by someone else (such as Meyer Industries Pty Ltd). The reference to “an employee or employees of Fairfield Mines Pty Ltd” in the resolution about amounts due and payable but not paid is, in my view, a shorthand description of those persons previously referred to in the second resolution.
Even if it was intended on 14 January 1997 that the applicants be employees of Fairfield, their wages were not debited to a labour accrual account in the subsequent accounting records of Fairfield. Indeed, Fairfield was never registered for group tax purposes and it did not remit any group tax to the Australian Taxation Office. Nor did it ever make any contribution pursuant to the superannuation guarantee legislation. It was not registered for fringe benefits tax or for Queensland payroll tax. It did not pay workers’ compensation premiums in respect of the applicants.
Moreover, the documentary evidence is consistent with the applicants’ having been employees of Meyer Industries Pty Ltd, at least until 23 October 1998.
Mr Eastwood practised in Melbourne. Mr Meyer swore to having dealt with him over 25 years and to having had absolute faith in him. He did all the accounts for Fairfield (as well as those for Meyer Industries Pty Ltd) from the day the mine started in 1996 until the books were delivered to the respondents. Because Mr Meyer was at all material times at the mine site, sometimes there would be no communication between them for up to four weeks. He participated in meetings by telephone. Mr Eastwood had authority to issue requisite invoices for Meyer Industries, and to sign documents required by the Australian Taxation Office and any other prescribed paperwork that had to be signed.
The position to 23 October 1998
Fairfield’s accounts
The amounts the subject of the disputed proofs of debt were recorded in the books of the company as management and consultancy fees, rather than as wages, or casual or contract labour.
Accounts for Fairfield as at three dates were in evidence – 30 November 1997, 30 June 1998 and 31 January 1999. Amounts recorded as management and consulting fees were reflected in increases in the company’s loan from Meyer Industries Pty Ltd as trustee for the GJ Meyer Family Trust.
The profit and loss statement for the period 1 July to 30 November 1997 shows casual labour of $2,038-00 and management and consulting fees of $69,006-00. Included in the non-current liabilities in the balance sheet as at 30 November 1997 is a loan from the GJ Meyer Family Trust of $289,228-61.
The profit and loss statement for the year ended 30 June 1998 shows casual labour of $2,038-00, wages of $2,000-00, and management and consulting fees of $170,872-00. In the balance sheet as at 30 June 1998 the loan from the GJ Meyer Family Trust is shown as $888,505-40.
The profit and loss statement for the period 1 July 1998 – 31 January 1999 shows contract labour of $106,000-00 and management and consulting fees of $37,789-29 plus $12,339-09. There is no loan from the GJ Meyer Family Trust shown in the balance sheet. Since 30 June 1998, Fairfield had increased its authorised capital by the allotment of 1,165,055 shares of $1-00 each, and used the proceeds to discharge its liability to the Trust and to acquire and install plant and equipment.
Invoices
Mr Eastwood caused invoices for management and consultancy services rendered by the applicants to be raised by Meyer Industries Pty Ltd and addressed to Fairfield as follows –
No 1221-002/97 30 June 1997
To
The provision of Management and
Consultancy Services during the twelve
months ended 30 June, 1997 as under:
Mr. George Meyer –
52 weeks at $1,000.00 per week $ 52,000.00
Mrs. Elizabeth Meyer –52 weeks at $1,000.00 per week $ 52,000.00
Mr. Anthony Corboy
52 weeks at $961.54 per week $ 50,000.00
Sundry Fees for the services of casual labour $ 10,000.00
$ 164,000.00
Add Compulsory Superannuation @ 6% $ 9,840.00
$ 173,840.00
No 1221-003/98 30 June 1998
To
The provision of Management and
Consultancy Services during the twelve
months ended 30 June, 1998 as under:
Mr. George Meyer –
52 weeks at $1,000.00 per week $ 52,000.00
Mrs. Elizabeth Meyer –52 weeks at $1,000.00 per week $ 52,000.00
Mr. Anthony Corboy
52 weeks at $950.00 per week $ 49,500.00
Mr. Adam Meyer and Miss Samantha Meyer
52 weeks at $150.00 per week $ 7,800.00
$ 161,200.00
Add Compulsory Superannuation @ 6% $ 9,672.00
$ 170,872.00
No 1221-004/98 30 October 1998
To
The provision of Management and
Consultancy Services during the period from
1 July, 1998 to 23 October, 1998, as detailed
below:
Mr. George Meyer –
17 weeks at $1,500.00 per week $ 25,500.00
Mrs. Elizabeth Meyer –17 weeks at $1,000.00 per week $ 17,000.00
Mr. Anthony Corboy
17 weeks at $950.00 per week $ 16,150.00
Miss Samantha Meyer
17 weeks at $300.00 per week $ 5,100.00
Mr Adam Meyer
17 weeks at $150.00 per week $ 2,550.00
$ 66,300.00
Add Compulsory Superannuation @ 7% $ 4,641.00
$ 70,941.00
The position after 23 October 1998
According to a letter written by Mr Meyer to the respondents on 25 June 2000 the shareholders discussed the future direction and pace of Fairfield’s operations at a meeting on 29 July 1998 and in the days following.
“Rex arrived on the lease on the 29/07/1998. Discussions commenced on this day, with all Directors present, as to the direction and pace Fairfield should take. Funding and staff requirements were discussed in detail.
…
On the weekend of 2/08/1998 after the Special Share Holders Meeting, followed by a Directors Meeting, discussions were continued from the previous four days by all directors to establish the direction that Fairfield Mines would take. It was agreed that a ‘line in the sand’ would be drawn on 23/10/1998 and that all employees would be a direct responsibility of Fairfield Mines Pty. Ltd.
On the 10/08/1998 the Mines Department were notified of the imminent changes in our labour status, as required by the Regulations. Meyer Industries was notified, as was the ATO.
On the 15/08/1998 Fairfield Mines was inspected by the Mines Inspector and the proposed labour arrangement discussed. The inspector advised Liz (Mine Manager) to enter the changes, when they occurred, into the Official Mine Record Book as was required under ‘Regulation 11.2.7 – Authorised persons to perform certain duties’;.
The entries were made as required. Fairfield was informed that the need to submit hours worked each month was no longer required.
On the 18/07/1997 applications for group tax registration and sales tax exemption were made. The sales tax number was issued (E8 211 745) there was no group tax number issued as no employee was paid more than $450.00 per calender month.
The person at the ATO that was contacted on 132866 was Peter. Liz contacted him on the 15/07/1997 and again on the 9/06/1998.
…
In the event of the wages claimed by the former employees of Fairfield Mines Pty Ltd. being rejected Meyer Industries Pty Ltd will re-submit its initial claim for the wages owed.”
Mr Meyer told the Court that Mr Eastwood was asked “to finalise and accrue and lump all wages together up to 23 October 1998, and issue shares against those wages” so that Fairfield was left debt free. He said he was asked to do so on behalf of the staff. In fact shares were issued to Meyer Industries Pty Ltd, rather than to the applicants. This seems odd. There is no evidence as to who the beneficiaries of the GJ Meyer Family Trust were. There is certainly nothing to suggest Mr Corboy was a beneficiary. Indeed, the issue of share to Meyer Industries Pty Ltd is more consistent with the satisfaction of a liability to it for management and consultancy fees.
Attached to that letter to the respondents were a number of documents including –
(a) a memorandum from Fairfield to Meyer Industries Pty Ltd dated 10 August 1998 and signed by Mr Meyer, which said in part:
“It was agreed by all directors in the course of discussions after the Share Holders meeting to increase the Authorised capital to $2,000,000 that on the 23/10/1998 Fairfield Mines Pty Ltd will take over all current and future staff that will be employed on the lease.”
(b) handwritten entries in the official mine record book signed by Mrs Meyer, including –
“23/10/98 All staff now employed by Fairfield Mines P/L as at this date no longer employed by Meyer Industries P/L.
23/10/98 Positions staff are employed as:-
Liz Meyer Mine Manager
George Meyer Technical Manager
Anthony Corboy Welder/Fitter, Technical Support
Samantha Meyer Administrative, General Duties and Environmental
Adam Meyer Part time General Duties”
(c) Copies of taxation forms, etc (but no evidence the originals were lodged).
Annual General Meeting 13 March 1999
There was an annual general meeting of Fairfield on 13 March 1999. At that meeting the accounts as at 30 June 1998 and the company’s affairs were discussed. A tape recording of the meeting was made, and the tapes and a transcript were in evidence. Discussion ensued on the (unstated) premise that Fairfield would continue to be liable to Meyer Industries Pty Ltd for management and consultancy fees. Indeed, when Mr Meyer was asked how Fairfield would meet its ongoing commitment in that regard, he responded that it would do so by going into production. When someone asked whether individuals had been paid, Mr Eastwood replied that that was a question for Meyer Industries Pty Ltd, and Mr Corboy said that he had an arrangement with Meyer Industries Pty Ltd. When the question of workers’ compensation and insurance for employees was raised, Mr Meyer replied, “That’s all covered by Meyer Industries. Fairfield hasn’t got the money to do it.”
Invoice
Mr Eastwood caused the following invoice to be raised by Meyer Industries Pty Ltd and addressed to Fairfield.
No 1221-005/9930 January 1999
To
The provision of Management and
Consultancy Services during the period from
24 October 1998 to 23 January, 1999, as
detailed below:
Mr. George Meyer –
13 weeks at $1,500.00 per week $ 19,500.00
Mrs. Elizabeth Meyer –13 weeks at $1,000.00 per week $ 13,000.00
Mr. Anthony Corboy
13 weeks at $950.00 per week $ 12,350.00
$ 44,850.00
Add Compulsory Superannuation @ 7% $ 3,139.50
$ 47,989.50
Mr Meyer said he personally took no part in the raising of any of the invoices.
In a letter to the respondents dated 27 July 2000 Mr Eastwood said that the invoice for the period after 23 October 1998 should not have been issued. In the company’s accounts the amounts on the invoice were wrongly debited to management and consultancy fees instead of to wages and superannuation. He said –
“Mr. Meyer has repeatedly stated that remuneration of personnel was changed on 24th. October, 1998 and to clarify matters I set out the procedures used before and after that date:
Until 23rd. October, 1998 –
Meyer Industries Pty. Ltd. (‘Industries’) was responsible for the construction phase at the mine site and, as contracted, hand (sic) responsibility for the remuneration of all personnel.
Industries billed Fairfield Mines Pty. Ltd. (‘Fairfield’) by invoice with an equivalent amount for ‘Management and Consulting Fees’ being shown as Account No. 3450 in Fairfield’s General Ledger.
Fairfield settled this liability in various ways, mainly by share issues from time to time.
After 24th. October, 1998 –
At the finalisation of the construction phase, Fairfield accepted the liability for remuneration, superannuation, Group employer taxation and other on-costs. This office was informed that registration as a Group Employer had been sought by Mine management direct with the Australian Taxation Office and that we had no involvement with group remittances or superannuation other than to document these costs appropriately until otherwise advised.
To complete the financial accounts to the 31st. January, 1999 we were asked to bring to account the remuneration payable on that date: this was done as per copy invoice attached.”
Proof lodged by Meyer Industries Pty Ltd
The proof Meyer Industries Pty Ltd lodged in the administration was signed by Mr Meyer. It was for $415,653-00 particularised as follows –
30.06.97 wages $173,840-00 Inv 1221-002/97
30.06.98 wages $170,872-00 Inv 1221-003/98
30.10.98 wages $ 70,941-00 Inv 1221-004/98.
There was a handwritten note on the proof apparently initialled by Mr Meyer: “All back wages liability acknowledged in Fairfield minutes.”
In cross-examination Mr Meyer described this as a “provisional proof of debt”. Mr Hurst had commenced proceedings in the Federal Court seeking to reverse the allotment of shares to Meyer Industries Pty Ltd on 23 October 1998. In Mr Meyer’s view, if the Court reversed the share issue, then the employees were entitled to wages. Given the position he took at the hearing on 15 October 2001 (that they had always been employees of Fairfield), it is difficult to follow his logic that if the share issue were reversed, Meyer Industries Pty Ltd was entitled to the amounts claimed in the proof of debt. Mr Meyer said that this proof was “removed’ subsequently when the Federal Court action was withdrawn.
Claims by Adam and Samantha Meyer
The respondents took issue with the quantum of the claims by Adam and Samantha Meyer. Their counsel drew attention to their failure to give evidence and the absence of any amounts payable to them in invoice no 1221-005/99 raised by Mr Eastwood. However, there is some material in support of their claims attached to their proofs. I would be inclined to accept the quantum of their claims if I were satisfied that they were employed by Fairfield rather than Meyer Industries Pty Ltd over the relevant periods.
Conclusions
The case presented to the Court by Mr Meyer was that the applicants had always been employees of Fairfield, not that they had become so post 23 October 1998. I am not satisfied that this was so.
Whatever was intended at the meeting on 14 January 1997, they were in fact employed by Meyer Industries Pty Ltd at least until 23 October 1998.
There is reason to doubt that it was intended that they should be employed by Fairfield after that date, particularly given what was said at the meeting on 13 March 1999. Despite the submissions of Counsel for the respondent, I am not prepared to find that the documents attached to Mr Meyer’s letter to the respondents of 25 June 2000 were created after the appointment of the respondents. However, there is no evidence that the application to the Australian Taxation Office and other applications relevant to a change in employment were ever lodged. Moreover, the proceedings at the meeting in March and the invoice raised by Mr Eastwood are consistent with the applicants having in fact continued in the employ of Meyer Industries Pty Ltd. Mr Eastwood’s letter to the respondents of 27 July 2000 does not assist the applicants’ case. It was written before the proofs were formally rejected, but at a time when it was clear that the respondents were unlikely to accept them in the absence of more supporting evidence. Of most significance is the fact that it does not support the case put to the Court that they had always been employees of Fairfield.
There was no evidence from Mr Eastwood. Counsel for the respondents asked me to infer that his evidence would not have assisted the applicants, and relied on Jones v Dunkel (1959) 101 CLR 298 and Payne v Parker [1976] 1 NSWLR 191. There was no evidence as to the reason for his absence, although Mr Meyer sought to give some explanation from the Bar table. Given Mr Meyer’s stance that the point before the Court was a narrow one turning on the interpretation of the minutes of the meeting of 14 January 1997, it is understandable that he did not lead evidence from Mr Eastwood. I am not prepared to draw any adverse inference against the applicants from their failure to call Mr Eastwood.
In all the circumstances, the appeal against the rejection of the proof of debts should be dismissed.
Orders:
That Bruce Eastwood be removed as an applicant from the application.
That there be no order as to the costs of Bruce Eastwood’s participation in the matter as an applicant.
That Anthony Bede Corboy be joined as an applicant.
Appeal dismissed.
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