Mr Andreas Prill v Leafbrook Pty Ltd T/A inTechnology Distribution (Australia Group)
[2019] FWC 7542
•31 OCTOBER 2019
| [2019] FWC 7542 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.394 - Application for unfair dismissal remedy
Mr Andreas Prill
v
Leafbrook Pty Ltd T/A inTechnology Distribution (Australia Group)
(U2019/3583)
COMMISSIONER HUNT | BRISBANE, 31 OCTOBER 2019 |
Application for an unfair dismissal remedy – jurisdictional objection – whether applicant met minimum employment period – whether respondent is small business employer – whether overseas entity is an associated entity – no capacity to determine outcome of decisions of overseas entity – overseas entity not an associated entity – respondent is small business employer – minimum employment period not met – jurisdictional objection upheld – application dismissed.
[1] On 29 March 2019, Mr Andreas Prill made an application pursuant to s.394 of the Fair Work Act 2009 (the Act) alleging his dismissal from Leafbrook Pty Ltd T/A inTechnology Distribution (Australia Group) (Leafbrook; the Respondent) was harsh, unjust or unreasonable.
[2] Leafbrook objected to the application on the basis that it was, at the time of Mr Prill’s dismissal, a small business employer, and Mr Prill had not completed the requisite 12 month minimum employment period to competently bring his application.
[3] It is not in dispute that Mr Prill was employed by Leafbrook between 21 March 2018 and 15 March 2019, being a total period of 11 months, 3 weeks and 1 day. The issue in dispute relevant to the jurisdictional objection is whether Leafbrook is a small business employer for the purposes of the minimum employment period, when regard is had to the relationship between Leafbrook and another entity, inTechnology Distribution Inc (the Philippines Company).
[4] At the time of Mr Prill’s dismissal, Leafbrook employed 13 employees, including Mr Prill. The Philippines Company employed approximately 10 – 15 employees at the same time. If the Philippines Company is an associated entity of Leafbrook, the number of employees employed at the time of the dismissal would be 15 or more employees, and the minimum employment period necessary for Mr Prill to bring a claim of unfair dismissal would be six months, not twelve months. 1
[5] Directions were issued for the filing of material, and a hearing was conducted on 7 August 2019. Mr Prill represented himself while Leafbrook was represented by Mr Mark Winter, Chief Executive Officer (CEO), who appeared by telephone.
Legislative Framework
[6] A National System Employer is a small business employer at a particular time if the employer employs fewer than 15 employees at the time. 2 For the purpose of calculating the number of employees employed by the employer at a particular time:
(a) all employees employed by the employer at the time (including the dismissed employee who has made the unfair dismissal application) are to be counted subject to the caveat that a casual employee is not to be counted unless, at the time, he or she has been employed by the employer on a regular and systematic basis 3; and
(b) associated entities are taken to be one entity 4. The expression “associated entity” has the meaning given by section 50AAA of the Corporations Act 2001 (Cth) (the Corporations Act).
[7] Section 50AAA of the Corporations Act provides as follows:
“50AAA Associated entities
(1) One entity (the associate ) is an associated entity of another entity (the principal ) if subsection (2), (3), (4), (5), (6) or (7) is satisfied.
(2) This subsection is satisfied if the associate and the principal are related bodies corporate.
(3) This subsection is satisfied if the principal controls the associate.
(4) This subsection is satisfied if:
(a) the associate controls the principal; and
(b) the operations, resources or affairs of the principal are material to the associate.
(5) This subsection is satisfied if:
(a) the associate has a qualifying investment (see subsection (8)) in the principal; and
(b) the associate has significant influence over the principal; and
(c) the interest is material to the associate.
(6) This subsection is satisfied if:
(a) the principal has a qualifying investment (see subsection (8)) in the associate; and
(b) the principal has significant influence over the associate; and
(c) the interest is material to the principal.
(7) This subsection is satisfied if:
(a) an entity (the third entity)controls both the principal and the associate; and
(b) the operations, resources or affairs of the principal and the associate are both material to the third entity.
(8) For the purposes of this section, one entity (the first entity) has a qualifying investment in another entity (the second entity) if the first entity:
(a) has an asset that is an investment in the second entity; or
(b) has an asset that is the beneficial interest in an investment in the second entity and has control over that asset.”
[8] Section 50AA of the Corporations Act defines “control” as follows:
“50AA Control
(1) For the purposes of this Act, an entity controls a second entity if the first entity has the capacity to determine the outcome of decisions about the second entity's financial and operating policies.
(2) In determining whether the first entity has this capacity:
(a) the practical influence the first entity can exert (rather than the rights it can enforce) is the issue to be considered; and
(b) any practice or pattern of behaviour affecting the second entity's financial or operating policies is to be taken into account (even if it involves a breach of an agreement or a breach of trust).
(3) The first entity does not control the second entity merely because the first entity and a third entity jointly have the capacity to determine the outcome of decisions about the second entity's financial and operating policies.
(4) If the first entity:
(a) has the capacity to influence decisions about the second entity's financial and operating policies; and
(b) is under a legal obligation to exercise that capacity for the benefit of someone other than the first entity's members
the first entity is taken not to control the second entity.”
[9] Except in chapter 2E of the Corporations Act, a reference to an “entity” in the Corporations Act is a reference to “a natural person, a body corporate (other than an exempt public authority), a partnership or a trust” (s.64A of the Corporations Act). Accordingly, it is necessary for the Commission to consider relevant to some of the subsections of s.50AAA of the Corporations Act if Leafbrook, or alternatively Mr Winter is an entity with relevant control over the Philippines Company.
Evidence and Submissions
[10] In advancing its jurisdictional objection, Leafbrook submitted that it has 13 employees and is therefore a Small Business. It was said that the alleged associated entity in Manila is a separate company which provides external, outsourced services to Leafbrook.
[11] To establish authority for the ways in which entities may be associated, Mr Prill cited the case of Lau v Nelson (Australia) JA Pty Ltd 5 which identifies s.50AAA of the Corporations Act as providing the conditions necessary for entities to be associated. He submitted that as in Lau6, s.50AA of the Corporations Act was also relevant to determine whether, for the purposes of s.50AAA, Leafbrook controlled the Philippines Company.
[12] Mr Prill submitted that Leafbrook and the Philippines Company are associated entities pursuant to ss.50AAA(3) and 50AA(1) of the Corporations Act as Leafbrook is controlled and partially owned by Mr Winter, and he also controls and ‘potentially owns’ the Philippines Company. Accordingly, it was submitted that the employees of the Philippines Company should be included in the number of relevant employees.
[13] Mr Prill submitted that Leafbrook or Mr Winter controls the Philippines Company, and further, the operations or affairs of it are material to Leafbrook or to Mr Winter. A form, titled ‘Letter of Certification’ was produced which Mr Prill says demonstrates that Mr Winter has control over the Philippines Company.
[14] The ‘Letter of Certification’ was undated and on the letterhead of Intechnology Distribution Pty Ltd, which is not the name of the respondent, nor the name of the Philippines Company. It reads:
“CERTIFICATION
[Addressee]
Re: Authorised Signatory for South Insula Lease
To whom it may concern:
This is to certify that Christian Liloc is an authorized signatory for inTechnology Distribution.
This certification is issued in relation to the lease agreement for Unit 204, South Insula Tower, Timog Avenue, Quezon City.
Certifying in behalf of the Board.
Certified by:
Pearl Cacas
Business Development Manager
Board of Director/Finance Officer
Conforme:
Mark Winter
Chief Executive Officer – APAC
inTechnology Distribution and Cloud Distribution”
[15] Particularly, Mr Prill contended that the provision of the Letter of Certification evidences an employee of the Philippines Company conducting business with Mr Winter ‘holding himself out’ as the CEO for the employee in the Philippines.
[16] After the hearing Mr Prill provided a number of screen shots of the ‘LinkedIn’ accounts of employees of the Philippines Company who had listed their place of employment as inTechnology Distribution Pty Ltd. Again, it is noted that this entity is neither the respondent, nor the Philippines Company.
[17] Mr Prill provided a further ‘chat’ transcript with Ms Pearl Cacas, whom I understand to be an employee and perhaps a shareholder of the Philippines Company. It reads as follows:
Prill: | “Also Pearl, was Mark Winter involved in getting you employed and do you know whether he generally was hiring/firing staff from the Phillipines? What did you guys do together when he was flying over from Australia? |
Cacas: | New job is great! The Muscat’s are now managing the Manila office. He’s not involved in getting me hired in the new company, it was a personal decision. |
Prill: | Was Mark hiring you at Intechnology? Good to hear that you new job is good and I am sure you gonna do great… |
Cacas: | yeah he did hired me, found my profile on linkedin [sic]” |
[18] Mr Prill submitted that the Philippines Company should be viewed as an associated entity controlled by Leafbrook because Leafbrook, through its business with the Philippines Company is supporting it, and he contended that the Philippines Company would not exist without Leafbrook. He contended that Leafbrook is effectively paying for the salaries of the employees of the Philippines Company.
[19] It was also contended by Mr Prill that pursuant to s.50AAA(6) of the Corporations Act, Leafbrook has a qualifying investment in and significant influence over the Philippines Company, and the interest of Leafbrook is material to the Philippines Company. He advanced the proposition that the requisite qualifying investment exists where the first entity has an asset that is an investment in the second entity or the first entity has an asset that is the beneficial interest in an investment in the second entity and has control over that asset.
[20] Mr Prill submitted that this matter was one in which Leafbrook has a qualifying investment in the Philippines Company and significant influence over that company, and the interest is material to Leafbrook. The qualifying investment identified by Mr Prill was the fact that, he contended, Leafbrook was responsible for ensuring the employees were paid because the Philippines Company was so ‘reliant’ on Leafbrook’s business. He also submitted that any business that is developed in the Philippines will have a financial benefit for Leafbrook.
[21] It was conceded by Mr Prill that there was no evidence that a person was a shareholder in both of the two relevant companies. Mr Prill suggested that Leafbrook was renting the premises in the Philippines, however this was rejected by Mr Winter, who confirmed that there were no leases held by Leafbrook outside of Australia.
[22] Mr Winter gave evidence that while he is CEO of some other entities, none of those entities have employees in addition to those employed by Leafbrook.
[23] Relevant to the ‘LinkedIn’ profiles of the employees of the Philippines Company, Mr Winter stated that he has no control over what people list as their current employment on ‘LinkedIn’. He asserted that it is easy for an individual to incorrectly select the wrong organisation.
[24] Mr Winter declared that neither he nor Leafbrook had any ownership of the Philippines Company, and he is not a director within the Philippines Company. He stated that as far as he is aware, the Philippines Company is owned by four Filipinos, and he is aware that his adult son is a director of the Philippines Company, and lives in London.
[25] Mr Winter’s evidence is that he used to use another entity in the Philippines to provide services to the respondent. That particular entity was not paying its employees correctly, and some of those employees established the Philippines Company. It provides a number of services to Leafbrook, including technical and sales support in relation to the software and hardware technology that Leafbrook distributes in Australia.
[26] He is aware of, and says it is part of an oral agreement that 40% of services that the Philippines Company provides to its customers are to Leafbrook. To ensure appropriate standards of service, Leafbrook paid for a number of employees of the Philippines Company to travel to and train in Australia.
[27] A number of invoices were provided as evidence of the transactions between the Philippines Company and Leafbrook. The invoices include the following description: “Outsourced Sales and IT Support Services”
[28] Mr Winter stated that he is aware that the Philippines Company also provides services across Asia. I asked why the trading names of the two entities are so closely aligned, to which he responded that the Philippines Company is using Leafbrook’s reputation to work with the same or similar vendors (as Leafbrook) in the Philippines.
[29] It was conceded that if the work performed by the Philippines Company is not performed well it impacts on Leafbrook. It was the evidence of Mr Winter that Leafbrook has no commercial input into the decisions of the Philippines Company. He stated the decisions of the Philippines Company were a matter for it and if the Philippines Company decided to stop providing services to Leafbrook, that would be a decision that could be made by the Philippines Company unilaterally, and Leafbrook would need to find another provider of services.
[30] Following the hearing, Mr Winter provided the following letter dated 9 August 2019 from the Philippines Company:
“To whom it may concern,
Intechnology Distribution Inc. is an independent organization providing outsourced sales and support services along with the distribution of technology across the Asia region.
As part of our business, we provide these services to inTechnology Distribution Pty Ltd and other similar organizations. No client, including inTechnology Distribution or any of our other outsourced clients have any financial interest in inTechnology Distribution Inc.
(Signature omitted)
Albert Sherwin R. Muscat
Sales Manager – Southeast Asia
inTechnology Distribution Inc. [original emphasis].
Consideration
[31] I note that the issue of whether corporations incorporated in different countries can be associated was dealt with in the matter of Lau cited above. In that matter, Deputy President Booth held that: 7
“This question has been considered by single Members of the Commission but does not appear to have been determined by a Full Bench of the Commission or the Federal Court. Single Members have concluded that the offshore incorporation of the associated entity is not a constraint on finding that the employees of the associated entity are to be counted for the purpose of deciding whether an employer is a small business employer. A Full Bench of the Commission granted permission to appeal in relation to one of these instances but the substantive appeal did not proceed. I adopt the reasoning of these Members and conclude that there is nothing in the Act or the Corporations Act that means that I should not take into account the employees of the associated overseas based entity for the purposes of s.23 of the Act.
Control
[32] Relevant to s.50AAA(3) of the Corporations Act, it must be determined if Leafbrook, or alternatively, Mr Winter controls the Philippines Company. In doing so regard must be had to the test of ‘control’ in s.50AA of the Corporations Act.
[33] On the evidence of Mr Winter, there is no shareholding and no commonality in terms of Directorship or executive management. The ability for Leafbrook to exert influence over the Philippines Company is limited to the commercial strength it holds when engaging the Philippines Company to provide services to it. This position is supported by the evidence of Mr Winter indicating that the Philippines Company could cease doing business with Leafbrook unilaterally at any time.
[34] Mr Prill was unable to point to any evidence that identified a practical influence exerted by Leafbrook to determine the outcome of decisions of the Philippines Company or to identify any practice or pattern of behaviour, beyond the payment for services, affecting the Philippines Company’s financial or operating policies.
[35] Accordingly I make the following findings and have had regard to the following:
(a) Leafbrook does not have the capacity to determine the outcome of decisions about InTechnology Distribution Inc.’s financial and operating policies;
(b) The practical influence that Leafbrook can exert, rather than the rights it can enforce has been considered;
(c) The practices or pattern of behaviour affecting InTechnology Distribution Inc.’s financial or operating policies has been taken into account.
[36] For the same reasons to those in finding that Leafbrook is not in control of the Philippines Company, I also determine that Mr Winter is not in control of the Philippines Company. Mr Winter gave evidence at hearing that he has no ownership of or directorship with the Philippines Company. Further, he gave evidence that the extent of his interaction with the Philippines Company is limited to engaging them, by agreement, to provide services for Leafbrook.
[37] While Mr Prill provided evidence after hearing that purported to show that Mr Winter was involved in the hiring of employees of the Philippines Company, that evidence also suggested that others (the Muscats) were ‘managing the Manila office now’. I am satisfied that Mr Winter does not have the capacity to determine the outcome of decisions about the Philippines Company’s financial and operating policies. Given he does not hold any position with or have any ownership of the Philippines Company, I am satisfied that he has little practical influence over the Philippines Company in relation to its financial and operating policies. No evidence was provided as to any practice or pattern of behaviour of Mr Winter affecting the Philippines Company’s financial or operating policies that should be taken into account. Relevant to him “hiring” Ms Cacas, with the scant information before the Commission, it might be as far as having sourced her from LinkedIn, but it is not clear that he made any decisions relevant to Ms Cacas’ employment, and associated terms and conditions.
[38] Given this determination as to the lack of control Mr Winter exercises over the Philippines Company, it is not necessary to consider whether, pursuant to s.50AAA(7)(a) of the Corporations Act whether the operations, resources or affairs of the Philippines Company are material to Mr Winter.
Qualifying Investment
[39] It was also said by Mr Prill that Leafbrook and the Philippines Company were associated entities by virtue of Leafbrook having a qualifying investment in the Philippines Company pursuant to s.50AAA(6) of the Corporations Act.
[40] s.50AAA of the Corporations Act defines a ‘qualifying investment’ as existing if Leafbrook:
(a) has an asset that is an investment in the Philippines Company; or
(b) has an asset that is the beneficial interest in an investment in the Philippines Company and has control over that asset.
[41] The term ‘asset’ is defined in s.601WAA of the Corporations Act as meaning ‘property, or a right, of any kind, and includes:
• Any legal or equitable estate or interest…of any kind; and
• Any chose in action; and
• Any right, interest or claim of any kind including rights, interests or claims in or in relation to property…; and
• Any CGT asset within the meaning of the Income Tax Assessment Act 1997
[42] An ‘investment’ in a company is defined in s.601WAA of the Corporations Act as meaning:
• A share; or
• A debenture; or
• A legal or equitable interest in a share or debenture; or
• An option to acquire a share, debenture or a legal or equitable interest in a share or debenture; or
• An option to dispose of a share, debenture or a legal or equitable interest in a share or debenture; or
• An interest a person holds under an arrangement that is a derivative if the consideration to be provided or the value of the arrangement is ultimately derived or varies by reference to an investment of the kinds above.
[43] Mr Prill’s assertion that Leafbrook has the requisite qualifying interest by virtue of Leafbrook providing the Philippines Company with significant amounts of business under an oral service agreement which allowed the employees of the Philippines Company to be paid is misguided.
[44] While the contractual arrangement between the parties for the provision of services provides Leafbrook with an asset in the sense that the contract confers legal interests and rights upon Leafbrook, it cannot be said to be an investment as defined by the Corporations Act. The legal interests and rights acquired by Leafbrook by virtue of the contact for services between Leafbrook and the Philippines Company may be an interest in personal property or some claim or chose in action in the event of non-performance, but the interests or rights arising out of that agreement are not of the nature required to characterise that asset as an investment so as be a qualifying investment which indicates the entities are associated. For those interests or rights to be an asset that is an investment and therefore a ‘qualifying investment’ in the Philippines Company, they would need legal interests or rights in relation to share or debentures.
[45] The evidence provided by Mr Winter at hearing was that Leafbrook holds no right or interest in relation to shares of the Philippines Company. No evidence has been advanced by Mr Prill that contradicts that.
[46] Further, Mr Prill contended that any business that is developed in the Philippines will have a financial benefit for Leafbrook. Aside from the admission by Mr Winter that both Leafbrook and the Philippines Company benefit from the success of the other by virtue of increased brand recognition as a result of their similar branding, there was no evidence to suggest that business that is developed by the Philippines Company will provide a financial benefit for Leafbrook.
[47] It is unequivocal that there was no evidence to suggest that Leafbrook benefitted in a manner that saw it have a legal right, interest, claim or chose in action that is a share or debenture or a beneficial interest in a share or debenture of the Philippines Company. Further, there was evidence provided by an officer of the Philippines Company (albeit not somebody that would be assumed to have complete knowledge of the financial arrangements in place) that explicitly states that Leafbrook has ‘no financial interest in [the Philippines Company]’. As discussed above, while it is uncontroversial that Leafbrook would obtain an asset out of its relationship with the Philippines Company, that asset is not an ‘asset that is an investment’ or ‘the beneficial interest in an investment’ in the Philippines Company so as to make the two associated entities.
Conclusion
[48] On the evidence available it cannot be said that either Leafbrook or Mr Winter has the capacity to determine the outcome of decisions of the Philippines Company. While it may be that Leafbrook can enforce rights over the Philippines Company by virtue of the contract for services between the companies, it cannot be said that Leafbrook can exert any practical influence over the Philippines Company. It is also not apparent that there have been practices or a pattern of behaviour of Leafbrook affecting the Philippines Company’s financial or operating policies.
[49] For these reasons, I do not find that Leafbrook and the Philippines Company (InTechnology Distribution Inc.) are associated entities. Further, I do not find Mr Winter’s involvement results in Leafbrook and the Philippines Company being held to be associated entities.
[50] As such the number of employees to be counted for the purpose of determining whether Leafbrook was a small business employer is 13 and therefore Leafbrook is a small business employer pursuant to s.23 of the Act.
[51] As Leafbrook is a small business employer, the minimum employment period required by s.383 of the Act to be completed by Mr Prill in order to be protected from unfair dismissal is 12 months. I determine that Mr Prill did not complete the minimum employment period of 12 months pursuant to s.383(b) of the Act.
[52] For that reason I am satisfied that the Applicant was not, pursuant to s.382 of the Act, a person protected from unfair dismissal.
[53] Accordingly, I must dismiss the Applicant’s application and I do so.
COMMISSIONER
Appearances:
Mr Andreas Prill, Applicant;
Mr Mark Winter, Respondent, by telephone
Hearing details:
Brisbane
2019
August 7.
Final written submissions:
Applicant, 21 August 2019;
Respondent, 21 August 2019.
Printed by authority of the Commonwealth Government Printer
<PR713917>
1 Fair Work Act 2009, s.383.
2 Ibid, s.23(1).
3 Ibid, ss.23(2) and (4).
4 Ibid, s.23(2).
5 [2016] FWC 7490
6 Ibid
7 Lau v Nelson (Australia) JA Pty Ltd[2016] FWC 7490 at [17].
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