Mr Troy Gravolin v Master Accident Repair Centre Pty Ltd T/A H Harvey Nerang

[2013] FWC 1002

[2013] FWC 1002

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394 - Application for unfair dismissal remedy

Mr Troy Gravolin
v
Master Accident Repair Centre Pty Ltd T/A H Harvey Nerang
(U2012/3401)

COMMISSIONER ASBURY BRISBANE, 14 FEBRUARY 2013

Application for unfair dismissal remedy - jurisdiction - small business employer - minimum employment period.

Background

[1] Mr Troy Gravolin (the Applicant) has made an application under s.394 of the Fair Work Act 2009 (the Act) for an unfair dismissal remedy with respect to his dismissal by Master Accident Repair Centre Pty Ltd T/A H Harvey Nerang (the Respondent). The application is met with a jurisdictional objection on the grounds that the Respondent is a small business employer as defined in s.23 of the Act and the Applicant is not a person protected from unfair dismissal, because he has not served the minimum employment period required by s.383(b) of the Act.

[2] The Respondent also contended that the Applicant was not dismissed, but was demoted without significant reduction in remuneration or duties and remained in employment. The Respondent sought that the jurisdictional objections be dealt with prior to any conciliation conference being conducted.

[3] The matter was originally listed for Conference/Hearing on 23 November 2012, and Directions were issued requiring the parties to file and serve outlines of submissions and statements from any witnesses in relation to the jurisdictional objections. When material was filed by the parties in response to those Directions, it was apparent that there was a mutual lack of understanding about the issues required to be addressed in the jurisdictional hearing, and that the objection on the basis that the applicant had been demoted and not dismissed, was not being pressed.

[4] A Directions Conference was held on 21 November 2012 at which it was confirmed that the Respondent was relying only on the objection on the ground that it is a small business employer and the Applicant has not served the minimum employment period. The hearing date of 23 November 2012 was vacated, and further Directions were issued, setting out in detail the issues and the legislative provisions that the submissions and witness statements were required to address. Further material was filed by the parties and the application was heard on 29 November 2012.

[5] The Respondent was represented in these proceedings by Mr Dennis Kakoniktis, the Director and Owner of Pay No Excess Pty Ltd and the Applicant represented himself.

Issues in Dispute

[6] It is not in dispute that the Applicant was employed from 5 January 2012 and that his dismissal took effect on 27 August 2012. Those dates are set out in the Form F2 Application for Unfair Dismissal Remedy filed by the Applicant. A record setting out the Applicant’s employee details tendered by the Respondent also states that the date he commenced employment was 5 January 2012 and the payroll details tendered by the Respondent indicate that the Applicant was listed as an employee up until the pay period ending on 27 August 2012.

[7] The issues in dispute surround the relationship between the Respondent and Pay No Excess Pty Ltd. Essentially Mr Gravolin asserts that the Respondent and Pay No Excess Pty Ltd are related entities in accordance with s. 50AAA(2) of the Corporations Act 2001, on the basis that the two companies operate from the same premises and share employees from time to time.

Legislative Provisions

[8] The meaning of the term “small business employer” is found in s.23 of the Act, which is in the following terms:

23 Meaning of small business employer

(1) A national system employer is a small business employer at a particular time if the employer employs fewer than 15 employees at that time.

(2) For the purpose of calculating the number of employees employed by the employer at a particular time:

(a) subject to paragraph (b), all employees employed by the employer at that time are to be counted; and

(b) a casual employee is not to be counted unless, at that time, he or she has been employed by the employer on a regular and systematic basis.

(3) For the purpose of calculating the number of employees employed by the employer at a particular time, associated entities are taken to be one entity.

(4) To avoid doubt, in determining whether a national system employer is a small business employer at a particular time in relation to the dismissal of an employee, or termination of an employee’s employment, the employees that are to be counted include (subject to paragraph (2)(b)):

(a) the employee who is being dismissed or whose employment is being terminated; and

(b) any other employee of the employer who is also being dismissed or whose employment is also being terminated.

[9] An associated entity for the purposes of s.23(b) (by virtue of s.12 of the Act) has the meaning given by s.50AAA of the Corporations Act 2001. Section 50AAA of the Corporations Act 2001 provides that:

(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.

[10] For the purposes of s.50AAA(2) of the Corporations Act 2001, an entity (the associate) and another entity (the principal) are related bodies corporate if they meet the following definition found in s.50 of that Act:

Related bodies corporate

Where a body corporate is:

(a) a holding company or another body corporate; or

(b) a subsidiary of another body corporate; or

(c) a subsidiary of a holding company of another body corporate;

the first mentioned body and the other body are related to each other.

[11] Section 50AA of the Corporations Act 200 defines control as follows:

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.

Evidence and Submissions

[12] Mr Dennis Kakoniktis gave evidence on behalf of the Respondent. That evidence can be summarised as follows. Mr Dennis Kakoniktis is a Director of Pay No Excess Pty Ltd. The owner and director of the Respondent is Mr Steven Kakoniktis, who is the father of Mr Dennis Kakoniktis. Company extracts for both companies, appended to witness statements in the form of Statutory Declarations, made by Mr Dennis Kakoniktis and Mr Steven Kakoniktis, indicate that neither holds shares or is a Director of the other Company.

[13] Mr Steven Kakontis said in his statutory declaration that on 29 August 2012, the Respondent had 12 employees including the Applicant. The following evidentiary material was placed before the Commission in support of that assertion:

● A payroll activity summary dated 29 August 2012 relating to Master Accident Repair Centre Pty Ltd T/A H Harvey Nerang setting out the names of 12 persons, including the Applicant, the amount of Applicant’s wages paid on that date and the total wages paid to all 12 persons on that date.

● A Bank Statement for the Respondent indicating that on 29 August 2012 the amount shown on the payroll activity summary as the total of net wages for the 12 persons listed on the summary was debited to a business cheque account in the name of Master Accident Repair Centre PL for pays for the week ending 26 August 2012.

[14] Mr Steven Kakoniktis said in his statutory declaration that the Respondent entered into a business relationship with Pay No Excess Pty Ltd on or about March 2012, which provided for that company to perform work for the Respondent based on key performance indicators and reviewable on a quarterly basis. Mr Dennis Kakoniktis gave evidence to the same effect, in a Statutory Declaration. Mr Dennis Kakoniktis also gave oral evidence about the relationship between the Respondent and Pay No Excess Pty Ltd.

[15] Mr Dennis Kakoniktis said that the Master Accident Repair Centre Pty Ltd purchased a business from Hayden Harvey - H Harvey Nerang. The business model was that the administration was done by a separate company. This model was maintained by Mr Steven Kakoniktis, after he purchased the business of H Harvey Nerang, and work was outsourced to a contractor for the first eighteen months the Respondent commenced to operate H Harvey Nerang. That contractor ceased operating and there was a four month period when the work was done by employees of the Respondent.

[16] Mr Dennis Kakoniktis then started his own business, Pay No Excess Pty Ltd, to perform the work previously performed by a contractor to H Harvey Nerang, from March 2012. Pay No Excess Pty Ltd took on some of the employees of Master Accident Repair Centre Pty Ltd to carry out the contracted work. Those employees transferred from the Respondent to Pay No Excess Pty Ltd between April and the end of June 2012. The work undertaken by Pay No Excess Pty Ltd includes: administering insurance claims and getting them ready for the workshop; quoting on vehicles; setting out work flow in the workshop; accounts receivable and accounts payable; and some human resource functions. The last employees to join Pay No Excess Pty Ltd were accounts staff who did so from 1 July 2012. The Company Extract tendered by Mr Dennis Kakoniktis in relation to Pay No Excess Pty Ltd indicates that it was registered as a proprietary company on 23 March 2012.

[17] Mr Dennis Kakoniktis maintains his own office at Ferry Road, and Pay No Excess Pty Ltd also operates out of the premises of the Respondent. Pay No Excess Pty Ltd performs work for the Respondent and for other companies. Mr Dennis Kakoniktis maintained that the Respondent and Pay No Excess Pty Ltd are not associated entities under any of the provisions of the definition in s.50AAA of the Corporations Act. Mr Steven Kakoniktis also gave evidence in the form of a Statutory Declaration in relation to this matter to the same effect.

[18] Mr Gravolin contended that the Respondent and Pay No Excess Pty Ltd are associated entities because employees of the Respondent were transferred to Pay No Excess Pty Ltd, and because employees cross over performing work for both companies.

Conclusions

[19] The Respondent has provided evidence establishing that, at the time the Applicant was dismissed, it employed 12 persons. The evidence establishes that Mr Dennis Kakoniktis established a business - Pay No Excess Pty Ltd - for the purpose of contracting with Master Accident Repair Centre Pty Ltd (the Respondent in these proceedings) to carry out administrative tasks. Some of the employees of the Respondent transferred to Pay No Excess Pty Ltd, and that business carries out work from the same premises as the Respondent.

[20] Mr Dennis Kakoniktis gave sworn evidence to the effect that the businesses are not associated entities, by way of oral evidence under Oath, and in a Statutory Declaration, addressing sub-sections (2) to (8) of s.50AAA of the Corporations Act 2001 and stating that none of those provisions was satisfied with respect to the relationship between the Respondent and Pay No Excess Pty Ltd. Mr Dennis Kakoniktis maintained this position under cross-examination.

[21] That some employees of the Respondent transferred to Pay No Excess Pty Ltd does not result in the two entities being associated entities as defined in s.50AAA of the Corporations Act 2001. A transfer of employment may occur between non-associated entities. The fact that two entities share resources such as premises, does not result in them being considered associated entities for the purposes of s.50AAA of the Corporations Act 2001. 1

[22] The Company Extracts with respect to the Respondent and Pay No Excess Pty Ltd do not reveal any common directors or shareholders. There is no evidence of any relationship upon which a finding could be made that the Respondent and Pay No Excess Pty Ltd are associated entities within the meaning in s.50AAA of the Corporations Act 2001. There was also no evidence about how and to what extent employees move between the two entitles, and this is not of itself a basis for finding that entities are related.

[23] Accordingly the Respondent is a small business employer. The Applicant was employed for less than six months, and is not a person protected from unfair dismissal. The Application must be dismissed. An Order to that effect will issue with this Decision.

COMMISSIONER

Appearances:

Mr T. Gravolin on his own behalf.

Mr D. Kakoniktis on behalf of the Respondent.

Hearing details:

2012.

Brisbane:

November 29.

 1   [2011] FWA 7925 Amanda Myburgh v Variety NSW the Children’s Charity.

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