Ms Lorraine Eggers v Direction Employment and Training Limited

[2018] FWC 7174

[2018] FWC 7174

FAIR WORK COMMISSION

DECISION

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

Ms Lorraine Eggers
v
Direction Employment and Training Limited
(U2018/7438)

COMMISSIONER HUNT BRISBANE, 14 DECEMBER 2018

Application for an unfair dismissal remedy – jurisdictional objections – respondent in liquidation – applicant’s earnings exceeding high income threshold – no bar to proceeding as liquidation at order of Supreme Court of Queensland and not voluntary – applicant’s earnings did not exceed high income threshold – jurisdictional objections dismissed

[1] Ms Lorraine Eggers was employed by Direction Employment and Training Limited (Direction Employment) as the National Manager for Industry Engagement from 19 October 2017. She was dismissed from her employment on 12 July 2018. Ms Eggers made an application for an unfair dismissal remedy under s.394 of the Fair Work Act 2009 (the Act).

Jurisdictional objection – high income threshold exceeded

[2] On 3 August 2018 Direction Employment filed its response to the application and raised a jurisdictional objection to the application on the grounds that Ms Eggers earned more than the $145,400 high income threshold, and was otherwise not covered by an award or enterprise agreement.

[3] The parties participated in a conciliation conference before a Fair Work Commission (the Commission) staff conciliator on 16 August 2018. The matter could not be resolved through conciliation and was allocated to Deputy President Dean for further consideration.

[4] On 21 August 2018 the Deputy President sought Ms Eggers’ views in respect of Direction Employment’s jurisdictional objection that she earned more than the high income threshold.

[5] On 27 August 2018 Ms Eggers provided her submissions and maintained that her earnings were less than the high income threshold. Ms Eggers submitted that Direction Employment had improperly included amounts of a ‘travel allowance’ payable to Ms Eggers in the course of her employment in its treatment of her annualised earnings, and that discounting the amount of the ‘travel allowance’, she did not earn in excess of the high income threshold.

[6] This matter was allocated to me for determination of the jurisdictional objection raised by Direction Employment.

[7] On 14 September 2018 I wrote to the parties and referred them to the decision of the Full Bench of this Commission in Sam Technology Engineers Pty Ltd v Bernadou 1(Sam Technology) and the principles set out in that decision relevant to when and how much of a vehicle allowance will form part of an employee’s earnings. I sought Direction Employment’s submissions regarding Ms Eggers’ vehicle allowance, and particularly addressing the principles expounded in Sam Technology.

Respondent in liquidation

[8] On the same day, Mr George Hovan, Chief Commercial Officer of Direction Employment advised that Direction Employment had been wound up in liquidation by way of an order in the Supreme Court of Queensland. Mr Hovan stated that a copy of the ‘necessary confirmation letter’ regarding the liquidation would be forwarded to chambers and to Ms Eggers once received by Mr Hovan. Mr Hovan indicated that the appointed liquidator would be made aware of the present proceedings, and the liquidator would consider whether it wished to take part in the proceedings.

[9] On 17 September 2018 I wrote to the parties regarding Direction Employment’s apparent liquidation. I expressed the preliminary view that the application in this matter may be prevented from proceeding by operation of s.500(2) of the Corporations Act 2001 (the Corporations Act), which states:

“500 Execution and civil proceedings

(2) After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.”

[10] The parties were provided an opportunity to request a jurisdictional hearing of this matter. On 24 September 2018 Ms Eggers requested an extension of time to take legal advice in respect of Direction Employment’s apparent liquidation and whether she should request this matter proceed to jurisdictional hearing.

[11] I instructed my Associate to conduct a search of the Australian Securities and Investments Commission’s (ASIC) website to attempt to determine the corporate status of Direction Employment. Through those inquiries, it appeared to me that Direction Employment may in fact have been in external administration and not liquidation.

[12] I wrote to the parties on the above issue, requiring Direction Employment to provide evidence that it was in liquidation by 25 September 2018.

[13] On 24 September 2018 Mr Hovan confirmed his understanding that Direction Employment was in liquidation. Mr Hovan stated that he could not otherwise advise of the exact status of the respondent. Mr Hovan provided a contact phone number for the appointed liquidator, Mr David Orr of Deloitte, and stated that Ms Eggers could contact Mr Orr and make enquiries on her own behalf.

[14] On 28 September 2018 my Associate received a phone call from Mr Chris Muthukrishna, Analyst of Deloitte Financial Advisory Pty Ltd. Mr Muthukrishna indicated to my Associate that documents confirming Mr Orr’s appointment as liquidator of Direction Employment would be provided to chambers during the week commencing Monday, 1 October 2018.

Court ordered liquidation

[15] On 3 October 2018 Mr Muthukrishna forwarded to my chambers a copy of an Order of the Supreme Court of Queensland dated 6 August 2018, ordering that Direction Employment be wound up by the court in insolvency pursuant to s.459A of the Corporations Act and appointing Mr Orr as liquidator for the purposes of the winding up (the Order).

[16] On 5 October 2018 I wrote to the parties to confirm my understanding of Direction Employment’s status. I referred the parties to the Order and to my earlier preliminary opinion regarding Direction Employment’s liquidated status of 17 September 2018. I noted that my earlier opinion had been expressed on the basis that Direction Employment had been wound up following the passing of a voluntary resolution. Having received a copy of the Order, it was necessary to revise my preliminary opinion of how Direction Employment’s liquidation may affect Ms Eggers’ application.

[17] Section 471B of the Corporations Act states:

“471B Stay of proceedings and suspension of enforcement process

While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with:

(a) a proceeding in a court against the company or in relation to property of the company; or

(b) enforcement process in relation to such property;

except with the leave of the Court and in accordance with such terms (if any) as the Court imposes.”

[18] I referred the parties to the decision of the Full Bench of the Australian Industrial Relations Commission, as this Commission then was, in Smith v Trollope Silverwood & Beck Pty Ltd (Smith).  2 In Smith, the Full Bench considered the meaning of the word ‘court’ within s.471B of the Corporations Act and stated:

“pursuant to s.9 of the Corporations Act "court" has the meaning it bears in s.58AA of the same Act unless the contrary intention appears. The first question is, therefore, what meaning does the term "court" bear in s.58AA?

[9] It seems clear that in s.58AA, the terms of which we have just set out, "court" means a body capable of being invested with the judicial power of the Commonwealth. In other words, the term is confined in meaning to Federal and State courts. This conclusion arises primarily from the terms of s.58AA(2). Proceedings in relation to a matter under the Act would require to be brought in a curial body exercising judicial power. It is beyond argument that the Commission is not a body capable of exercising the judicial power of the Commonwealth: R v Kirby; Ex parte Boilermakers' Society of Australia; Miller v University of New South Wales. If the term "court" is to be given its defined meaning it excludes the Commission. Therefore the Commission is not a court within the definition of that term in s.9. This was the conclusion reached by a justice of the Federal Court of Australia in Australian Liquor, Hospitality and Miscellaneous Workers Union v Home Care Transport Pty Ltd. We respectfully agree.

[10] It follows from the terms of s.9 that the expression "any court" in s.471B includes only courts capable of exercising the judicial power of the Commonwealth, unless the contrary intention appears. Does an intention appear, either in s.471B itself or from the statutory context, that in s.471B "court" includes the Commission?

…

[21] Taking these considerations into account, we have concluded that the contrary intention does not appear and that "court" in s.471B should be given its defined meaning. With respect to those who have held otherwise, in our view the purposive approach does not take the respondent the distance it needs to go. [footnotes omitted]”

[19] I expressed my preliminary view to the parties that Direction Employment’s liquidation by way of the Order would prevent proceedings being commenced or continued in a court. However, given the Commission is not a court, Ms Eggers’ application is not troubled by s.471B of the Corporations Act and can proceed. I provided Direction Employment, through the liquidator, an opportunity to request a jurisdictional hearing of this matter.

[20] On 8 October 2018 I received through my chambers correspondence from Mr Muthukrishna on behalf of the liquidator. Mr Muthukrishna confirmed that the liquidator made no comment on this matter and did not propose to represent Direction Employment in this matter, as Ms Eggers’ application has been commenced prior to the liquidator’s appointment.

Conference

[21] On 21 November 2018 I convened a telephone conference. Ms Eggers attended by phone; the liquidator on behalf of Direction Employment did not attend. I indicated to Ms Eggers that it was my preliminary view her application could continue on the basis that the liquidator was court appointed and not voluntarily appointed.

[22] Ms Eggers relied on her earlier written material and submissions that stated that her annual earnings were $135,000. Further, the terms of her employment required Direction Employment to pay to her a car allowance of $13,500 per annum.

[23] Ms Eggers provided to my satisfaction a payment summary for the period 16 October 2017 to 30 June 2016 which specified that only $1,125 in allowances had been paid to Ms Eggers. The July 2018 payslip demonstrates that no allowance was paid to Ms Eggers for that period and the last payment made to her. Ms Eggers advised that she is pursuing the unpaid car allowance in a court of competent jurisdiction.

Kilometres travelled

[24] Ms Eggers kept a detailed log of the kilometres travelled by her. The detail she provided to the Commission included odometer readings each month. I have no reason to doubt the information provided by Ms Eggers to the Commission.

[25] The calculations demonstrate that for the employment period between 19 October 2017 and July 2018, Ms Eggers travelled approximately 18,191 kilometres. Ms Eggers claims that the kilometres travelled by her were approximately 69.87% business usage and 30.13% private usage. Again, I have no reason to doubt the information provided by Ms Eggers, and it appears to be a reasonable calculation having regard to the kilometres from an employee’s home to work and return counting towards private use.

[26] If the kilometres for the period 19 October 2017 to July 2018 (an approximate nine month period) were extrapolated for a 12 month period, the kilometres travelled would be approximately 24,254. 3 On Ms Eggers’ estimated business versus private usage, she would have travelled approximately 69.87% x 24,254 kilometres for business purposes = 16,946 kilometres.

[27] Ms Eggers declared that for the relevant period she drove a 2013 Ford Territory titanium luxury model. She provided detailed information on the ‘Red Book’ calculations, demonstrating running costs of 86.54 cents per kilometre. The RACQ running costs for a lower-standard vehicle, the Ford TX Territory provide for an identical running cost per kilometre.

Authority

[28] The Full Bench in Sam Technology helpfully set out the formula to use when determining the portion of a car allowance to be allocated towards earnings, as follows:

[72] For the reasons set out above and having regard to the relevant statutory context, we are of the view that a car allowance should be treated in the following way for the purpose of calculating an employee’s "annual rate of earnings" within the meaning of ss.332 and 382(b)(iii) of the Act:

(a) If a car allowance is paid to an employee in circumstances in which there is no requirement or expectation that the employee will have to use his or her car for work purposes, then the whole of the car allowance is, in reality, part of the employee’s wages and is therefore included in their “earnings”; or

(b) If a car allowance is paid to an employee at the time of their dismissal in circumstances in which there is a requirement or expectation that the employee will have to use his or her car for work purposes, then it will be necessary to determine and calculate the private benefit, if any, derived by the employee from the car allowance. To that end, we suggest the following methodology, which is based on the approach taken in Fewings:

1. Determine the annual distance travelled by the car in question. The amount of the annual distance will be as follows:

a. if the car allowance has been paid for at least 12 months prior to the dismissal - the distance travelled by the car over the 12 months immediately prior to the dismissal; or

b. if the car allowance has been paid for a period of less than 12 months prior to the dismissal, determine the distance travelled by the car in the period during which the car allowance has been paid and then extrapolate that distance over a period of 12 months to calculate an annual distance. For example, if an employee moved into a new position with his or her employer 6 months prior to his or her dismissal, received a car allowance during that 6 month period, and drove his or her car for 10,000 km in that 6 month period, the assumed annual distance travelled by the car for the purpose of calculating the employee’s “annual rate of earnings” would be 20,000 km.

2. Determine the percentage of the annual distance travelled which was for business use, which would not include travel between the employee’s home and usual place of work. If the car allowance has been paid for a period of less than 12 months prior to the dismissal, determine the business use percentage of the distance travelled in the period during which the car allowance was paid.

3. Multiply the annual distance calculated in accordance with paragraph 1 above by the business use percentage calculated in accordance with paragraph 2 above. This provides the annual distance travelled for business purposes.

4. Estimate the cost per kilometre for a car of the type used. This information can be obtained from the RACV, NRMA or like motoring organisations.

5. Multiply the annual distance travelled for business purposes by the estimated cost per kilometre. The result is the annual cost of using the car for work purposes. Compare that annual cost with the amount of the annual car allowance. The amount of the annual car allowance will be as follows:

a. if the car allowance was paid for at least 12 months prior to the dismissal - the amount of the car allowance paid to the employee in the 12 months immediately prior to the dismissal; or

b. if the car allowance has been paid for a period of less than 12 months prior to the dismissal, determine the amount of the car allowance paid in that period and then extrapolate that payment over a period of 12 months to calculate an annual amount of the car allowance. For example, if an employee in a business other than a small business was employed in that business for a period of 9 months prior to his or her dismissal, and received a car allowance of $2,000 each month in that 9 month period, the assumed annual car allowance for the purpose of calculating the employee’s “annual rate of earnings” would be $24,000 ($2,000/month x 12 months = $24,000).

6. If the amount of the annual car allowance exceeds the annual cost of using the car for work purposes, the difference is the private benefit to the employee of the car allowance, which forms part of their "annual rate of earnings".

Consideration

[29] The respondent is in liquidation by way of a court order. Having regard to s.471B of the Corporations Act, the Commission is not a court, and the application before the Commission may proceed.

[30] Ms Eggers is not employed pursuant to a modern award, nor does an enterprise agreement apply to Ms Eggers.

[31] I accept Ms Eggers’ material relevant to the kilometres travelled by her, and her separation between business and personal use.

[32] I am satisfied that for the relevant period, Ms Eggers’ earnings should only include the annual salary of $135,000 wages, together with the $1,125 actually paid to her as a car allowance. Even if all of the $1,125 was attributable to personal use (which it is not), the earnings would only equal $136,125, well below the threshold of $145,400.

[33] If it is necessary to include the full amount of $13,500 (even though a portion of this is a debt owed to Ms Eggers and she is pursuing it in a court of competent jurisdiction), the calculations to count as earnings for the purposes of the high income threshold are included below, having regard to the authority in Sam Technology:

(a) business kilometres estimated to be travelled over a 12 month period, as per the calculations at [26] is equal to 16,946 kilometres;

(b) the relevant vehicle running cost is determined to be 86.54 cents per kilometre;

(c) multiply 16,946 kilometres by 86.54 cents = $14,665.07.

[34] The amount of $14,665.07 exceeds the $13,500 car allowance, and accordingly, none of the $13,500 car allowance is to be calculated as earnings. Accordingly, the annual rate of earnings is only $135,000.

[35] For Ms Eggers’ earnings to exceed the high income threshold of $145,400, an amount of $10,400 of the car allowance would need to have been attributable to personal use, and only $3,100 for business use. I would need to be satisfied that only $3,100 divided by 86.54 cents per kilometres = 3,582 kilometres over a 12 month period would have been travelled by Ms Eggers for business use. Over the relevant nine month period that would equal approximately 2,687 kilometres. Of the 18,191 kilometres travelled by Ms Eggers in the relevant nine month period, I would need to be satisfied that Ms Eggers used the vehicle for work purposes for only approximately 15% of the kilometres travelled. I do not accept that only approximately 15% of the kilometres travelled by her were for business purposes.

Conclusion

[36] Ms Eggers’ earnings for the purposes of the high income threshold jurisdictional objection are $135,000.

[37] Ms Eggers is a person protected from unfair dismissal as required by s.382 of the Act as:

(a) she has completed a period of employment with Direction Training of at least nine months; and

(b) a modern award or enterprise agreement does not apply to her, and the sum of her annual rate of earnings is less than $145,500.

[38] The jurisdictional objection is dismissed and the application will be reallocated for arbitration.

COMMISSIONER

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 1   [2018] FWCFB 1767

 2 (2003) 142 IR 437.

 3   18,191 kilometres over 9 months. Divide by 3 and multiply by 4 to cover 12 months.