Paul Mercuri v Australian Travel Deals Pty Ltd
[2024] FWC 3508
•16 DECEMBER 2024
| [2024] FWC 3508 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.394 – Unfair dismissal
Paul Mercuri
v
Australian Travel Deals Pty Ltd
(U2024/5099)
| COMMISSIONER PERICA | MELBOURNE, 16 DECEMBER 2024 |
Application for unfair dismissal remedy
On 6 May 2024, Mr. Paul Mercuri made a s 394 application for a remedy, alleging he had been unfairly dismissed from his employment with Australian Travel Deals Pty Ltd (“ATD”). Mr. Mercuri seeks compensation.
Directions were issued and the matter was heard by determinative conference on 8 and 30 October 2024. Mr. Mercuri represented himself and gave evidence. Mr. Christopher Banson, the Managing Director of ATD, represented it and gave evidence.
During the determinative conference, Mr. Banson conceded the dismissal was harsh, unjust and unreasonable within the terms of s 385. This decision therefore only deals with the question of remedy.
For the reasons I publish below, I have found in all the circumstances a remedy of compensation is appropriate in the gross sum of $15,458 and superannuation subject to the payment of tax as required by law.
BACKGROUND FACTS
Mr. Mercuri created ATD in 2018. It was formed as a joint enterprise between Mr. Banson and Mr. Mercuri. Mr. Banson took the position of Managing Director of ATD and was the majority shareholder at 51%. Mr. Mercuri was the minority shareholder at 49%. It was agreed Mr. Mercuri would be both a director and an employee. He signed an employment contract and commenced employment with ATD on 1 May 2018. It was Mr. Mercuri’s role to hire staff, to deal with supplier relationships and to handle digital marketing.[1]
In late November 2023, negotiations ensued for Mr. Mercuri to purchase Mr. Banson’s shares. In his submissions, Mr. Mercuri states Mr. Banson “and I agreed that I would purchase his shares for $250,000 payment to be made over two years”.[2] On 23 February 2024, the lawyers for Mr. Mercuri provided a sale agreement to affect this arrangement.[3]
On that same day, 23 February 2024, Mr. Banson sent a “Request for members meeting” of ATD to call a general meeting of members of that company for 2:00 PM on 22 March 2024.[4] The notice of members meeting attached to that request noted the “business of that meeting” as:
· The members elected Banson Parks Pty Limited acting through Christopher John Banson to chair this Members Meeting.
· Pursuant to clause 104(a) of the Company’s constitution, the Company removes Paul Joseph Mercuri as a director of that Company, with immediate effect at the time this resolution was passed.
· The remaining director of the Company is instructed to notify ASIC of the change in directors of the Company within 28 days of this resolution.[5]
On 20 March 2024, Mr. Mercuri’s lawyers, Allied Legal, wrote a letter to Mr. Banson’s lawyers demanding the proposed meeting be adjourned because:
· A third party had expressed interest in purchasing ATD and the resolution to remove Mr. Mercuri was “highly prejudicial to the overall proposed transaction”; and
· The proposed resolution may constitute a breach of Mr. Banson’s directors’ duties and constitute minority oppression.[6]
On 22 March 2024, the Members meeting took place by proxy and Mr. Mercuri was removed as a director.[7]
By a letter dated 2 April 2024, Mr. Banson and Mr. Mercuri received a non-binding letter of intent from an American company U. S News and World Report LP (US News) to purchase ATD. Mr. Mercuri made submissions that the offer “valued the business at 981,000 Australin Dollars” on the then exchange rate.[8] This letter of intent was not acted on by ATD.
On 16 April 2024 by a letter from Mr. Banson to Mr. Mercuri, Mr. Mercuri’s employment with ATD was terminated. The letter was in the following terms:[9]
“I consider your performance unsatisfactory and have decided to terminate your employment. I have made repeated email and verbal requests to implement industry specific trust account software to allow for accurate financial reporting and this still has not been implemented.
I have no confidence in your ability to operate the company nor provide accurate day to day reporting of the financial position of the company.
Your employment will end immediately. Based on your length of service, your notice period is 4 weeks. In lieu of receiving that notice, you have been paid the gross sum of $7,692.30.
You have also been paid your accrued entitlements and any outstanding pay, up to and including your last day of employment.”
Mr. Banson elaborated on the reason for the dismissal in the Form F3 filed in this proceeding: “Paul was asked countless times to reconcile the payments from customers against payments to suppliers and against bank accounts to determine the actual financial position of the business. Paul refused to do this.”[10] ATD filed a series of e-mails dated from 9 March 2022 until 20 March 2024 which establish persistent requests by Mr. Banson for the individual deposits given by customers to be balanced and reconciled.[11] In his response, Mr. Mercuri argues that ATD had specialist accounting advice and there is no legal requirement for a travel company to keep a trust account.
During the proceeding, Mr. Banson conceded that although he had raised the issue of the reconciliation many times, he never warned Mr. Mercuri in relation to this conduct. He also conceded that Mr. Mercuri would not have known his job was in peril until he received the termination letter.[12]
Mr. Banson also conceded the dismissal was not consistent with the Small Business Code as Mr. Mercuri had not been warned, nor was he aware his job was in peril at the time of the dismissal and the dismissal was unfair for the purposes of s 385 (b) and (c). Based on this concession, it was agreed that “the issue between the parties was the amount of compensation” should be paid.[13]
As there is no contest on the question of whether Mr. Mercuri was unfairly dismissed, and the parties agree that reinstatement is not an appropriate remedy, I will only deal with the assessment of compensation as required by the Act.
ASSESMENT OF COMPENSATION
It was not contested between Mr. Mercuri and ATD that reinstatement is not an appropriate remedy. I agree with this assessment. The relationship between Mr. Banson and Mr. Mercuri has utterly broken down.
Section 392(2) requires all the circumstances of the case be considered when determining an amount to be paid as compensation in lieu of reinstatement. It includes a list of circumstances I am required to consider. What follows is my assessment of the amount of compensation against each of those circumstances.
In the process of this analysis, I have sought to apply the Sprigg formula as it is expressed in Bowden v. Ottrey Homes Cobram and District Retirement Villages.[14] The steps in the Sprigg formula (which I apply in my analysis below) are:
· Step One: Estimate the remuneration Mr. Mercuri would have received or have been likely to have received had ATD not terminated him.
· Step Two: Deduct monies earned since termination. The failure to mitigate loss may lead to a deduction in the amount of compensation ordered.
· Step Three: Discount for contingencies.
Step Four: Calculate the impact of taxation to ensure that the employee receives the actual amount he or she would have received if they had continued in employment.
CIRCUMSTANCES PRESCRIBED BY SECTION 392
Viability of the employer’s business [s 392(2)(a)]
Mr. Banson argues ATD is in a parlous state and any compensation payable would impact the viability of the business. In his evidence he said the following about the financial position of ATD:[15]
· Its position was “extreme”;
· ATD was “struggling to stay afloat”;[16]
· During the month of October ATD had four redundancies and it is down to two full time staff;[17]
· ATD has lost “about $130,000 last financial year” which Mr. Banson has had to “prop up”;
· Mr. Banson “doesn’t know if the business is going to be viable”; and
· ATD will keep trading for another six months “to see if it can be turned around” but Mr. Banson is not “positive”.
In response, Mr. Mercuri agreed that “the business has not been profitable for a little bit of time. But I certainly believe that the business is viable to pay an unfair dismissal claim of a reasonable amount.”[18]
I am satisfied there is some risk that a larger quantum of compensation may impact the viability of ATD. The quantum of compensation otherwise payable should be reduced.
The evidence is that Mr. Mercuri earned an annual gross salary of $100,000 a year.[19] I consider it appropriate that the compensation otherwise payable should be reduced by an equivalent to four weeks’ pay which I extrapolate from his annual salary figure to be $7,671.23 (being $100,000 divided by 365 days and then multiplied by 28 days, the length of four weeks).
The length of Mr. Mercuri’s service with ATD [s 392(2)(b)]
Mr. Mercuri was employed by ATD from May 2018 to April 2024, a period of five years, 11 months and 16 days. This is a significant period of employment. It follows there should be no discount in the amount of compensation by reason of the length of his employment.
The remuneration Mr. Mercuri would have received or would likely have received had he not been dismissed [s 392(2)(c)]
Mr. Banson argues by reason of the poor financial position of ATD, which he attributes solely to Mr. Mercuri, his employment would not have lasted more than a month. His evidence was:
“Well, probably if I didn't terminate him, I wouldn't have been willing to inject any funds to cover any losses so probably that month. It was either terminate him and try it without him or find money elsewhere, which wasn't an option and I wasn't willing to realistically, if I didn't terminate him it would have been – the company probably would have wound up in April, May.”[20]
Mr. Mercuri argues his employment would have been ongoing and would have lasted longer than six months.
I accept the proposition that ATD is in a poor financial state. It is too convenient for Mr. Banson that the anticipated length of employment would be equivalent to the one-month payment in lieu of notice he had already paid. Mr. Banson filed no documentary evidence as to the financial position of ATD. I was prepared to discount the compensation based on his oral evidence as to the financial position of ATD, but I do not accept his assertions here, when he had an opportunity to put documents before me that established conclusively the financial position.
Mr. Banson gave evidence that ATD would keep trading for another “six months to see if ATD could be turned around”. As it is anticipated that ATD will continue to trade up to that time, I find that, had Mr. Mercuri remained in his employment, it would have continued for that period.
The evidence shows Mr. Mercuri’s annual salary was $100.000. It follows that Mr. Mercuri would have received a gross amount of $50,000 had he remained in employment.
The efforts of Mr. Mercuri to mitigate the loss he suffered because of the dismissal [s 392(2)(d)]
There are several matters that are relevant to Mr. Mercuri’s efforts to mitigate the loss he suffered because of the dismissal. I consider them below:
Applying for a position with US News
On 8 August 2024 (four months after his termination) Mr. Mercuri secured a position with US News. Mr. Mercuri gave evidence that negotiating this job took some time during the period he was unemployed. He explained getting this job was his “No.1 preference”.[21]
Mr. Mercuri explained he was occupied between “two and three hours a day” working on the proposal to US News.[22] This included giving instructions for lawyers' submissions on “absolutely everything”:[23] “There was a detailed business plan on multiple occasions and financial projections as well.”[24] He also stated he “was doing some pre-work before actually finalising everything and getting everything done so I was working during that time even though I wasn't formally on a contract as well”.[25]
Other job applications
Outside of his work on the US News proposal, Mr. Mercuri gave evidence he applied for three jobs between April and August 2024, including a CEO position at “For Change”, a Land Contracting Manager position at Helloworld Melbourne and a Sales manager at A & K.[26]
Hospitalisation from 4 June 10 to 11 July 2024
For the period 4 June to 11 July 2024, Mr. Mercuri was hospitalised and was incapable of taking any steps to secure alternative employment.
Consideration
Discounting the five-week period of hospitalisation, Mr. Mercuri was capable of applying for work for eleven weeks of the period of his unemployment. During that period, he effectively applied for four jobs. He was unsuccessful in three of those applications.
When asked to explain why he had not applied for more work, Mr. Mercuri stated “I was focusing all my energy and efforts”[27] on the US News position. From the evidence, it is clear Mr. Mercuri was focused on the US News job because it was the most prospective. The time and energy required to negotiate it involved far more than sending a curriculum vitae. Two to three hours a day is not an insignificant amount of time to be seeking work. The fact that effort was successful justifies the time he spent.
In those circumstances, the absolute number of job applications does not represent the effort he made to get another job. I am satisfied the hours he spent on the ultimately successful application to US News, together with the other three applications, were genuine efforts to mitigate his loss. Mr. Mercuri was not sitting around for a week between sending job applications - he was actively and persistently working towards getting another job.
It follows I am satisfied he made genuine efforts to mitigate his loss for the period he could do so. I therefore make no discount for a failure to mitigate.
The amount of remuneration earned, and reasonably likely to be earned by Mr. Mercuri from employment or other work during the period between his dismissal and the making of the order for compensation [392(2)(e) and (f)]
Mr. Mercuri was effectively unemployed for four months. From 8 August 2024, he has been employed by US News and has been receiving an amount of around $157,000 Australian Dollars a year. I assume he continues to be employed by US News up to the date of making any order for compensation. He suffered no loss from the termination of his employment after 8 August 2024.
The amount of “remuneration earned from his employment after his dismissal” includes the notice payment that was made to him by ATD. This payment was in lieu of notice and for the period after he was terminated. It follows that this amount being a “gross amount of $7692.30”[28] is deducted from any calculation of compensation.
Any other matter the Commission considers relevant [392(2)(g)]
There is no other matter I take into account for the purposes of assessing compensation under s 392(2)(g).
Calculation of compensation taking into account the s 392 circumstances
Remuneration that would have been received if employment continued
I have found that had Mr. Mercuri not been terminated, he would have remained employed by ATD for a period of six months, from 16 April 2024 until 16 October 2024. It follows that he would have earned six months’ additional pay in the gross sum of $50,000.
Deduction for new employment from 8 August 2024
Deduct for the period from 8 August 2024 to 16 October 2024 (a period of ten weeks) when he was employed by US News and suffered no loss. The remuneration he would have received from ATD for the ten weeks would have amounted to $19,178.08 (being $100,000 divided by 365 days and then multiplied 70, the length of ten weeks). So, the deduction is $50,000.00 – $19,178.08 = $30,821.92.
Deduction for payment in lieu of notice
Deduct the remuneration Mr. Mercuri received in lieu of notice for the period after his termination being $7,692.30: $30,821.92 – $7692.30 = $23,129.62.
ATD Viability deduction
Deduct an amount for the effect any compensation order may have on the viability of ATD: $23,129.62 - $7,671.23 = $15,458.39
I will round the compensation figure down to the nearest dollar which is $15,458.
Misconduct [s 392(3)]
There is a real question whether Mr. Banson’s persistent requests for financial reconciliations and Mr. Mercuri’s failure to comply amounted to misconduct. There is a serious issue of condonation in that Mr. Mercuri continued not to comply with the directions. Mr. Banson never escalated these directions to a disciplinary action like counselling or a warning. Mr. Banson was prepared to live with this failure for two years.
There is no evidence before me of any conversation between Mr. Banson and Mr. Mercuri prior to his removal as a director by proxy. There is also no evidence of any communication prior to the termination letter which ended his employment with ATD.
It is a truism that hard calls must often be made in business, however, the way Mr. Mercuri was exited as a director, and then as an employee, can only be described as a brutal. For a small business employer to justify termination, the dismissed worker must at least be given an opportunity to correct an error and be warned that their job is in peril. Neither occurred here.
In the circumstances, I do not make any deduction from the assessment of compensation by reason of the nature of the misconduct relied on by Mr. Banson.
Shock and distress to be disregarded [s 392(4)]
The amount of compensation does not include a component for shock, humiliation and distress.
Compensation Cap [ss 392(5) and (6)]
The gross amount of $15,458 is less than the compensation cap of 26 weeks. No further adjustment is necessary.
Application of Step 4 of Sprigg with respect to tax
I have considered the impact of taxation and have elected to settle upon a gross amount of $15,458. I leave the taxation for determination in accordance with the applicable tax legislation.
Assessment of the compensation amount in all the circumstances
Under s 392(2), I am required to ensure that “the amount of compensation is considered appropriate having regard to all the circumstances of the case”. I have considered all the circumstances and, based on the reasons I have provided, am satisfied the compensation amount is appropriate.
CONCLUSION
Mr. Banson conceded Mr. Mercuri had been unfairly dismissed under s 385 when his employment was terminated on 16 April 2024. I am satisfied that compensation is the appropriate remedy for the loss Mr. Mercuri suffered by reason of that dismissal.
I find compensation in the gross sum of $15,458 is neither excessive nor inadequate. The payment of that gross amount, taxed as required by law, along with payment of superannuation is an appropriate remedy in all the circumstances of this case. An order to that effect will issue with this decision.[29]
COMMISSIONER
Appearances:
Mr. Paul Mercuri, the Applicant, for himself.
Mr. Christopher Banson on behalf of the Respondent.
Hearing details:
8 October 2024, 30 October 2024
Microsoft Teams
[1] PN52.
[2] Digital Court Book (from here on “DCB”) at page 45 – Statement of Paul Mercuri.
[3] Ibid.
[4] DCB at 15.
[5] DCB at 16-17.
[6] DCB at 48-54.
[7] DCB at 45.
[8] Ibid.
[9] DCB at 9.
[10] DCB at 85.
[11] DCB at 70-75 and 88-96.
[12] PN336-346.
[13] PN339-346.
[14] [2013] FWCFB 431.
[15] PN383-369.
[16] PN383.
[17] PN382.
[18] PN391.
[19] A payslip was forwarded to the Commission by an e-mail dated 17 October 2024.
[20] PN412.
[21] PN437.
[22] PN433.
[23] PN431.
[24] Ibid.
[25] Ibid.
[26] Mr. Mercuri forwarded these details to the Commission in an e-mail dated 17 October 2024.
[27] PN439.
[28] DCB at 56.
[29] PR782518.
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