Polome and Secretary, Attorney-General's Department

Polome and Secretary, Attorney-General's Department [2021] AATA 1724 (11 June 2021)
Division:GENERAL DIVISION
File Number(s): 2017/6734; 2018/5753
Re:Daniel Polome
APPLICANT

AndSecretary, Attorney-General's Department
RESPONDENT

DECISION
Tribunal:The Hon. John Pascoe AC CVO, Deputy President
Date:11 June 2021
Place:Sydney

The correct and preferable decision is to set aside both reviewable decisions and to substitute them with a decision as follows:
(a)The Applicant was at all times from 28 October 2009 an employee of Prius.
(b)The Applicant failed to meet the criteria in subsection 10(1) of the FEG Act in relation to his claim for entitlements under that Act.

..............................[sgd]..........................................
The Hon. John Pascoe AC CVO, Deputy President
CATCHWORDS
FAIR ENTITLEMENTS GUARANTEE – eligibility for advance under subsection 10(1) of the Fair Entitlements Guarantee Act 2012 (Cth) – unpaid remuneration due to insolvency event – where Applicant employed in “chaotic” corporate structure – where nature of the employment relationship unclear – where claims made against two separate entities – whether the Applicant took reasonable steps to prove debts in the winding up of the employer – whether the Applicant took reasonable steps before insolvency event to be paid debts – decision set aside and substituted
LEGISLATION
Fair Entitlements Guarantee Act 2012 (Cth), ss 10(1)
CASES
On Call Interpreters and Translators Agency Pty Ltd v Federal Commissioner of Taxation (No 3) [2011] FCA 366
REASONS FOR DECISION
The Hon. John Pascoe AC CVO, Deputy President
11 June 2021
INTRODUCTION

The Applicant has brought two applications for review of decisions made by the Respondent, which are being heard together.
On 28 October 2009, the Applicant entered into an employment contract with Prius Healthcare Solutions Pty Ltd (Prius).
On 1 June 2012, Medsupply Australia Pty Ltd (Medsupply) was incorporated. The Applicant became the sole director and shareholder of Medsupply.
The records of Prius indicate that the Applicant's employment was terminated on or around 31 August 2012.
On 5 November 2014, Dickson & Dickson Healthcare Pty Ltd (Dickson), a related body corporate of Prius, entered into a contract with Medsupply for consultancy management services commencing 1 January 2015 (Medsupply Contract).
On 19 September 2016, administrators were appointed to Dickson and Prius. Liquidators were appointed to both companies on 25 October 2016.
Dickson Claim
On 12 December 2016, the Applicant made a claim for an advance under section 14 of the Fair Entitlements Guarantee Act 2012 (Cth) (FEG Act) in which he stated that Dickson was his employer from 1 January 2010 until 25 October 2016. In that claim, he stated that he is owed amounts by Dickson in respect of unpaid wages, annual leave, payment in lieu of notice, redundancy pay and long service leave.
On 16 January 2017, a delegate of the Respondent made a decision under subsection 15(1) of the FEG Act that the Applicant was not eligible for an advance (Dickson Initial Decision). The delegate found that the Applicant was not an employee of Dickson but rather that the Applicant was the director of Medsupply, that Medsupply provided management services to Dickson, and that Medsupply invoiced Prius for these services. Consequently, the delegate concluded that the Applicant was not eligible for an advance under the FEG Act, which establishes a basic payment scheme solely for former employees.
On 13 February 2017, the Applicant applied for internal review of the Dickson Initial Decision under subsection 38(1) of the FEG Act. The Applicant asserted that, despite the existence of Medsupply and the Medsupply Contract, the characterisation of the arrangement between Dickson and the Applicant could only be that of an employment relationship.
On 16 October 2017, a delegate of the Respondent made a decision under subsection 39(1) of the FEG Act to affirm the Dickson Initial Decision (Dickson Internal Review Decision). The delegate found that the Applicant was not an employee of Dickson. For that reason, the Applicant did not satisfy the general conditions of eligibility set out in paragraphs 10(1)(a), (c) and (d) of the FEG Act.
The delegate considered the nature of the Applicant's relationship with Dickson in reaching a determination as to the Applicant's eligibility for FEG assistance. The delegate found that, on balance, the Applicant was an employee of Medsupply and that Medsupply provided management services to Dickson via a contracting arrangement. The delegate determined that there were several relevant factors that weighed in favour of the Applicant being considered an employee of Medsupply, and not Dickson. These included:
(a)no evidence of employment entitlements owing to the Applicant in the books and records of Dickson examined by the insolvency practitioner, in comparison to the other employees of Dickson;
(b)Medsupply having provided Prius with regular invoices, which included GST and directed payment to a Medsupply bank account;
(c)advice from the former CFO of Prius indicating that the Applicant's employment with Prius ended on 31 August 2012 and that from mid-2012, Medsupply was responsible for the Applicant's superannuation entitlements; and
(d)PAYG summaries of the Applicant for the 2012-13, 2013-14 and 2014-15 income years all listed Medsupply as the payer.
Prius Claim
On 6 July 2017, the Department (which was in the process of assessing the Applicant's internal review application in relation to Dickson) recommended that the Applicant lodge an effective claim in relation to Prius, noting that this would be a prudent step to take to protect a potential future claim should it be determined that he was an employee of Prius rather than Dickson.
On 24 July 2017, the Department received a second claim form completed by the Applicant for an advance under the FEG Act. The Applicant stated in this claim form that he commenced work as an employee with Prius on 1 January 2010 and his employment with that company was terminated on 25 October 2016. In that claim, he stated that he is owed amounts by Prius in respect of unpaid wages, annual leave, payment in lieu of notice, redundancy pay and long service leave.
On 16 October 2017, a delegate of the Respondent made a decision (Prius Initial Decision) under subsection 15(1) of the FEG Act that the Applicant was not eligible for an advance. The delegate determined that the Applicant was not an employee of Prius and was not entitled to an advance, as the delegate was not satisfied that all of the general conditions of eligibility in subsection 10(1) of the FEG Act were met.
On 20 February 2018, the Applicant applied for internal review of the Prius Initial Decision under subsection 38(1) of the FEG Act.
On 31 May 2018, a delegate of the Respondent made a decision under subsection 39(1) of the FEG Act to affirm the Prius Initial Decision (Prius Internal Review Decision).The Respondent's delegate was not satisfied that the Applicant had taken steps, so far as reasonable, to prove debts attributable to employment entitlements in the winding up of Prius under paragraph 10(1)(e), or that the Applicant had taken reasonable steps prior to the insolvency event to be paid those debts under paragraph 10(1)(f) of the FEG Act. The delegate concluded that the Applicant was not eligible for an advance.
The Respondent's delegate considered the issue of whether the Applicant was an employee or contractor of Prius but did not decide on that issue as they had already made a finding that the Applicant was not eligible for an advance as he did not meet the conditions of eligibility in paragraphs 10(1)(e) and 10(1)(f) of the FEG Act.
Decisions under review
The decisions under review are the Dickson Internal Review Decision and the Prius Internal Review Decision.
Conduct of the proceedings before the Tribunal
On 4 March 2019, the Applicant filed a witness statement (accompanied by additional documentary evidence) and a Statement of Facts, Issues and Contentions in which he asserted that he should be classified as an employee of Prius and not an independent contractor. He requested that the Tribunal 'look beyond' the contractual description of his working relationship to the work practices which established the totality of the relationship between himself and Prius. On 5 April 2019, in support of that Statement, the Applicant filed witness statements from each of Paul Dickson, John Sneddon, Mark Workman, Stuart Clark, Arshad Jaleel, Dianne Dickson and Phillip Schroth.
On 14 June 2019, the Respondent filed a Statement of Facts, Issues and Contentions. In that Statement, the Respondent accepted that the new information before the Tribunal, which was not available to the decision makers on review, supported a finding by the Tribunal that the Applicant was an employee of Prius, not Dickson, and was therefore not an independent contractor. However, the Respondent contended that the Applicant was not eligible for an advance because the Tribunal could not be satisfied that he met the conditions of eligibility in paragraphs 10(1)(e) and 10(1)(f) of the FEG Act.
The proceedings were listed for hearing on 9 September 2019. Following an application by
the Applicant to file additional evidence, that hearing was vacated. On 6 September 2019, the Applicant filed a supplementary witness statement of Mr Clark and a witness statement of David McIntosh, as well as a Summary Timeline.
On 14 October 2019, the Respondent filed a Statement of Facts, Issues and Contentions in Reply and supporting documents.
The proceedings were listed for hearing a second time, to be held on 18 February 2020.
On 14 February 2020, the Applicant advised that he had received further statements from each of Mr Dickson and Mr McIntosh. At a directions hearing held later that day, the Applicant was directed to file a brief outline specifying the issues for determination and giving a brief summary of submissions.
On 14 April 2020, the Applicant filed that outline, in which he submitted that he was an employee of Dickson. The Applicant filed a fresh Statement of Facts, Issues and Contentions on 19 May 2020, supported by an appendix of additional evidence. The content of that appendix overlaps significantly with the content of the appendix filed by the Applicant in March 2019.
ISSUES
The Applicant asserts that he was an employee of Dickson, not Prius. He also states
that the decision under review is the Dickson Internal Review Decision. However, the
Applicant has not withdrawn his application for review of the Prius Internal Review Decision. Both applications therefore came before the Tribunal and were heard together.
The issues before the Tribunal are:
(a)whether the Tribunal is satisfied of all of the general conditions of eligibility in subsection 10(1) of the FEG Act in relation to Dickson; and
(b)if not, whether the Tribunal is satisfied of all of the general conditions of eligibility in subsection 10(1) of the FEG Act in relation to Prius.
LEGISLATION
There are two main objects of the FEG Act, which are set out in section 3 of that Act. The first is to provide for the Commonwealth to pay advances on account of unpaid employment entitlements of former employees of employers in cases where:
(i)        the employers are insolvent or bankrupt; and
(ii)       the end of the employment of the former employees was connected with that insolvency or bankruptcy; and
(iii)      the former employees cannot get payment of the entitlements from other sources.
The second main object of the Act is to allow the Commonwealth to recover the advances through the winding up or bankruptcy of the employers and from other payments the former employees may receive for the entitlements.
Subsection 10(1) of the FEG Act sets out the general conditions of eligibility for an advance. It relevantly provides:
(1)       a person is eligible for an advance if the Secretary is satisfied of all of the following:
(a)       the person’s employment by a particular employer has ended;
(b)       after the commencement of this section, an insolvency event happened to the employer;
(c)       the end of the employment:
(i)        was due to the insolvency of the employer; or
(ii)       occurred less than 6 months before the appointment of an insolvency practitioner for the employer; or
(iii)      occurred on or after the appointment of an insolvency practitioner for the employer;
(d)       the person is (or would, apart from the discharge of the bankruptcy of the employer, be) owed one or more debts wholly or partly attributable to all or part of one or more employment entitlements;
(e)       the person has taken steps, so far as reasonable, to prove those debts in the winding up or bankruptcy of the employer;
(f)        if the person was owed any of those debts before the insolvency event happened, the person took reasonable steps before that event to be paid those debts;
(g) when the employment ended, the person was an Australian citizen or, under the Migration Act 1958, the holder of a permanent visa or a special category visa;
(h)       an effective claim (see section 14) that the person is eligible for the advance has been made to the Secretary by or on behalf of the person.
EVIDENCE
Mr Polome’s evidence
Mr Polome, the Applicant, made a statement to the Tribunal outlining his work history with various entities within the Dickson & Dickson Group (D&D Group). Mr Polome agreed that he was initially employed as part of the D&D Group which consisted of five companies within a larger corporate structure, which provided services to the medical care industry. Dickson was the parent entity of four other companies within the D&D Group, namely Prius, ClaveGuard Pty Limited (Claveguard), DP Logistics Pty Ltd (DPL) and Total Compression Solutions Pty Ltd (TCS).
Mr Polome said he left Prius to set up a new company called Medsupply Pty Ltd. He said he agreed to do that and to become the managing director of Medsupply because he saw it as an opportunity and also because he had been asked to do so by the company. He said that the company’s Chief Financial Officer, Mrs Gabrielle Heaton, used Mr Polome’s email address in setting up Medsupply.
Mr Polome said that Mr Dickson confirmed that Mr Polome was an employee and that his sick leave and holiday pay as an employee would continue on as usual. He said tax and other issues continued to be managed by Mrs Heaton.
He said that his leave continued in the same way, his salary was paid as normal and he was referred to as the general manager of Medsupply.
Mr Polome said that Medsupply was administered and controlled by Mr Dickson and that he remained as an employee of Mr Dickson until the liquidators distinguished him. Mr Polome said that in his view he was no different from any other employee in Dickson. He had a standard working week, he reported to HR and he was expected to work every day. All profit made by Medsupply went back to the D&D Group.
He said he was subject to the day-to-day direction of the D&D Group and that all of the office equipment and other facilities used by Medsupply were provided by Dickson.
In Mr Polome’s view, he had no latitude as to his actions and he always did as he was instructed to do. He received bonuses from the D&D Group and was given an award as employee of the year by Dickson. His mobile phone was provided by Dickson and he was included in group organisational charts as a general manager.
Mr Polome said that he provided services across the D&D Group and invoices from Medsupply or himself were sent to the D&D Group, although he was paid by a variety of different entities.
Any profit earned by Medsupply went back to the D&D Group and he said he was referred to as “your Dickson representative, our general manager Daniel Polome”.
In relation to the claims he made after the liquidation of the D&D Group, he says that he took steps in relation to both Dickson and Prius. He said he claimed against Prius as instructed and that he made a claim against Dickson for employee entitlements and CPI payments.
Mr Polome said that he had had no worthwhile interaction with the administrators of the group. He said that prior to the administration of the group he had been instructed by the Dickson team to submit monthly invoices to Prius, and if he had not been told to do so he would not have submitted his claims to Dickson and made a claim against Dickson.
Mr Polome said that on 7 September 2016 he submitted a monthly invoice to Prius. On 19 September 2016, administrators Ferrier Hodgson were appointed and at that time his invoice was still outstanding.
Mr Polome said that he made a request for a meeting with the administrators in October 2016, who advised him that they did not think it was appropriate for them to meet with him because the companies had not yet been placed into liquidation.
On 12 September 2016, Mr Polome lodged his claim for entitlements under the FEG Act. He said at that time there were sufficient funds in Prius but not in Dickson and that is why he had been told to make a claim under the Act. Mr Polome said that he received no cooperation or assistance either from the administrators or Dickson staff in relation to his claims, which were said to be comprised of the following:
(a)10 weeks of unpaid wages totalling $35,480.80;
(b)8 weeks of annual leave totalling $40,448.00;
(c)12 weeks payment in lieu of notice totalling $42,576.00;
(d)52 weeks of redundancy payments totalling $184,500.00; and
(e)5.90 weeks of long service leave totalling $29,094.00.
Mr Polome said that he was also told that he was not an employee of Dickson and that for the purposes of the claim under the Act he should make a claim against Prius.
On 31 March 2018, Mr Polome was informed that he was ineligible to make a claim against Prius because he had not taken reasonable steps in relation to his claim.
Under cross-examination, Mr Polome acknowledged his contract in 2009 was with Prius. He was also referred to a contract between D&D Group and Medsupply. Once liquidators were appointed to the D&D Group, Mr Polome made claims as follows:
(a)Proof of Claim for Claveguard – Medsupply Australia;
(b)Proof of Claim for D&D – Daniel Polome;
(c)Proof of Claim for D&D – Medsupply Australia; and
(d)Proof of Claim for Prius – Medsupply Australia.
Under cross-examination, Mr Polome agreed that the decision of the delegate on 16 January 2017 found that he was not an employee of Dickson. He initiated an internal review, and on 15 October 2017 the delegate decided to affirm the original decision, holding that the Applicant was not an employee of Dickson so did not meet the requirements of section 10 as an employee of that company. The delegate said he was in fact an employee of Medsupply, which in turn provided invoices to Prius for Mr Polome’s employment costs.
When cross-examined, Mr Polome said that none of his duties changed when he moved to Medsupply and that he was not really sure when his employment with Prius terminated. He agreed that he had signed a contract with the D&D Group on behalf of Medsupply.
Mr Polome said that he did not know whether Prius had continued to employ people but said that new employees were hired under the D&D Group.
Mr Polome said that he did not know which entity within the group was party to product sales contracts, nor was he sure of the proportion of his time spent on different tasks. However, he said that over time, the majority of his work related to divisions other than Prius.
It was agreed that Mr Polome had signed a document as general manager of Prius by way of an email signature after the Medsupply / Dickson contract had come into effect.
Mr Polome further agreed in his statement that he continued to use Prius emails and other items supplied to assist him in doing his work. He said his car was paid for by Medsupply.

Having initially said that Dickson paid for his mobile phone bills, Mr Polome subsequently said he did not know who had paid for them. I note there did seem to be some confusion and inconsistency on this point, although it is not of itself significant. He said that Prius was administered by the D&D Group. Mr Polome initially said that all costs of Medsupply were covered by Prius, however, he said that he now thinks that it was all done by Dickson and that it may have been that bills were paid by different entities from time to time.
Mr Polome said he did not know who paid payroll tax in relation to his employment.
When questioned by counsel for the Respondent, Mr Polome said he had no control either directly or indirectly of money going in and out of Medsupply and that he was not directly involved in the garment business conducted by Medsupply. Although he was the only director of Medsupply, Mr Polome said he was not aware of all its activities. Mr Polome gave examples of invoices which were addressed to the D&D Group. Mr Polome said he did things the way he was instructed to. He did not know whether Prius was paying his monthly salary or invoices.
He was directed to a number of invoices, namely those dated 17 February 2013, March 2013 and April 2013, which he accepted were paid by Prius.
In his second claim under the Act in 6 July 2017, Mr Polome made a claim against Prius which he said he did because of the 12-month time frame for making such a claim. He agreed that the delegate’s initial decision on 15 October 2017 found that he was not an employee of Prius and this was subsequently affirmed as the delegate was not satisfied in relation to paragraphs 10(1)(e) and 10(1)(f).
In June 2019, the Respondent accepted new information which supported a decision that Mr Polome was an employee of Prius. However, the conditions of paragraph 10(1)(e) and 10(1)(f) were not met.
Mr Polome acknowledged the delays in the proceeding whilst he filed further evidence. Mr Polome currently claims that the decision for review relates to him being a Dickson employee. However, the claim against Dickson and the claim against Prius remains on foot.
When questioned in relation to the claims he made following the appointment of administrators to the group, Mr Polome agreed that he had submitted a proof of debt form on 24 October 2016 to Prius in the name of Medsupply. He agreed there were two claims: one personal and one on behalf of the company. He said that in making the claim he had been trying to make it as comprehensive as possible.
Mr Polome referred to his email of 28 September 2016 to the administrators attaching a proof of claim form for the D&D Group, and further email of 10 October 2016 requesting a face-to-face meeting in relation to his entitlements which he said were all due from the D&D Group.
After receiving a response and being referred to the liquidators, Mr Polome says that he was on gardening leave from the company.
In November 2016, he agreed that he asked about unpaid entitlements of Dickson employees.
Mr Polome said that despite describing himself as an employee with Prius on 12 February 2018, he did not lodge a proof of debt in his capacity as an employee of Prius at that time.
Mr Polome agreed that he had made offers to buy part of the business from the liquidators and he had gone to meetings with creditors in which he had tried to speak with the liquidators. He said that Medsupply had been appointed to the committee of creditors for the D&D Group.
Mr Polome was notified on 26 September 2016 that there were sufficient funds to pay creditors of Prius, who were paid 100% of their claims. Mr Polome said that he thought that this related only to secured creditors.
Mr Polome acknowledged that he did not lodge a proof of debt in the winding up of Prius, which he said was because he believed that his contract was not with Prius.
Mr Stuart Clark’s evidence
Mr Clark gave evidence by video link. He affirmed his statement dated 3 April 2019 but said that it did not cover off the evolution of the D&D Group over time.
He said it was part of the strategy to build the company with a group of key people so that it could ultimately be sold. He said Mr Polome was essential to this strategy.
Mr Clark said that when Mr Polome’s contract with Prius lapsed he was made an employee of Dickson.
When questioned in relation to the set-up of Medsupply, Mr Clark had said that it had been set up before he was employed by the D&D Group and he was not sure why the company had been initially set up. Mr Clark said that everything had been controlled by Mrs Heaton and that everything was a “bit of a mess” because of the rapid growth of the company.
When questioned about Prius and its relationship with Mr Polome, Mr Clark said the various entities in the group became irrelevant and that brands and projects were broader than the various entities, which he said were not relevant for the various day-to-day activities of the group.
Mr Clark said that Mr Polome was treated as an employee of Dickson and that they paid his super entitlements, which he thought were paid to Medsupply but he said he was not certain. He said Mr Polome was to find new products for sale, establish markets and develop a selling team. He said that this meant Mr Polome needed to travel to meet suppliers, customers and others in order to build a pipeline of business.
Mr Clark said it was irrelevant which entity was actually involved and that the company was not focused on the entities.
He said that administratively everything was “a bit of a quagmire” as the company was trying to grow very quickly.
Mr Polome was said to be responsible for the remanufacturing of garments and getting them back into the hospital system, but he didn’t know how much time was taken up on these duties.
Mr Clark said Dickson was the parent entity and all other entities were regarded as irrelevant and of no advantage. He said that new people coming into the business were employed by Dickson.
Mr Clark said that Dickson was viewed as the controlling entity and they didn’t worry about where the money was and simply transferred it to meet the need of the business.
Mr Dickson’s evidence
Mr Dickson was referred to his letter of 12 February 2020 and to his statement dated 25 March 2019.
Mr Dickson said that Mr Polome had an employment contract with Dickson. He said that he had been part of the D&D Group from the time he started it until it was sold to OXC Bidco Pty Ltd. He said at the time of sale Mr Polome was an employee of Dickson, although he worked in the business primarily under the “cost centre of Prius”.
Mr Dickson said his strategy had been to copy the business model of large companies such as Johnson & Johnson and that the whole push was to grow the business. He said that new people were put on Dickson contracts and some other contracts when they expired were changed to Dickson.
According to Mr Dickson, there had been a period of crazy growth, and he said the administration was always playing catch up. The focus was on sales, marketing and growth.
Mr Dickson said that the liquidators had never spoken to him in relation to the group.
Under cross-examination, Mr Dickson said that there is a very big difference between a person’s job and the entity with whom they have an employment contract. He accepted that his original statement talked about Mr Polome in relation to the Prius team, whereas his letter of February 2020 talked about Mr Polome having an employment contract with Dickson.
Mr Dickson said that Mr Polome was certainly an employee of Dickson and he was employee of the year in 2016. Mr Dickson referred to the problems of managing a growing business using the MYOB accounting software which was designed for small businesses. Mr Polome might have been put into a particular group for administrative purposes, but the cash pool was regarded as being money of the group and because of the limitations of MYOB it had been necessary to move money from one part of the group to another.
When questioned, Mr Dickson said he didn’t understand what the liquidators meant when they said that Prius, ClaveGuard and DP Logistics were the main entities in the group. He said contracts were initially in the names of individual members of the group but later, once Dickson was formed, contracts were in the name of Dickson, and Dickson was pushed to the forefront. He said the overall structure morphed into the D&D Group.
He referred to cross guarantees between the companies and said that the administrator had all of the records.
Mr Dickson said that even when people were employed by other entities in the group they were regarded as employees of Dickson. He said there were 40 to 50 employees of the group. Mr Dickson said the administrator was incorrect in the way he looked at Prius and that it should have been seen as a brand, and not as an entity.
Mr Dickson said Dickson was the overarching company for the group for the purposes of the bank and the cross-guarantee and emphasised that in reality the various entities in the group were only brands and existed only for the purposes of the MYOB accounting system. He said Dickson sold Prius equipment and that prior to Dickson being established contracts were all over the place.
Mr Dickson gave evidence that he had first met Mr Polome in 2010 and that Mr Polome was in fact related to him, although he said he had not met Mr Polome before he came to work for the D&D Group.
Mr Dickson’s attention was drawn to his statement of March 2019, which says that Mr Polome was an employee of Prius until he resigned in 2016. Mr Dickson said he was referring to Mr Polome’s job within the D&D Group and as a member of the Prius team. He said he asked Mr Polome to set up a private company in 2012 so that he could use that company to approach overseas manufacturers to source products more cheaply. Mr Dickson said that he made Mr Polome managing director of Medsupply but he was in fact an employee of Dickson, as was shown by him becoming employee of the year. Mr Dickson said Prius, DP Logistics and Claveguard all benefited from Mr Polome’s work at Medsupply.
Mr Dickson said that Mr Polome was paid through Medsupply because he wanted to be a head of a division. He said that although Mr Polome was in fact paid through Prius, the money “could have come from anywhere”.
Mr Dickson said that when Mr Polome’s contract “ran out” with Prius he was re-signed with Dickson. He said that he was referred to as a brand manager within the D&D Group.
Mr Dickson, however, could not remember if there were any changes in the contract between Mr Polome’s contract with Prius and his contract with Dickson.
Mr Dickson said that Medsupply had a contract with Dickson as he wanted it to be a standalone entity. There was an arrangement to ensure that Prius paid all of the costs but he said it was all about how they fitted the group arrangements into the MYOB system and said this was one of the issues in the negotiations in relation to the sale of the D&D Group to OXC Bidco Pty Ltd.
Mr Dickson said cash would have been moved from one entity to the other within the group whenever it was necessary to do so. He said the entities were cost centres for MYOB but ultimately, they were consolidated into the D&D Group.
He stressed the limitations of the MYOB accounting system and said that one of the attractions of the sale to OXC Bidco Pty Ltd was the group having access to better systems.
Although not further questioned on the matter at the hearing, it was accepted that Mr and Mrs Dickson were also directors of Prius and Dickson.
Mr McIntosh’s evidence
Mr McIntosh said that he was aware of Mr Polome’s situation based on his experience as the company’s auditor and his previous experience as a team leader.
He said that the D&D Group had grown very quickly until it had reached the point where it needed an external auditor. He said that the audits were troublesome because of the limitation of MYOB, which led to things being much more complex. He said the administrative staff of the group were overworked and that triple bookkeeping was required. There was often a shortage of money and money had to be moved around the group.
He said there were always issues in relation to the auditing of the company and difficulty in balancing accounts with the accounting staff having to run multiple MYOB accounts.
Mr McIntosh said that in the end the companies’ accounts were always right but the way it was done was wrong.
Mr McIntosh said it was necessary to see Mr Polome’s employment in light of the chaotic management of the group. He said that he started with Prius, then he was contracted to Prius through another entity for his services. He said Mr Polome was always an employee but presented as an independent contractor. He said the contract situation was changed because of the risk profile.
Mr McIntosh said Mr Polome was actually working for Dickson. He referred to the deed of cross-guarantee across all the groups and said the group was always cash strapped. The money was collected by subsidiaries who had the contracts with customers and then that cash was moved within the group as required.
Under cross-examination, Mr McIntosh accepted that he had first met Mr Polome when he was the financial controller of the D&D Group which he thought was about 2004/2005, although it could have been 2010. He had met Mr Polome first as a colleague and continued to have contact with him as the auditor of the business.
Mr McIntosh confirmed that he had worked with the administrator, for both the administrator and the creditors. He had met with the administrators as a member of the audit team and explained why the company was collapsing. He had previously worked for the administrators.
He represented a number of creditors in talking to the administrators but said he couldn’t recall whether Mr Polome was one of them, although he did recall representing Medsupply.
The administrators thought that the accounts of some entities were materially misstated, but this was disputed by Mr McIntosh and he felt this was ultimately accepted by the administrator. Mr McIntosh said that the group spent a lot of money growing the business and that because of multiple MYOB files and multiple bank accounts, every entity was “in each other’s pockets” and cash would be moved around by the financial controller, who apparently saw the money in the various entities as “one big pool of cash”. Mr McIntosh said that this was one of the reasons Mr Polome was paid from Prius. He said he knew Mr Polome was being paid from Prius because of the accounts. However, he did not think any one set of MYOB files or accounts was correct but that the consolidation was correct. Individual entities were not treated as independent.
Mr McIntosh said that Mrs Heaton, the financial controller of Dickson, was always doing triage. He could not remember the number of bank accounts in the group and he could not remember whether any of the entities paid Mr Polome directly or through Medsupply. He said paying Mr Polome from Prius was “a mistake”. Mr Mcintosh said Mr Polome was in fact only paid for his labour and he did not receive any benefit from the profits of Medsupply which went directly to the D&D Group.
When questioned on Mr Polome being referred to as “general manager” of Prius, Mr McIntosh said that this only really correlated with Prius as a business unit. He said the Prius business had changed over time.
Mr McIntosh said Mr Polome had moved from being contracted to Prius in 2012, to being contracted by Medsupply through the D&D Group and that the Tribunal needed to look through this to see Mr Polome as an employee of the D&D Group. He said that Mr Polome provided only his personal labour. He said that staff also reported to Mr Polome from across the group.
Mr McIntosh in his evidence was not able to provide the Tribunal with any specifics as to what had actually changed in the Applicant’s employment relationship once Medsupply was set up, nor of any details as to changes in his duties or employment relationships.
DISCUSSION
In order for the Applicant to succeed in his claim, the Applicant must satisfy all of the requirements of subsection 10(1) of the FEG Act in relation to either the claim he has made against Prius or the claim he has made against Dickson.
The first issue to be decided is whether the Applicant was employed by a particular entity, either Prius or Dickson, or whether he was in fact an independent contractor. If the Tribunal is to find that the Applicant was, on the balance of probabilities, an independent contractor rather than an employee, then his claim must fail.
In considering the question of whether the Applicant is an employee, the Tribunal must look at the totality of the relationship, including any contractual terms and the actual nature of the relationship between the Applicant and the purported employer. In this regard, I give consideration to the comments of Bromberg J in On Call Interpreters and Translators Agency Pty Ltd v Federal Commissioner of Taxation (No 3) [2011] FCA 366. At [188]-[190], his Honour noted:
Whether a person is an employee or alternatively an independent contractor is to be answered by reference to an objective assessment of the nature of the relationship that person has with the entity that takes the benefit of that person’s work…In that regard, it is well settled that what a court will look to is the real substance of the relationship in question…
The relationship is to be found not simply from the contractual terms agreed to but by the system operated thereunder and by the work practices which establish the “totality of the relationship”
There are also many decisions by the Tribunal in relation to the employment relationship, which make it clear that each case has to be dealt with on its own particular facts.
Turning first to the question of whether the Applicant was an employee of Dickson, the following issues are relevant. Firstly, the only documentary evidence which records a contractual relationship is in fact the contract between Medsupply and Dickson. The Applicant did not have an independent contractual relationship with Dickson. Rather, the contract was between Medsupply and Dickson.
In accordance with various authorities, the Tribunal would need to be satisfied on the basis of other relevant material that the reality of the relationship between the Applicant and his employer was not reflected in the contractual arrangement with Medsupply.
The only direct contract of employment between the Applicant and an entity within the D&D Group was in fact the Applicant’s contract with Prius. It does not matter that Prius was not a party to the Medsupply contract, if in reality he continued as an employee of Prius even though ostensibly, at least as far as the outside world was concerned, he was the managing director of Medsupply, an independent entity.
Mr Stuart Clark gave evidence to the Tribunal that the purported change to the Applicant’s apparent employment as director of Medsupply was part of an initiative to have all employee contracts under Dickson as it was the parent company. From the evidence, it would appear that new employees after 2014 were employed by Dickson and it may be that some existing employees of other entities had their employment contracts formally changed to Dickson, but there was no evidence of this in relation to the Applicant.
The Applicant gave evidence that his duties did not change after he joined Medsupply and that the company entered into a contract with Prius. This was never in contention before the Tribunal.
The Applicant gave evidence that he was happy that he ceased working for Prius in order to take up a position with Medsupply because he had been asked to do so and he thought that such a move would be good for his career. There was also evidence from the Applicant and others, including Mr Dickson, that Medsupply had been set up as part of a new growth and brand strategy and that it was primarily done in order to build relationships with overseas suppliers. In fact, the Applicant’s salary continued, in the main, to be paid by Prius, his former employer, which on the evidence was also responsible for providing him with office equipment and other facilities needed for him to be able to perform his duties.

The Applicant said that after he moved to Medsupply he in fact performed services for other entities within the D&D Group, but the evidence indicates that the Applicant performed only limited additional duties primarily related to the “remanufacturing of pressure garments”.
I also take into account the evidence of Mrs Dianne Dickson, who provided a statement to the Tribunal, that the Applicant was always regarded as a fulltime employee of Prius and presented himself to customers and employees as an employee of Prius at all times. Mrs Dickson was not called to give oral evidence and her statement was not questioned or disputed at the hearing. In her statement, she is described as the former Sales & Clinical Director of Prius Healthcare Solutions Pty Ltd and Dickson & Dickson Healthcare Pty Ltd, and anecdotally from the evidence it appeared that she played an active role within the D&D Group.
Mr Clark in his initial statement dated 3 April 2019 said the Applicant was responsible for the Prius division and for Prius employees, although at the hearing Mr Clark said that the reality was that everyone was an employee of Dickson which was the controlling entity.
Mr Dickson also changed his evidence, perhaps on further reflection, from that which was initially filed with the Tribunal and at the hearing he also said that the reality was that all employees of the various entities in the group were in fact employees of Dickson as it was the controlling entity and that ultimately all of the directions were given by him.
Although Mr Dickson sought to emphasise the fact that he saw the Applicant as an employee of the D&D Group, his written evidence and his evidence at the hearing is difficult to reconcile. Mr Dickson talked about the company’s strategy being to emulate Johnson & Johnson, but he did not explain how this was reflected in the structure of the D&D Group or how this affected the Applicant. Clearly it was open to Mr Dickson to change the Applicant’s employment relationship with one company in the group to another, but there is no evidence he actually did so. Furthermore, the liquidator found that although invoices that related in some way to the Applicant may have been addressed to Dickson, the invoices were always paid by Prius. Dickson was largely a non-trading company, a view which was supported by the insolvency practitioners.
Mr Dickson said that all the various entities within the D&D Group were in fact just cost centres. This was consistent with the evidence of Mr McIntosh before the Tribunal. Mr McIntosh said that each of the entities really only existed to meet the needs of the MYOB accounting system within an environment he described as chaotic. Mr McIntosh said that funds were shifted around the group to meet day to day cash needs and that the Applicant’s salary could have in fact been paid by any of the entities in the group. On the basis of the accounts, however, the evidence showed a very high level of consistency in transfers of money from Prius to Medsupply to meet the costs of Mr Polome’s employment. Superannuation payments also appeared to be made by Prius. Mr Dickson said the Applicant’s telephone was provided by Prius, although he said his car was provided by Dickson.
It is not unusual in large conglomerates for particular executives or employees to be actually employed by one of the subsidiaries within the group rather than by the parent company. In fact, there are many instances where most employees are employed by subsidiary companies with only a handful of employees at head office. The fact that the managing director of the parent company is ultimately responsible for giving overall directions which impact all employees of the group and may give very particular directions of an employee of a subsidiary company does not detract from that individual’s employment relationship with the subsidiary company.
Although it is unclear on the face of it why the Applicant took up the position with Medsupply, other than for the reason that it could advance his career goals and being requested to do so by his employer, it did not on the evidence lead to significant change in either his terms and conditions of employment or duties. All of the profits of Medsupply went back to Dickson. He did not receive any share of the profits and did not seem to have any control over the affairs of Medsupply including financial management (which was entirely in the hands of the group financial controller, Mrs Heaton).
I accept that the limitations of the MYOB accounting system meant the continuation of “silos” within the group in order to meet accounting requirements for the group as a whole. I also accept the evidence as to the cross-guarantee affecting all companies within the group, but this does not mean that the Applicant was an employee of Dickson.
Again, it is relevant that although Medsupply issued invoices to Dickson, the management fee is said to relate to “Prius HCS” and appears just as a single number of days and hours. It is possible Dickson may indeed have incurred expenses for the Applicant’s travel.
The evidence was also clear that Dickson was primarily a holding company and not a trading entity of itself. This is consistent with the finding of the administrator that most staff, including the Applicant, were in fact employees of other entities within the group.
The Applicant was an employee of Prius from October 2009 on terms contained in his contract of employment. There was no evidence of any employment contract between the Applicant and any other entity between 2009 and 2012.
After the establishment of Medsupply and the Applicant becoming managing director of that company, with very few exceptions, the cost of the Applicant’s employment continued, in the main, to be paid by Prius. It also appears that the Applicant worked from the offices of Prius and that Prius provided the basic essentials he needed for his work.
The Applicant’s core duties remained the same after he moved to Medsupply. He used a Prius email address and continued to be shown as general manager of Prius on organisational charts. He continued to be represented as the general manager of Prius in ongoing contracts with Prius customers.
Accordingly, I find that the Applicant was at all times an employee of Prius and was not at any time an employee of Dickson. Although Dickson was the ultimate holding company, it in fact had very few direct employees. The interposing of Medsupply and the Applicant’s description as managing director of that company did not in reality change the Applicant’s employment status. On the basis of the above finding, it is not necessary for me to consider any further the Applicant’s claim in relation to Dickson.
Subsection 10(1) of the FEG Act
Having found that Prius was the Applicant’s employer, the Tribunal must now consider whether the Applicant met the requirements of paragraphs 10(1)(e) and (f) of the FEG Act in relation to Prius. In looking at whether the Applicant met the requirements of this section, it is relevant to look at the two main objects of the Act which are set out in section 3 of the Act. The first object is to provide for the Commonwealth to pay advances on unpaid unemployment entitlements of former employees of an employer where the employers are insolvent or bankrupt and the termination of the former employee’s employment was connected with that insolvency or bankruptcy. Payments to former employees will only be available if they cannot get payment of the entitlements from other sources. In other words, the scheme is one of last resort.
The first difficulty the Applicant faces is that he did not lodge a proof of debt against Prius in his own personal capacity as an employee. Instead, the only claim the Applicant made against Prius was lodged as a proof of debt in his capacity as managing director of Medsupply, in relation to monies owed by Prius to Medsupply.
Unfortunately for the Applicant, he only lodged a proof of debt in his personal capacity against Dickson, which included the reasons why he thought he should be treated as an employee of Dickson. In addition, he also lodged a proof of debt as a director of Medsupply against Claveguard Pty Ltd, another D&D Group subsidiary. Clearly the Applicant understood that he was not an independent contractor, as evidenced by the fact he lodged a proof of debt against Dickson in which he claimed unpaid wages for the period 8 August 2016 to 26 September 2016. In contrast, the proof of debt lodged by the Applicant against Prius claimed Medsupply was owed a debt in relation to unpaid invoices for consultancy services provided from 8 August 2016 to 16 September 2016.
A further hurdle for the Applicant is that as at 21 December 2017, he was clearly on notice that priority creditors of Prius, which included employees, had been paid 100% of their claims by the liquidators. However, he still failed to take any steps to prove debts attributable to his unpaid employment entitlements in the winding up of Prius, even though at that time the liquidation of the company had not been finalised.
The Applicant’s position is made more difficult by the fact that all of the circumstances which he outlined in his emails in support of his being an employee of Prius must, or certainly should, have been known to him at the time the liquidators were appointed, but he failed to take any steps at this time to lodge a proof of debt in his personal capacity against Prius.
Further, despite being advised Prius was to pay all outstanding debts to its employees, the Applicant did not change the manner in which his proof of debt was provided so that the application related to him as an employee of Prius. From the evidence, it was clear to the Tribunal that Prius had been making payments to its employees prior to it being wound up.
The Applicant said that he did not know he was still an employee of Prius and said that the administrators would not assist him. He did not advise the liquidator that he was an employee of Prius or that he was confused as to his employer and that he was seeking advice in this regard.
The administrator was quite explicit in the response to the Applicant’s meeting request. There is no evidence that the Applicant ever sought help in trying to identify his employer. The evidence shows that the Applicant was well advised as to what was happening with the companies being put into administration and subsequently liquidated. Moreover, he was a very senior member of the group with a very active role in management. He was also advised/represented in his negotiations with the administrators/liquidators by Mr Clark and Mr McIntosh. However, despite the advice of Mr Clark, the Applicant did not lodge a proof of debt with Prius, nor did he alert the administrators to his situation and his employment by Prius. In fact, he advised the administrators that he had been “headhunted” by Dickson. His only claim against Prius was for unpaid invoices on behalf of Medsupply. Right up until 12 February 2018, the Applicant did not make any claim to be an employee of Prius.
It is very unfortunate that the Applicant is now seeking a decision from the Tribunal that he is entitled to payment under the Act on the basis of a single email, dated 12 February 2018, having done nothing for an extended period of time prior to this date.
All of the facts and circumstances which he said formed the basis of his “additional review”, and the desirability of informing the liquidator that he was a Prius employee, should have been known to him in October 2016 when the liquidators were appointed. The Applicant said he was on gardening leave prior to the appointment of the liquidators. He received his final salary payment from Prius on 15 August 2016. Despite the fact that the Applicant must have known that he was owed unpaid wages and there was a danger that he might not be paid, he continued to do nothing.
Further, the administrators had advised the Applicant that Dickson was not expected to have sufficient funds to make priority payments to creditors and that employees without standing entitlements could lodge a claim under the Act. The Applicant did not lodge a claim against Prius at this time.
On the basis of the evidence outlined above, it is also clear that the Applicant does not meet the requirements of paragraph 10(1)(f).
It is unfortunate in this case that the Applicant seems to have been adversely affected by a lack of clarity as to his employer in a rather chaotic corporate structure where lines were blurred, accounting systems were inadequate, and a powerful founder/director moved money around at will. This is not unusual in rapidly growing companies and groups. When looked at in the context of black letter law, where the Applicant must meet the requirements of the legislation, there is no discretion given to the Respondent and/or the Tribunal. The lack of structure and clarity is very detrimental to the Applicant.
DECISION
The correct and preferable decision on the basis of the evidence outlined above is to set aside both reviewable decisions and to substitute them with a decision as follows:
(a)The Applicant was at all times from 28 October 2009 an employee of Prius.
(b)The Applicant failed to meet the criteria in subsection 10(1) of the FEG Act in relation to his claim for entitlements under that Act.

I certify that the preceding 152 (one hundred and fifty-two) paragraphs are a true copy of the reasons for the decision herein of The Hon. John Pascoe AC CVO, Deputy President

..............................[sgd]..........................................
Associate
Dated: 11 June 2021

Date(s) of hearing: 2 March 2021

Date final submissions received: 3 March 2021

Applicant: In person (by Microsoft Teams)

Solicitors for the Respondent: Katherine Cooke, HWL Ebsworth Lawyers

[2021] AATA 1724

11 June 2021

Key Legal Topics

Areas of Law

Administrative Law

Immigration

Employment Law

Legal Concepts

Judicial Review

Procedural Fairness

Standing

Statutory Construction

Natural Justice

Appeal

Date(s) of hearing:	2 March 2021
Date final submissions received:	3 March 2021
Applicant:	In person (by Microsoft Teams)
Solicitors for the Respondent:	Katherine Cooke, HWL Ebsworth Lawyers