Queensland Mining Corporation Ltd v Renshaw

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FEDERAL COURT OF AUSTRALIA

Queensland Mining Corporation Ltd v Renshaw [2014] FCA 365

Citation: Queensland Mining Corporation Ltd v Renshaw [2014] FCA 365
Parties: QUEENSLAND MINING CORPORATION LIMITED (ACN 109 962 469) v HOWARD VICTOR RENSHAW, BUTMALL PTY LIMITED (ACN 060 658 639) and DFK RICHARD HILL PTY LIMITED (ACN 145 097 258)
File number: NSD 1308 of 2013
Judge: PERRY J
Date of judgment: 10 April 2014
Catchwords: CORPORATIONS – Where termination payments made to Managing Director upon retirement from public company – Where settlement deed entered into between the parties prior to payments being made – Whether application for recovery of termination payments should be allowed pursuant to Division 2 of Part 2D.2 of the Corporations Act 2001 (Cth) – Whether payments were benefits that required shareholder approval under the Act – Whether payments were made in connection with Managing Director’s retirement – Whether certain payments are exempt as genuine superannuation contributions under reg 2D.2.02 of the Corporations Regulations 2001 (Cth) – Whether payments exempt pursuant to s 200F(2) from the operation of s 200B(1) – Whether payments were a genuine payment by way of damages for breach of contract for the purposes of s 200F(2)(a)(i) – Proper calculation of base salary for the purposes of s 200F(2) in accordance with s 200F(4) – Whether company estopped from recovering payments – Whether company liable under the settlement deed for failure to obtain shareholder approval
Legislation: Corporations Act 2001 (Cth), ss 199A, 200, 200A, 200AA, 200AB, 200B, 200E, 200F, 200G, 200H, 200J, 334
Corporations Amendment (Improving Accountability on Termination Payments) Act 2009 (Cth)
Corporations Regulations 2001 (Cth), regs 2D.2.01, 2D.2.02, 2M.3.03
Legislative Instruments Act 2003 (Cth), s 13(3)
Property, Stock and Business Agents Act 1941 (NSW), s 42AA
Statute of Frauds 1677 (UK)
Workplace Relations Act 1996 (Cth)
Cases cited: Ace Insurance Ltd v Trifunovski (2011) 200 FCR 532
Bell Group Ltd (In liq) v Westpac Banking Corporation (No. 9 and 10) (2008) 39 WAR 1
Commonwealth v Verwayen (1990) 170 CLR 394
Dawson v Hoffman Brick & Potteries Ltd [1924] VLR 208
Ferrier v Stewart (1912) 15 CLR 32
Grundt v Great Boulder Pty Gold Mines Limited (1937) 59 CLR 641
Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623
Macquarie Bank Ltd v Lin [2005] QSC 221
Minister for Immigration and Multicultural Affairs v Singh (2000) 98 FCR 469
Overmyer Industrial Brokers Pty Ltd v Campbells Cash and Carry Pty Ltd [2003] NSWCA 305
Re Nanaimo Community Hotel Ltd v British Columbia [1944] 4 DLR 638
Shah v Shah [2002] QB 35
Shevill v Builders Licensing Board (1982) 149 CLR 620
Siegwerk Australia Pty Ltd (in liq) v Nuplex Industries (Australia Pty Ltd) (2013) 305 ALR 412
Standard Chartered Bank Australia Ltd v Bank of China (1991) 23 NSWLR 164
White v Norman (2012) 199 FCR 488
Yaxley…
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Details
Case
[2014] FCA 365
Decision Date

CaseChat Overview and Summary

The case of Queensland Mining Corporation Ltd v Renshaw involves a dispute over termination payments made to the Managing Director, Mr Renshaw, upon his retirement from the company. The matter was heard in the Federal Court of Australia. The central issue before the court was whether the Queensland Mining Corporation Ltd (QMCL) could recover the termination payments made to Mr Renshaw under Division 2 of Part 2D.2 of the Corporations Act 2001 (Cth). The court had to decide if the payments constituted "benefits" requiring shareholder approval, if they were made in connection with Mr Renshaw's retirement, and whether certain payments could be exempt as genuine superannuation contributions. Additionally, the court examined whether the payments were exempt from the operation of s 200B(1) and whether they were a genuine payment by way of damages for breach of contract. The court also needed to properly calculate the base salary for the purposes of s 200F(2) and determine if QMCL was estopped from recovering the payments or liable under the settlement deed for failure to obtain shareholder approval.

The court reasoned that the statutory scheme under the Corporations Act and the Corporations Regulations cast a broad net to ensure that all payments or things given in connection with retirement are subject to the statutory requirement for shareholder approval, except where specific exemptions apply. The court found that the termination payments made to Mr Renshaw and Butmall (as his consultancy company) constituted benefits under the Act. However, certain payments were exempt as genuine superannuation contributions under reg 2D.2.02 of the Corporations Regulations. The court concluded that the payments were not exempt from s 200B(1) and were not a genuine payment by way of damages for breach of contract. The base salary was properly calculated in accordance with s 200F(4). The court further determined that QMCL was not estopped from recovering the payments and was liable under the settlement deed for failure to obtain shareholder approval.

Orders

Orders of the court

1. On or before 4.00pm on 17 April 2014, the parties are to submit Short Minutes of Orders which give effect to the reasons of the Court.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Broadly speaking, the objections to the relevance of these paragraphs turned upon whether I accepted the correctness of certain defences relied upon by the Renshaw defendants. In those circumstances, I have received the material deposed to in those paragraphs, save for the last two sentences of paragraph 26 which does not relate to any issue fairly raised by the defendants.2. FACTUAL BACKGROUND2.1 Employment and consultancy agreements between QMCL and the Renshaw defendants QMCL initially entered into a contract of employment with Mr Renshaw appointing him as Managing Director on 30 November 2007 (the Initial Employment Contract). The contract was for a term of three years retrospectively commencing on 1 July 2007 and was to continue after the initial term for periods of three months (cl 4 of the Initial Employment Contract). Save for circumstances not presently relevant, the contract was terminable on three months’ notice by either party under cl 5. On 5 September 2007, Butmall entered into a consultancy contract with QMCL to supply a managing director, Mr Renshaw, to QMCL effective on 1 October 2007 (the October 2007 Consultancy Contract) and therefore also intended to operate retrospectively. The expressed intention was, among other things, that the contract would not create any relationship of employment between Mr Renshaw and QMCL. Thus, cl 17 expressly provided that “[t]his Agreement is made on the understanding that it shall not be deemed to constitute any form of contract or employment or partnership between QMC and the Contractor or between QMC and the personnel or employees of the Contractor.” The contract provided for contractor remuneration to be an amount equivalent to the salary of $180,000 plus 9% superannuation exclusive of GST, being a total of $192,200. By clause 5, the Consultancy Contract was for a term of 1 year and was to continue on a month by month basis thereafter as QMCL would determine and require. It is apparent from the terms of this contract that it was intended to be substituted for the contract made directly between Mr Renshaw and Butmall on 30 November 2007. Several years later, by a letter dated 16 May 2011, QMCL confirmed the basis of a renewed Service Contract ratified by the Board on 30 March 2011 between QMCL and Mr Renshaw. Mr Renshaw entered into that contract both personally for the provision of personal services by him and for and on behalf of Butmall for the provision by Butmall of corporate services as agreed between QMCL and Butmall (the May 2011 Services Agreement). The May 2011 Services Agreement was terminated by the Services Agreement between QMCL and Mr Renshaw both personally, and for and on behalf of Butmall, which was ratified by the Board of QMCL on 20 November 2011 (the November 2011 Services Agreement). The terms of this agreement as ratified by the Board of QMCL were confirmed in a letter dated 27 November 2011. This agreement provided for:(a)the provision of a base amount of $285,000 plus $50,000 superannuation per annum, the amount of $285,000 being comprised of a payment of $165,000 to Mr Renshaw for his personal services and a further $120,000 plus GST payable to Butmall for corporate services;(b)a cash bonus calculated according to share movements up to a maximum of $120,000; and(c)a further performance bonus of up to $120,000 based on the Board’s assessment of Mr Renshaw’s performance in achieving and/or implementing QMCL’s strategy.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

The term “benefit” and the circumstances in which “a benefit is given in connection with a person’s retirement” are broadly defined in ss 200AB and 200A respectively of the Act, while s 200 requires that a broad interpretation be adopted of when a benefit is given, affording priority to substance over form. The Corporations Regulations2001 (Cth) (Corporations Regulations) also specify that certain things are, and are not, benefits pursuant to s 200AB(1)(e) and (2) of the Act respectively, and when a benefit is given in connection with a person’s retirement pursuant to s 200A(1A). Those things which are specified in the Corporations Regulations as not constituting a benefit for the purposes of the Division include, relevantly, a genuine superannuation contribution paid by an employer or employee: see reg 2D.2.02(2)(c), Corporations Regulations made pursuant to s 200AB(2)). The Act also provides that certain benefits and benefits given in certain circumstances are exempt from s 200B(1), namely, (a)a payment for leave of absence to which a person is entitled under an industrial instrument (s 200F(1)(a));(b)a benefit given under an order of a court (s 200F(1)(aa));(c)a genuine payment by way of damages for breach of contract or for past services where the value of the benefit is less than the person’s average annual base salary (ss 200F(2) and 200G respectively); (d)a benefit given in prescribed circumstances (s 200F(1)(b)); or(e)a benefit given where the failure to do so would contravene a law in force in Australia (otherwise than because of breach of contract or trust) (s 200H). In effect, the statutory scheme can be summarised as casting a broad net so as to ensure that all payments or other things given in connection with retirement are caught by the statutory requirement for shareholder approval save where the Act or regulations creates an exemption. Where a contravention of s 200B(1) occurs, the benefit is held on trust by force of s 200J(1) and must be immediately repaid. Specifically, s 200J provides that:(1)If an entity (the giver) contravenes section 200B by giving a benefit to a person (the recipient), then the amount of the benefit, or the money value of the benefit if it is not a payment:(a)is taken to be received by the recipient on trust for the giver; and(b)must be immediately repaid by the recipient to the giver.(1A) An amount repayable under subsection (1) to the giver:(a)is a debt due to the giver; and(b)may be recovered by the giver in a court of competent jurisdiction.(2)Subsection (1) applies to the whole of the amount of a payment or of the money value of the benefit even though giving the benefit would not have contravened section 200B if that amount or value of the benefit had been less.”1.4 The matters in issue on the application First, no argument was put by the Renshaw defendants that the payments to Butmall should be treated differently from the payments to Mr Renshaw for the purposes of s 200B of the Act because those payments were made to a different legal person. In effect, the parties proceeded on the basis that the payments made to Butmall were to be treated as payments made to Mr Renshaw in determining whether the Termination Payments constituted a “benefit”. That understanding is correct in my view given the terms of s 200B(1): see also note 3 to s 200B(1). Specifically, s 200B proscribes the giving of a benefit to “a person” simpliciter where it is given in connection with “a retiree’s” retirement.