RingIR Pty Ltd v Maryanne Spiers, Lisa Linssen, Richard Hebden, Jacob Filiti, Alex Barry
[2023] FWCFB 249
•14 DECEMBER 2023
| [2023] FWCFB 249 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.604—Appeal of decision
RingIR Pty Ltd
v
Maryanne Spiers, Lisa Linssen, Richard Hebden, Jacob Filiti, Alex Barry
(C2023/5728)
| VICE PRESIDENT CATANZARITI | SYDNEY, 14 DECEMBER 2023 |
Appeal against decision [2023] FWC 2184 of Commissioner McKinnon at Sydney on 4 September 2023 in matter numbers C2023/4168, C2023/4170, C2023/4171, C2023/4172 and C2023/4174 – permission to appeal granted – appeal dismissed.
Background
RingIR Pty Ltd (the Appellant) has lodged an appeal under s.604 of the Fair Work Act 2009 (the FW Act), for which permission to appeal is required, against a decision of Commissioner McKinnon issued on 4 September 2023 (the Decision).[1] The Appellant had applied pursuant to s.120(2) of the FW Act for the reduction of redundancy pay for Ms Maryanne Spiers, Ms Lisa Linssen, Mr Richard Hebden, Mr Jacob Filiti and Mr Alex Barry (the Respondents) contending it had an incapacity to pay. The Commissioner did not consider it appropriate to reduce the redundancy pay of the Respondents as she was not persuaded that the Appellant could not afford to pay the redundancy entitlements. The Commissioner dismissed the applications.
After the parties had filed written submissions addressing permission to appeal and the merits of the appeal, they consented for the matter to be determined on the papers without the need for a hearing. On 9 November 2023, the Appellant filed some further material, consisting of a recent financial report, and brief written submissions that it would have otherwise made at the hearing. We are satisfied based on the materials before us that the appeal can be adequately determined without parties making oral submissions.
For the reasons that follow, permission to appeal is granted but the appeal is dismissed.
The decision under appeal
The Commissioner determined the appellant had an obligation to pay redundancy pay under s.119 of the FW Act[2] and calculated the gross value of the Respondents’ redundancy pay entitlements to be $106,673.08.[3]
The Appellant submitted that it could not pay the entitlements as this would create a risk of insolvency within weeks, and that it had suffered a number of setbacks and delays to contracts that caused it to reduce costs to avoid insolvency. At [14] of the Decision, the Commissioner set out a series of matters which she described as pertinent to whether the Appellant could afford to pay redundancy pay:
“[14] . . .
1. As noted above, the total redundancy pay due to the five respondents is $106,673.08.
2. As at 30 June 2023, cash at bank was $96,000. The net assets of the business were approximately $465,000, including the tax credit discussed below.
3. In the financial year 2022/23, the business operated at a net loss before taxation of approximately -$775,237. Management fees paid to RingIR Inc. over this period (plus an additional month) were approximately $278,000.
4. In May 2023, the business hired a new Chief Executive Officer, Mr Michael Robinson. Mr Robinson’s contract of employment provided for an initial salary of $190,000 (equivalent to the salary of the then General Manager, Ms Linssen). It also provided for a step up in salary to $300,000 upon achievement of certain targets. It is not apparent what those targets were, but they are said to have been met, and on that basis, Mr Robinson’s salary was increased to $300,000 in early July 2023.
5. On and from 10 July 2023, the roles of the five respondents were made redundant. Ms Linssen and Mr Barry ceased employment in July 2023 and Dr Spiers, Mr Filiti and Mr Hebden ceased employment on 9 August 2023. The cost of employee entitlements arising from redundancy had the effect of reducing RingIR’s cash reserves. Its predicted cash position in October 2023 is $39,000, although it does not appear that this figure takes into account the R&D tax credit below. Additional projected income for January 2024 is $168,000.
6. The business is due to receive a net cash injection of approximately $233,000 in connection with a research and development (R&D) tax credit due to the business in the next few weeks. The total value of the credit is $438,000, although its net value to the business is reduced by the amount of $205,000 which is required for the repayment of a related loan.
7. As at 30 June 2023, the business had trade debtors owing a total of $287,410.
8. RingIR is in early-stage discussions with potential investors in the business. It has also approached RingIR Inc. for a loan of up to $300,000 and has been advised that this would be subject to a capital raise.
9. There is a prospect of increased sales revenue although this may not be realised for approximately 4 months.”
At [15] of the Decision the Commissioner observed that the Appellant’s case that it could not pay redundancy pay to the Respondents was “not strong”. Accepting the Appellant’s cash flow position was under pressure, the Commissioner reasoned that the Appellant had assets upon which it could call to meet its obligations and could seek further assistance from its parent company. The Commissioner noted at [16]-[17] of the Decision that:
the Appellant’s current cash flow position was largely attributable to employee entitlements payable on termination of employment;
this was a one off rather than an ongoing expense;
the one-off expense and the shedding of staff with which it is associated will achieve an overall reduction in the Appellant’s annual labour costs of approximately $450,000 including superannuation;
the Appellant’s cash flow position was likely to gradually improve in the near future, especially upon receipt of the R&D tax credit; and
the decision to increase the CEO’s salary was relevant to her assessment, as the Appellant could have deferred this increase to meet its redundancy pay obligations.
The Commissioner was not persuaded that the Appellant could not afford to pay the redundancy pay entitlements of the Respondents and refused to reduce the amount under s.119 of the FW Act. Accordingly, she dismissed the applications.
Grounds of appeal
The Appellant’s notice of appeal contains a narrative of grievances rather than particularised appeal grounds. Nevertheless, we discern two broad complaints or grounds of appeal. The first is that the Commissioner made several erroneous factual findings related to the Appellant’s financial position.
In furtherance of this ground, the Appellant contends the Commissioner:
erroneously observed that “predicted cash flow in October 2023 is $39,000, although it does not appear that this figure takes into account the R&D tax credit below” (at [14] of the Decision) when the predicted cash flow position figures through the remainder of 2023 presented by the Appellant to the Commissioner included the R&D tax credit.
erroneously concluded that there would likely be a gradual improvement in the Appellant’s cash flow position in the near future, including upon receipt of the R&D tax credit (at [16] of the Decision), as the R&D tax credit had already been factored in, the predicted cash flow does not show any improvement in the period immediately following the hearing, and the evidence was that predicted sales income was not likely and at least 4 and perhaps 8 months away.
erroneously concluded that the Appellant has assets upon which it can call to meet its obligations, based on the willingness of its parent company to provide resources and the approximately $465,000 of net assets in its balance sheet. However, the Appellant’s parent company could not provide a cash loan, and a large portion of the Appellant’s net assets could not readily be converted into cash (for example, its pre-paid insurance) or were non-current assets.
The second broad ground is that the Commissioner erred by taking into account irrelevant considerations. Specifically, the Appellant submits that its decision to increase the CEO’s salary was irrelevant and the Commissioner erred in taking that matter into account. The Appellant contends that the CEO’s salary increase would not have impacted the cash available at the time of the redundancies. The Appellant further submits that if this is relevant, then it should also be relevant that the CEO recently voluntarily agreed to reduce his hours to save costs. The Appellant also contends that in March 2023, employees roundly rejected the opportunity to reduce their hours and remuneration and noted that the Commissioner did not make a similar suggestion that staff could reduce their remuneration as she did for the CEO.
We deal with these grounds below.
Consideration
An appeal under s.604 of the FW Act is an appeal by way of rehearing and the Commission’s powers on appeal are only exercisable if there is error on the part of the primary decision maker.[4] There is no right to appeal under the Act and an appeal may only be made with the permission of the Commission.
Subsection 604(2) requires the Commission to grant permission to appeal if satisfied that it is “in the public interest to do so.” The task of assessing whether the public interest test is met is a discretionary one involving a broad value judgment.[5] The public interest is not satisfied simply by the identification of error,[6] or a preference for a different result.[7] The public interest might be attracted where an appeal raises some issue of importance and general application, or where there is a diversity of decisions at first instance so that guidance from an appellate tribunal is required, or where the decision at first instance manifests an injustice, or the result is counter intuitive or that the legal principles applied appear disharmonious when compared with other recent decisions dealing with similar matters.[8]
It will rarely be appropriate to grant permission to appeal unless an arguable case of appealable error is demonstrated as an appeal cannot succeed in the absence of appealable error.[9] And, that the Member at first instance made an error is not necessarily a sufficient basis for the grant of permission to appeal. Permission to appeal may also be granted on discretionary grounds.
The Appellant’s outline of submissions and further material filed on 9 November 2023, includes updated financial material and reports reflecting its current cash flow position at the time of appeal, which we decline to consider. The Appellant’s appeal grounds contend that the Commissioner made various errors of fact and considered irrelevant matters. The issue on appeal is whether the Commissioner, in arriving at her decision to refuse the Appellant’s s.120 applications, made an appealable error. Whether to make a determination to reduce an amount of redundancy pay to a specified amount involves the exercise of discretion and so to succeed in an appeal against a discretionary decision, error in the exercise of the discretion of the kind discussed in House v The King[10] must be shown. The assessment whether to reduce an amount of redundancy pay is made based on the material before the Commission at the time of the assessment. As such, we consider it is appropriate only to examine the material that was before the Commissioner in determining this appeal.
As earlier noted, the Appellant by its first broad ground of appeal contends the Commissioner made erroneous findings of fact. Save for the tax credit issue, we are not persuaded the Commissioner erred as alleged.
First, there was material before the Commissioner suggesting that the cash flow projection figures for the remainder of 2023 included or took account of the tax credit. Although the income for July 2023 and that which is projected for August 2023 and the months following is set out in a lump sum and is not itemised by reference to its source, the Respondents’ “[r]response to claim 2” accepts that:
“. . . key incomes as described by the predicted cash flow statements supplied in the RingIR Pty Ltd Submission were the $262K from an R&D Tax Credit and $30K from the final deliverable of the Defence Innovation HUB contract. Both payments are expected imminently. For this reason alone, we are confident that [the Appellant] does possess the funds to afford redundancies.”
As the Respondents’ response before the Commissioner was consistent with the Appellant’s contention and is inconsistent the Commissioner’s finding, we accept that the finding was erroneous.
However, that the Appellant’s cash flow projections included the tax credit and the Commissioner wrongly concluded to the contrary, does not mean the appeal must succeed. We are not persuaded the error is significant. It is clear from the Commissioner’s analysis at [14] – [17] of the Decision that the tax credit was only one of many factors the Commissioner considered as pertinent to her assessment whether to reduce the amount of redundancy pay to which the Respondents were entitled to a specified amount. And we agree with the Respondents’ submission before the Commissioner noted above, to the effect that receipt of the tax credit was reason enough to be confident that the Appellant could meet its redundancy pay obligations.
Second, we do not accept that the Commissioner’s finding that the Appellant’s cash flow position would gradually improve in the near future was erroneous, even though the Appellant’s cash flow projection did not show an improvement in the months following the hearing, and that potential sales were likely 8 months away. We consider that on the evidence, the finding was reasonably open to the Commissioner. This is because the finding was not confined to the Appellant’s projections as to cash flow and sales, and the finding was as to the likelihood of a gradual improvement, not its actuality. The Commissioner also considered that:
the Appellant was in discussion with investors ([14] of the decision);
the Appellant had approached its parent company for a loan ([14] of the decision);
the Appellant had projected income of $168,000 in January 2024 ([14] of the decision);
the Appellant’s current cash flow position was largely attributable to the payment of employee entitlements on termination ([16] of the Decision);
the redundancy pay obligations were a one-off rather than an ongoing expense ([16] of the Decision); and
there would be savings of approximately $450,000 annually on labour costs due to the termination of the Respondents’ employment ([16] of the Decision).
Third, we do not accept the Appellant’s submission that the Commissioner erred in finding that the Appellant could rely on its parent company to meet its redundancy obligations and that the Commissioner’s finding “flies in the face of the evidence provided that [its parent company] cannot provide a cash loan”. The Appellant’s submission exaggerates the Commissioner’s finding. The Commissioner notes at [14] of the Decision that the Appellant had approached its parent company for a loan of up to $300,000 and was advised that this would be subject to a capital raise. At [15] of the Decision the Commissioner notes that the Appellant:
“. . . has a parent company which is currently trading. While there is no evidence of the financial position of [the parent company] . . . it is apparent that [the parent company] is willing and able to provide resources for the beneficial use of [the Appellant], including specialist labour to deliver on existing commitments and take advantage of new and imminent development opportunities.”
Moreover, the Appellant’s submissions at first instance did not suggest that its parent company “cannot provide a cash loan”. In its written submissions, the Appellant claimed that it “remained optimistic but [the loan] has not been approved yet, as [its parent company] has yet to complete its own capital raise.”
The Commissioner’s observations noted above are wholly consistent with the submissions made by the Appellant in the proceeding. The Appellant’s submission, that the Commissioner’s finding at [15] of the Decision “suggests that [she] believes [the parent company] could substitute labour for cash in order to pay redundancy for [the Appellant]” is absurd. No such suggestion may be inferred. As the passage from the Decision earlier extracted makes clear, the Commissioner was noting the apparent willingness of the parent company to provide resources for the beneficial use of the Appellant, including specialist labour “to deliver on existing commitments and take advantage of new and imminent development opportunities”. It is the delivery on commitments and the advantage taken of opportunities that will enhance cash flow. This seems to us self-evident and hardly controversial.
Fourth, the Appellant’s contention that many of its assets are not easily convertible to cash does not disclose any appealable error. The fact that some of the Appellant’s assets are not easily liquidated, or that it has been unable to liquidate many of its assets in the time since the Decision, does not assist the Appellant. The Appellant does not say that all assets cannot be converted to cash. The Commissioner’s finding that the Appellant could call on its assets to meet its redundancy pay obligations, was but one of the many possible means identified by the Commissioner by which the Appellant could raise cash, and it was one open to her on the evidence.
The Appellant’s first broad ground of appeal fails.
The Appellant’s second broad ground of appeal is that the Commissioner considered irrelevant matters in arriving at her conclusion to dismiss its s.120 applications: that the Appellant had approved a raise of the CEO’s salary by $110,000 in May 2023. The Commissioner finds at [17] of the Decision that:
“[17] The decision to increase the CEO’s salary by $110,000, coinciding with the decision to make the five respondents redundant at an almost equivalent cost ($106,673.08) in addition to their notice and accrued leave entitlements, is also relevant.”
The Appellant submits that, as this increase was contracted earlier and paid out over time rather than as a lump sum, any hypothetical agreement by the CEO to reduce his remuneration or defer the increase “would not have impacted the cash available around the time of redundancies.” We agree to the extent that the CEO accepting a deferral of his salary increase or a remuneration reduction would not have, in isolation, provided the amount of cash necessary to satisfy the Appellant’s redundancy pay obligations at the time. However, we are not persuaded that the matter was irrelevant.
The discretion under s.120(2) of the FW Act is broad and unincumbered by any mandatory considerations. Its exercise is to be guided by the object or purpose of the provision having regard to the object of the FW Act. A matter will be relevant to the exercise of the broad discretion under s.120(1) if it logically bears upon or is probative of a matter that is in issue. Here a matter in issue was the Appellant’s financial capacity to meet its redundancy pay obligations to the Respondents.
A salary reduction, or a deferral of the CEO’s salary increase would likely have, in conjunction with the other matters discussed at [14] – [16] of the Decision, gradually eased the cash flow pressure the Appellant was experiencing. This improvement in the Appellant’s cash flow position over time would likely have assisted the Appellant with meeting its immediate redundancy pay obligations whilst reducing the risk of insolvency. We consider the Commissioner’s finding was reasonably open on the evidence, and the consideration was patently relevant to a matter in issue.
For the reasons earlier set out, evidence of any actions the CEO has taken in the time since the Decision will not be admitted in the appeal. Moreover, the contention that the Appellant’s staff, including the Respondents, refused to reduce hours or remuneration in March 2023 when the financial pressure the Appellant was experiencing became “obvious” is not relevant to an issue in the appeal and it does not appear to us that this was an issue advanced by the Appellant in support of its application below.
The Appellant’s second broad ground does not disclose any appealable error, and so fails.
Conclusion
As the appeal discloses a factual error in the Commissioner’s reasoning, we will on discretionary grounds grant permission to appeal. However, for the reasons stated above the appeal will be dismissed.
We order:
Permission to appeal is granted; and
The appeal in C2023/5728 is dismissed.
VICE PRESIDENT
Appearances:
Matter determined on the papers.
Final written submissions:
31 October 2023, for the Appellant.
9 November 2023, for the Respondent.
[1] RingIR Pty Ltd v Spiers and Ors[2023] FWC 2184.
[2] Ibid at [10]
[3] Ibid at [12]
[4] Coal and Allied Operations Pty Ltd v AIRC (2000) 203 CLR 194 [17] per Gleeson CJ, Gaudron and Hayne JJ. (Coal and Allied Operations Pty Ltd).
[5] O’Sullivan v Farrer (1989) 168 CLR 210 at 216-217 per Mason CJ, Brennan, Dawson and Gaudron JJ: applied in Hogan v Hinch (2011) 243 CLR 506 at [69] per Gummow, Hayne, Heydon, Crennan, Kiefel and Bell JJ; Coal & Allied Mining Services Pty Ltd v Lawler and others (2011) 192 FCR 78 at [44] – [46].
[6] GlaxoSmithKline Australia Pty Ltd v Makin[2010] FWAFB 5343, 197 IR 266 at [24]-[27].
[7] Ibid at [26]-[27], Lawrence v Coal & Allied Mining Services Pty Ltd t/as Mt Thorley Operations/ Warkworth[2010] FWAFB 10089 at [28], affirmed on judicial review; Coal & Allied Mining Services Pty Ltd v Lawler (2011) 192 FCR 178; NSW Bar Association v Brett McAuliffe; Commonwealth of Australia represented by the Australian Taxation Office [2014] FWCFB 1663, 241 IR 177 at [28].
[8] GlaxoSmithKline Australia Pty Ltd v Makin [2010] FWAFB 5343, 197 IR 266 at [24] – [27]
[9] Wan v AIRC (2001) 116 FCR 481 at [30].
[10] (1936) 55 CLR 499 at 505
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