Rodney Roberg, Terry Scriven, Vincent Tuckfield, Henryk Wozniak v FGP Company Pty Ltd (in liquidation) and Steelworks Australia Pty Ltd

[2013] FWC 4947

[2013] FWC 4947

FAIR WORK COMMISSION

DECISION

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

Rodney Roberg, Terry Scriven, Vincent Tuckfield, Henryk Wozniak
v
FGP Company Pty Ltd (in liquidation) and Steelworks Australia Pty Ltd
(U2012/13043, U2012/13044, U2012/13045, U2012/13047)

Mark Szymanik
v
FGP Company Pty Ltd (in liquidation)
(U2012/13080)

COMMISSIONER HAMPTON ADELAIDE, 20 AUGUST 2013

Unfair dismissal applications - joint applications with common representative - additional single application - two respondent parties in most matters - first respondent in liquidation - applications stayed by virtue of the Corporations Act 2001 involving the company in liquidation pending permission of Court or other developments impacting upon liquidation - application to add second respondent in single application - application from second respondent to be removed from joint applications - whether appropriate to have second respondent in these matters - whether relevant to determination of merit - whether production of further documents should be ordered - dispute over when second respondent commenced operations - whether applicants ever employed by second respondent - first respondent was the evident employer - whether employment contract with second respondent could be implied - whether corporate veil should be lifted to find second respondent to be the actual employer for present purposes - second respondent not employer but potentially relevant to remedy - leave of Court required for matters to proceed - if no application for leave then applications to be dismissed.

1. Background

[1] This decision concerns a number of related applications seeking a remedy for alleged unfair dismissal pursuant to s.394 of the Fair Work Act 2009 (the Act). In all but one of the applications, the applicants are represented by the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union known as the Australian Manufacturing Workers’ Union (AMWU) and have cited two legal entities as respondents; namely, FGP Company Pty Ltd (FGP) and Steelworks Australia Pty Ltd (Steelworks). I will refer to these applications as the joint applications. 1

[2] In the other application, Mr Szymanik initially named only FGP as the respondent.

[3] FGP went into voluntary liquidation on 30 August 2012. That is, on that date it passed a resolution for voluntary winding up within the meaning of the Corporations Act 2001 (the Corporations Act).

[4] The applicants in each matter have claimed that FGP and Steelworks are related companies and that the liquidation of FGP is part of a “phoenix” arrangement. It is alleged that the operations of FGP were in effect transferred to Steelworks and this involved the “new” company continuing operations, the engagement of all former employees (except for the applicants) and with the same management. It has also been contended that the phoenix arrangements have been undertaken to avoid the payment of entitlements to the applicants and to effectively remove them from their employment.

[5] The applicants have indicated that if successful, they will be seeking “reinstatement” with Steelworks as contemplated by s.391(1A) of the Act.

[6] Much of the further background to this matter is set out in an earlier decision 2 of the Commission (the Stay decision) dealing with a request that the applications be stayed as they applied to FGP in light of the operation of s.500(2) of the Corporations Act. In that decision I found:

“[17] FGP has been subject to a voluntary liquidation and the operation of s.500(2) of the Corporations Act is such that civil proceedings of the nature of the present applications cannot continue against FGP unless leave has been given by a Court of competent jurisdiction. If leave is granted, these matters may be heard by the Commission subject to any terms the Court imposes.

[18] I note that the applicants contend that the status of the liquidation might be affected by the phoenix related investigations. It is not clear to me how this would work however I have at least taken that possibility into account.

[19] I also observe that Steelworks is a different legal entity and proceedings against it are not impacted for present purposes by s.500(2) of the Corporations Act.”

[7] In the Stay decision I also indicated as follows:

“[21] In terms of the applications as standing against Steelworks, the present investigations appear to bear upon certain issues as they might impact upon these applications. There are significant issues about the extent that the applications can properly be addressed to Steelworks in this jurisdiction however these matters have not yet been substantively heard. In the absence of a relevant discontinuance by the applicants, those matters will need to proceed before the Commission in due course.”

[8] Mr Szymanik has now applied to add Steelworks as a further respondent.

[9] Steelworks has also recently applied to be removed as a respondent in each of the joint applications and resists being joined to the Szymanik application.

[10] The applicants in each of the matters have also confirmed their intention, subject to the issues dealt with here, to proceed only against Steelworks. As a result, I understand that they do not presently intend to make an application to a Court for permission to proceed against FGP.

[11] This decision deals with the two competing propositions concerning the respondency of Steelworks and an associated request by the joint applicants that an order for production of certain documents be made against Steelworks.

2. The facts of the matters

[12] The material and evidence presently before the Commission includes the following:

● A letter from Steelworks to an apparent client dated 25 August 2012; 3

●A valuation report confirming the nature and value of assets held by FGP as at 25 May 2012; 4

●An entity validation concerning the ownership and directorship of FGP produced by Australian Business Research; 5 and

●An affidavit and relevant documentation provided by Mr Christopher Stewart, a Director and Partner in the Chartered Accountancy firm, Sims Stewart Pty Ltd, which provided advice to FGP concerning its liquidation and sale of assets to Steelworks. 6

[13] Mr Stewart gave evidence and was cross-examined in relation to the matters canvassed in his affidavit.

[14] Having regard to the relevant material I find the following facts.

[15] FGP manufactured metal office cabinets and other supplies. In mid 2012 it employed over 20 employees.

[16] FGP is part of a group of companies in which the Bell family trust has or had an interest. One of the directors of FGP, Mr Rod Bell, went into bankruptcy in early February 2012 and this was associated with the financial troubles of FGP and other circumstances. In early 2012, Mr Daniel Bell (son of Mr Rod Bell) took over as a director of FGP and although he is not a shareholder, Mr Daniel Bell is a beneficiary of the Bell family trust.

[17] During 2012, FGP sought to better manage its debt levels, which included amounts owing to the ATO in the order of $1 million. These strategies included unsuccessfully seeking additional finance, reducing staff costs by reducing overtime and eliminating the afternoon shift, and selling the factory premises.

[18] At some stage during 2012, a decision was made to sell the assets and business of FGP to Steelworks, being a company established by Mr Daniel Bell. Further, a decision was made that FGP would be liquidated.

[19] In July 2012, the terms of sale were agreed and were based upon an independent evaluation of the assets of FGP. The sale contract was executed between FGP and Steelworks on 1 July 2012 and contemplated a completion of the contract being achieved with the payment of the agreed price and the delivery by FGP of title to, and possession and control of, the assets of the business. This required a transfer of the factory property lease to Steelworks. The completion date was however recorded in the sale agreement as 25 August 2012. 7

[20] The assignment of the property lease was however delayed and apparently only signed on 28 August 2012. This deed recorded the date of assignment as being 24 August 2012.

[21] On 27 August 2012, upon being advised that the property lease arrangements were to be agreed, FGP made arrangements for those employees who were not being offered employment by Steelworks to be informed of their dismissal. Mr Stewart, acting on behalf of FGP, advised those employees who were at work that they were being dismissed effective immediately, that FGP was being put into liquidation, and that the liquidator would be in contact shortly. Employees who were being terminated but not at work at that time, were advised in writing.

[22] Although the precise details are not before the Commission, it appears that about half of the 25 employees of FGP at the time were dismissed. This included each of the applicants in these matters. At least nine of the other employees were offered employment with Steelworks and the sale contract directly provided for the transfer of entitlements for eight staff.

[23] The plant and other relevant assets including on-floor stock were transferred from FGP to Steelworks and the factory continued to operate with the “remaining” employees.

[24] FGP issued separation certificates to each of the applicants. These were apparently signed on 24 August 2012 and recorded the cessation date as 27 August 2012. The applicants were paid wages up to and including 27 August however no severance or other entitlements upon termination were paid.

[25] The applicants have subsequently received payments for their outstanding entitlements from the General Employee Entitlements and Redundancy Scheme 8 (GEERS).

[26] FGP went into “voluntary liquidation” on 30 August 2012.

[27] I note that the applicants alleged that they are still entitled to superannuation contributions, including in some cases, voluntary superannuation deductions that have been made by FGP but not paid to the relevant superannuation fund or the ATO. There is no material on this matter that would permit any findings to be made, and is something for the relevant corporate regulators and enforcement agencies to pursue.

[28] On 25 August 2012, Mr Daniel Bell as a Director of Steelworks wrote to another company and informed them that FGP had been “restructured”, that the “newly structured organisation” was Steelworks Australia Pty Limited, and in effect that they would continue to deliver a broader range of Australian made products.

[29] It is probable that at least some of the employee records of FGP are now held by Steelworks. 9

3. The contentions of the parties

3.1 The applicants

[30] Mr Hardie for the joint applicants, and Ms Stam, who appeared with permission for Mr Szymanik, contended that Steelworks should remain or be joined as a respondent in each matter.

[31] Although the precise foundation for that proposition was modified during the course of the proceedings associated with this matter, it is now advanced on the following basis.

[32] At the time of the dismissal of each of the applicants, which they accept as being 27 August 2012, the relevant employer was Steelworks. That is:

● Steelworks had purchased the business of FGP and was effectively conducting business prior to the dismissals;
● Work being performed by the applicants between the commencement of the new business (and the agreed sale) and the dismissals was in effect being performed for the benefit of Steelworks;
● Although the applicants were not advised of the sale until their dismissal, where an employee no longer has a connection with the original employer, their conduct in performing work for the new employer will usually be taken to constitute an acceptance of the original employer’s repudiation and an implied agreement to create a new contract whether or not they were aware of the transmission;
● Steelworks failure to give prior advice of the transfer of the business effectively estopps it from disavowing the transfer; and
● The intention to create a legal relationship between the applicants and Steelworks should be inferred by the conduct of the parties.

[33] Mr Hardie cited authorities that were said to support the above propositions and I will canvass these shortly.

[34] The applicant’s also contended that their ability to pursue Steelworks in this jurisdiction was supported by the approach of the Australian Industrial Relations Commission (AIRC) in DePaul v Nansen Enterprises P/L t/as Bayswater Sheet Metal Supplies; Moras v Nansen Enterprises Pty Ltd t/as Bayswater Sheet Metal Supplies (Nansen). 10 In that light, it was further contended that this Commission should lift the corporate veil and permit the applications to proceed against Steelworks.

[35] Ms Stam for Mr Szymanik contended that both FGP and Steelworks were effectively under joint control. Further, Steelworks was an associated entity within the contemplation of s.391(1A) of the Act. That provision permits reinstatement of an employee to an associated entity on certain conditions. This is the remedy being sought by the applicants and on that basis alone, it was suggested that Steelworks should be cited as a respondent.

3.2 Steelworks

[36] Mr Manos (of counsel), who appeared with permission for Steelworks, contended that the applicants had not demonstrated any cause of action against Steelworks and the proceedings against it should be struck out.

[37] The basis for that contention may be summarised as follows:

● Even if a transfer of business occurred between FGP and Steelworks, the applicants did not become employees of Steelworks at any point;
● Each of the applicants was dismissed by FGP on 27 August 2012;
● There was no basis for any suggestion that the applicants worked for Steelworks;
● There was no intention to establish a contract of employment between Steelworks and the applicants and the necessary elements of a contract (including consideration) did not exist; and
● FGP continued in operation until 30 August 2012 and the applicants could not have been employed by two different companies.

[38] Steelworks also contended that it was not a related entity to FGP for present purposes and should not be put to the expense and inconvenience of defending an application in which it had no proper interest.

[39] In terms of the alleged phoenix conduct, Steelworks rejected that any such behaviour had taken place and contended that despite the allegations being advanced by the AMWU over many months, there was no action being taken by any of the relevant regulatory agencies.

4. Is it appropriate for Steelworks to be named as a respondent?

[40] I am not presently dealing with the substantive merits of the applications and I am not in a position to determine whether the dismissals of the applicants were undertaken to discriminate against them on some improper basis as alleged. I am however mindful of the context for the determination of the immediate issues.

[41] Given the present status of these matters, the stay granted in relation to proceedings against FGP, and the decision of the applicants to only pursue Steelworks, it is necessary for me to consider whether there is an evident cause of action against Steelworks given the facts of the matters.

[42] Further, given the provisions of the Act 11 that are presently engaged, that cause of action would also need to be in relation to Steelworks as the employer of the applicants. I will return to the concept of Steelworks being relevant as a respondent in relation to remedy in due course.

[43] It is appropriate to set the foundation for consideration as to whether employment contracts existed between the applicants and Steelworks at any time.

[44] In Australian Workplace Solutions Pty Ltd v P. Fox 12 the Full Bench of the AIRC set out the elements of a contract as follows:

“The elements of a contract are stated in Macken, McCarry and Sappideen’s “The Law of Employment” (4th edition, 1997 by the Hon James Macken, Paul O’Grady and Carolyn Sappideen) (Macken, McCarry and Sappideen), a text to which reference was made both before Simmonds C and us, as follows (p.74):

“The law holds that before any simple contract is enforceable it must be formed so as to contain various elements. These are:

1. There must be an ‘intention’ between the parties to create a legal relationship, the terms of which are enforceable.

2. There must be an offer by one party and its acceptance by the other.

3. The contract must be supported by valuable consideration.

4. The parties must be legally capable of making a contract.

5. The parties must genuinely consent to the terms of the contract.

6. The contract must not be entered into for any purpose which is illegal.”

“In relation to the first of these elements, the learned authors say (p. 74):

“The first element essential to the existence of any contract is the requirement that the parties have a mutual intention to create a legally enforceable bargain.”

[45] The application of these principles was however considered by the Federal Court in Damevski v Giudice 13 which observed as follows:

“82 Although contracts are not to be implied lightly, the Court may find exceptions to the general rule concerning express intentions. The Court may imply a contract by concluding that the parties intended to create contractual relations after examining extrinsic evidence, including what the parties said and did: see Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) NSWLR 309; Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990] 3 All ER 25 at 31 per Bingham LJ and Orion Insurance Co Plc v Sphere Drake Insurance Plc [1990] 1 Lloyd’s Rep 465 at 492-4 per Hirst J.

83 Prerequisites for an enforceable contract were set out by Grainger C and are reproduced at [40] above. However, as discussed in the relevant chapter of The Law of Employment, which was the source for the list of prerequisites, those elements of contract are to be applied subject to the various nuances of contract law. In relation to the second element listed, offer and acceptance, it is pointed out in Cheshire, Fifoot & Furmston’s Law of Contract, 14th ed, (M P Furmston), (2001), England, Butterworths LexisNexis, at p.33 that:

“These complementary ideas present a convenient method of analysing a situation, provided that they are not applied too literally and that the facts are not sacrificed to phrases.”

Lord Wilberforce’s judgment in New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd [1975] AC 154 at 167 is quoted and reference is made to cases where the courts have held that there is a contract despite the difficulty or impossibility of analysing the transaction in terms of offer and acceptance. Below the relevant passage from the decision of Lord Wilberforce in New Zealand Shipping is set out more fully:

“It is only the precise analysis of this complex of relations into the classical offer and acceptance, with identifiable consideration, that seems to present difficulty, but this same difficulty exists in many situations of daily life, e.g., sales at auction; supermarket purchases; boarding an omnibus; purchasing a train ticket; tenders for the supply of goods; offers of rewards; acceptance by post; warranties of authority by agents; manufacturers’ guarantees; gratuitous bailments; bankers’ commercial credits. These are all examples which show that English law, having committed itself to a rather technical and schematic doctrine of contract, in application takes a practical approach, often at the cost of forcing the facts to fit uneasily into the marked slots of offer, acceptance and consideration.” 14

[46] In Damevski v Giudice, the Federal Court also confirmed that although intention is a necessary ingredient in the formation of a contractual relationship, the test of intention is objective, not subjective; and intention may be inferred from conduct. 15

[47] There are real connections between FGP and Steelworks including the business sale agreement, the probable transmission of the business between them, and the common directorships. It is also evident that FGP has made the decision to dismiss the applicants in consequence of decisions made by Steelworks as to which employees would be retained within the business. Amongst other potential implications of this conduct, it would be very difficult to find the necessary intention by Steelworks to enter into a contract with the applicants.

[48] Steelworks was in existence prior to the dismissal of the applicants and on face value it had commenced operations at least in terms of entering into the sale agreement with FGP, negotiating with the landlord of the factory premises, and preparing to employ some of the staff of FGP in the continuing operations of the business previously conducted by FGP.

[49] It is however equally clear that FGP was still in operation and was for all present purposes the employer of the applicants until their dismissal. FGP had control of the premises and the means of production; it paid the employees and carried out the dismissals on 27 August 2012. It is true that the production carried out in the few days immediately leading up to the dismissals had the practical effect of benefiting Steelworks, as it took possession of the remaining floor stock under the terms of the sale contract. This however, would not appear to change the fact of employment by FGP at that time.

[50] The Act relevantly defines a transfer of business in the following terms:

“311 When does a transfer of business occur

Meanings of transfer of business, old employer, new employer and transferring work

(1) There is a transfer of business from an employer (the old employer) to another employer (the new employer) if the following requirements are satisfied:

(a) the employment of an employee of the old employer has terminated;

(b) within 3 months after the termination, the employee becomes employed by the new employer;

(c) the work (the transferring work) the employee performs for the new employer is the same, or substantially the same, as the work the employee performed for the old employer;

(d) there is a connection between the old employer and the new employer as described in any of subsections (3) to (6).

Meaning of transferring employee

(2) An employee in relation to whom the requirements in paragraphs (1)(a), (b) and (c) are satisfied is a transferring employee in relation to the transfer of business.

Transfer of assets from old employer to new employer

(3) There is a connection between the old employer and the new employer if, in accordance with an arrangement between:

(a) the old employer or an associated entity of the old employer; and

(b) the new employer or an associated entity of the new employer;

the new employer, or the associated entity of the new employer, owns or has the beneficial use of some or all of the assets (whether tangible or intangible):

(c) that the old employer, or the associated entity of the old employer, owned or had the beneficial use of; and

(d) that relate to, or are used in connection with, the transferring work.

... .... ....

New employer is associated entity of old employer

(6) There is a connection between the old employer and the new employer if the new employer is an associated entity of the old employer when the transferring employee becomes employed by the new employer.”

[51] It is probable that a transfer of business has occurred in this case, by virtue of s.311(1) and (3) of the Act. However, it is evident that the transfer of business does not mean that the employees of the old employer (in this case FGP) are automatically transferred to the new employer (Steelworks). The Act itself expressly contemplates the circumstances of employees who may transfer with the business and those who may not.

[52] Further, most of the necessary elements of a contract do not exist between the applicants and Steelworks. The law also recognises that employees cannot generally be novated as between two employers or transmitted to a different employer without their express or implied consent. 16

[53] Given all of the above, there would appear to be little basis in the facts to establish that Steelworks and the applicants entered into employment contracts in any conventional sense.

[54] In that light, it is necessary to consider the major propositions advanced on behalf of the applicants that are said to lead to a different result in the particular circumstances of these matters. This is appropriate particularly as employment law does recognise that some flexibility is required in the application of contract principles given the fluid nature of employment and business arrangements. 17

Proposition 1: Although the applicants were not advised of the sale until their dismissal, where an employee no longer has a connection with the original employer, their conduct in performing work for the new employer will usually be taken to constitute an acceptance of the original employer’s repudiation and an implied agreement to create a new contract whether or not they were aware of the transmission.

[55] This proposition was said to be based upon the approach taken by Allen J in Ford v Lismore City Council 18 (Ford v Lismore).

[56] Ford v Lismore involved a circumstance where an employee was purportedly transferred from one local government council to another within the framework of the Local Government Act 1919 (NSW). The immediate issue was determined by applying the concepts of repudiation and acceptance of that repudiation by inference, based upon conduct. 19

[57] In the matters before me, any implied agreement would need to be based upon conduct up until the time of the dismissal. FGP continued to operate and for all present purposes employed and paid the applicants up until that time. This means that the applicants did not lose any connection with FGP and based upon the facts of these matters there would not appear to be any relevant repudiation of the contract prior to the dismissal as contemplated in Ford v Lismore. Further, the applicants did not in fact work for Steelworks following their apparent dismissal by FGP.

[58] On that basis, the foundation for the proposition drawn from Ford v Lismore does not exist in these matters.

Proposition 2: Steelworks failure to give prior advice of the transfer of the business effectively estopps it from disavowing the transfer.

[59] This proposition was said to be based upon the authority of Phillips v Alhambra Palace Co. 20 (Phillips)

[60] Phillips involved a case where a partnership, the composition of which was not known by the other party, changed through the death of one of the partners. The Court held that the contract was not of such a personal nature that it could not be enforced against the remaining partners.

[61] Even accepting the application of this principle to changes in the corporate structure of a business, this does not assist the applicants in these matters. Steelworks does not disavow the transfer of business and it has not been suggested that the transfer itself involved a transfer of employment.

[62] Employment with FGP continued until the point of dismissal and it is the absence of the transfer of employment to Steelworks when the business arrangements were transferred, that is the very basis of the alleged unfair dismissals.

Proposition 3: The intention to create a legal relationship between the applicants and Steelworks should be inferred by the conduct of the parties.

[63] This proposition was said to be based upon Walker v Salomon Smith Barney Securities Pty Ltd. 21 It is supported by the approach evident in Damevski v Giudice.

[64] The difficulty is that the preponderance of conduct of the parties in the relevant period is only consistent with FGP being the employer until the point of dismissal. This is evidenced by the fact that some employees were apparently dismissed by FGP and other were expressly offered ongoing employment.

Proposition 4: The Commission should lift the corporate veil and permit the applications to proceed against Steelworks.

[65] The concept of lifting the corporate veil is generally considered as meaning:

“Although whenever each individual corporate entity is formed a separate legal entity is created, courts will on occasions look behind the legal personality to the real controllers.” 22

[66] The applicants’ approach to lifting the corporate veil was based upon the decision in Nansen and what might be best described as the Commission’s broad statutory charter.

[67] In Nansen, the AIRC was dealing with two applications concerning alleged unfair or unlawful terminations under the Workplace Relations Act 1996. The respondent did not appear or provide evidence, however the Commissioner was provided with evidence about the ownership and trading status of Nansen Enterprises P/L t/as Bayswater Sheet Metal Supplies (Nansen Enterprises) and an apparently related company, BA and BW Fabrication, which shared a common director, Mr Nansen. Ultimately, an order for compensation was made against Nansen Enterprises or BA and BW Fabrication Pty Ltd. I note that BA and BW Fabrication were not cited as a respondent to the applications.

[68] Nansen was subject to a successful appeal 23 and remitted for further hearing on the following basis:

“We remit the matter to Commissioner Whelan, pursuant to s.45(7)(c) for the purpose of providing all relevant parties with an opportunity to put submissions in relation to the proper identity of the former employer of the applicants and whether an order should be made against that person or corporation. Any application for joinder or for an extension of the time within which an application for relief is to be lodged may also be dealt with by the Commissioner.”

[69] On remittal, Whelan C (as she then was), joined BA and BW Fabrications as a party, refused a joiner application against a member of the Nansen family, and referred the matter into conference. 24 The substantive matter as it applied to BA and BW Fabrications was not the subject of a further decision by the Commission.

[70] The basis of the joinder by the Commissioner included the following findings:

“There was no money in any account held by BA and BW Fabrications prior to 9 January 1997 and no wages were drawn until 23 January 1997. If BA and BW Fabrications was performing work off the street during December 1996 using equipment owned by Bernard Nansen and also used by BW Nansen Enterprises it would be difficult to distinguish what work was performed for which company and by which employees.

........

From the evidence of both witnesses I am of the view that Mr Bernard Nansen controlled the company BW Nansen Enterprises and in reality continues to control the business which continues to operate from that site, using his equipment and performing much the same work. I am satisfied from my observations of the witnesses that Mr Brett Nansen would not have the capacity to operate a business and it is most likely that the company which was established in his name in December 1996 was set up in contemplation of BW Nansen Enterprises ceasing to trade.”

[71] Earlier in the decision, the Commissioner observed that there was confusion in the evidence as to which entity paid and employed the staff at various points, and noted that the letter of the dismissal to each of the applicants was provided by BA and BW Fabrications, not Nansen Enterprises.

[72] The approach in Nansen, and the subsequent decisions concerning those parties, is an example of the Commission lifting, or at least looking through, the corporate veil in circumstances where there is the apparent interchangeable use and confusion of company identities during the employment of the employees concerned. I note also that the Commission has taken a similar approach in another case where these circumstances applied. 25 However, these circumstances are not replicated in these matters.

[73] Although in a different setting, the concept of lifting the corporate veil in an industrial relations context was discussed in Australian Liquor, Hospitality and Miscellaneous Workers Union, Western Australian Branch v Burswood Catering and Entertainment Pty Ltd 26 (Burswood) and Spreag v Paeson Pty Ltd.27

[74] The Western Australian Industrial Relations Commission in Court Session in Burswood stated:

“Where it is contended that the setting up and conduct of a company is an abuse of the privilege of incorporation a Court or Tribunal may ignore the corporate structure. However, there are few Australian cases where the veil has been lifted. Courts and tribunals are reluctant to lift the corporate veil and do so in three circumstances:

a) When a particular law requires it to be done;

b) When it can be established that the company is an agent of its controllers;

c) When the Court is satisfied the company has been created as “mere facade” or “sham” to conceal the true facts.” 28

[75] This approach has been the subject of comment in other matters. 29

[76] There is no law requiring the corporate veil to be set aside in this case and no contention based on agency has been made here. This leaves the concept of a mere facade or sham.

[77] In this regard, care must be taken to distinguish between what might in industrial parlance be described as a “sham” arrangement and what might on the basis of the relevant authorities be held to be a sham justifying piercing the corporate veil. For this to be done, it would need to be shown that there is a mere sham or facade in which the company is playing a role or that the creation or use of the company was solely or predominately designed to enable a fiduciary obligation to be evaded or a fraud to be perpetrated. 30

[78] In Equuscorp Pty Ltd v Glengallan Investments Pty Ltd 31 the High Court said:

“ ‘Sham’ is an expression which has a well-understood legal meaning. It refers to steps which take the form of a legally effective transaction but which the parties intend should not have the apparent, or any, legal consequences (Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449).” 32

[79] In Department of Justice v Lunn 33a Full Bench of the Australian Industrial Relations Commission, after referring to relevant passages in the decisions in Sharrment34and Equuscorp35, said:

“The judgments in Sharrment demonstrate that it is often a difficult matter to establish that a document that gives the appearance of creating binding legal relations is a sham.” 36

[80] The establishment of Steelworks and its purchase of the business of FGP was not a sham in the sense contemplated by the authorities. It was designed to be legally and practically effective in quarantining the debts of FGP and allowing the business to continue. However questionable this may be from a moral perspective, the corporate arrangements were not a sham.

[81] In these maters however, the motivation and impact of the corporate arrangements in terms of fiduciary duties and potential fraud must also be considered.

[82] The effect of the corporate arrangements was that the debts of FGP, including the entitlements of the applicants, remained the responsibility of FGP, which was then subject to voluntary administration. Importantly, Steelworks apparently paid an independently assessed value for the assets of FGP. At one level, this is the natural and intended operation of corporation laws.

[83] The dismissal of the applicants was not the result of the corporate arrangements but rather the consequence of the decision by Steelworks not to offer employment to all of the FGP employees. It is the case that the corporate arrangements, and the subsequent liquidation of FGP, has meant that the putative employer of the applicants and the evident respondent to the unfair dismissal proceedings, FGP, is subject to the protection of s.500 of the Corporations Act and in any event is in no position to meet any remedy determined by the Commission.

[84] The only evidence about the motivation for the corporate arrangements and the liquidation of FGP was provided by Mr Stewart. His evidence was to the effect that FGP could not continue to operate given its debt levels and sales; the business otherwise had good earnings potential; and it employed over 20 staff and many of whom could be employed in the new business.

[85] Mr Stewart was of course the adviser, rather than the decision maker, and he could not explain with any conviction why the applicants had not been offered employment with Steelworks when others had.

[86] As outlined earlier, the applicants have contended that the arrangements involving FGP and Steelworks amounted to a pheonixing arrangement. Although there is no established meaning of such arrangements, I understand that the term is often used in the following sense:

“Phoenix activity is the deliberate and systematic liquidation of a corporate trading entity which occurs with the fraudulent or illegal intention to:

Avoid tax and other liabilities, such as employee entitlements; and

Continue the operation and profit taking of the business through another trading entity.” 37

[87] Steelworks denies any phoenix activity or sham liquidation and contends that in any event these allegations are irrelevant to the determination of these matters.

[88] I am in no position to determine whether some form of phoenix activity has occurred in breach of relevant corporations laws or whether the directors of the companies have committed any offences under relevant legislation. I do note that allegations have been raised by the AMWU with various authorities and these matters quite properly rest with those regulators.

[89] The relevant question for the Commission is whether the circumstances of this case are such that the corporate veil should be lifted, and more importantly, the different corporate entities set aside to find, in effect, that Steelworks was the employer of the applicants. I note that it would not be proper for these proceedings to be used solely or predominately as a basis to gather information or seek findings for collateral purposes associated with these other allegations.

[90] The approach being urged upon this Commission by the applicants would represent a significant extension to the attitude adopted by Courts and industrial tribunals to such matters.

[91] That is, it would be one thing to put aside the different corporate entities in order to ascertain the true business of an employer (in the context of ascertaining award respondency or modern award coverage); or for the purposes of ascertaining continuous service of an employee amongst a group of related entities (such as for leave accruals and minimum service requirements); or to ascertain the true nature of a contract (such as to determine whether incorporation reflected the true nature of a putative employment relationship). Further, the decision to overlook the difference between entities for certain purposes where those entities are used interchangeably in the employment relationship (such as in Nansen) would be within the established legal principles. In these matters however, I am being requested to, in effect, completely ignore the two different legal entities and treat Steelworks as the employer, at least for present purposes, despite the evident connection between FGP and each of the applicants, the absence of any real connection with Steelworks, and the formality of the business transfer that did not include the applicants.

[92] There is certainly no express power under the Act to lift the corporate veil to that extent for the purposes of finding that Steelworks was the employer.

[93] The objects, 38 broad statutory powers and charter39 given to the Commission by the Act provides sufficient scope for me to overlook administrative and procedural technicalities; to deal with matters according to equity, good conscience and the merits; to, subject to affording natural justice, inform myself as I see fit; and to provide a fair go all around. However, this does not permit the Commission to ignore the statutory parameters applying to this jurisdiction.

[94] I have earlier found that the role of Steelworks was not a facade or a sham within the meaning of the authorities. I do not consider that any other basis that might exist to lift the corporate veil to produce the result contended here has been demonstrated in these matters.

[95] In the circumstances of this case, I do not consider that there is a basis to find that Steelworks was the employer of the applicants at any stage. Notwithstanding serious concerns about the effect of the arrangements upon the applicants, which I share, this is a bridge too far in the present circumstances. Accordingly, Steelworks is not properly a respondent, at least in the sense of being the employer of any of the applicants at any relevant time.

[96] I would observe that the substance of the complaints made by the applicants in these matters would appear to be comprehended by General Protections provisions in Part 3-1 of the Act. That is, the decision of Steelworks not to employ the applicants would appear to fall within scope of adverse action as defined by s.342(1) - item 2 and the applicants claim that this is based upon one or more of the protected workplace rights as defined by the Act. I make no finding or inference that this was the case, but note that these applications are not general protections matters and as such operate on a different and narrower jurisdictional basis.

[97] In terms of the relevance of Steelworks to the question of remedy, this matter was not fully argued. The applicants contend that Steelworks is an “associated entity” of FGP and as such could be subject to an order for reinstatement pursuant to s.391(1A) of the Act.

[98] Steelworks rejected the notion of being an associated entity, and contended in any event, that if this aspect was to be considered it would be fairer and more efficient for Steelworks to be joined at a later time if necessary. 40

[99] The term “associated entity” is defined in s.12 of the Act as having the meaning given by s.50AAA of the Corporations Act.

[100] Section 50AAA of the Corporations Act provides as follows:

“50AAA Associated entities

(1) One entity (the associate) is an associated entity of another entity (the principal) if subsection (2), (3), (4), (5), (6) or (7) is satisfied.

(2) This subsection is satisfied if the associate and the principal are related bodies corporate.

(3) This subsection is satisfied if the principal controls the associate.

(4) This subsection is satisfied if:

(a) the associate controls the principal; and

(b) the operations, resources or affairs of the principal are material to the associate.

(5) This subsection is satisfied if:

(a) the associate has a qualifying investment (see subsection (8)) in the principal; and

(b) the associate has significant influence over the principal; and

(c) the interest is material to the associate.

(6) This subsection is satisfied if:

(a) the principal has a qualifying investment (see subsection (8)) in the associate; and

(b) the principal has significant influence over the associate; and

(c) the interest is material to the principal.

(7) This subsection is satisfied if:

(a) an entity (the third entity) controls both the principal and the associate; and

(b) the operations, resources or affairs of the principal and the associate are both material to the third entity.

(8) For the purposes of this section, one entity (the first entity) has a qualifying investment in another entity (the second entity) if the first entity:

(a) has an asset that is an investment in the second entity; or

(b) has an asset that is the beneficial interest in an investment in the second entity and has control over that asset.”

[101] The concept of “related bodies corporate” referred to in s.50AAA(2) is ultimately defined by s.50 of the Corporations Act as follows:

“50 Related bodies corporate

Where a body corporate is:

(a) a holding company of another body corporate; or

(b) a subsidiary of another body corporate; or

(c) a subsidiary of a holding company of another body corporate;

the first mentioned body and the other body are related to each other.”

[102] It is not immediately evident that FGP and Steelworks are related entities within the meaning of the Act. It is conceivable that third entity control (s.50AAA(7) of the Corporations Act) might apply given the common directorships and effective ownership of both FGP and Steelworks, however nothing concrete has yet been put to me in this regard.

[103] It is sufficient for present purposes to note that the applicants seek to have Steelworks considered in terms of remedy, that this is potentially open to them, and would need to be determined when and if this arises.

5. The production application

[104] The joint applicants have made application for the Commission to order the production by Steelworks of documentary evidence of the date of completion of the sale by FGP to Steelworks. This, it was said, would support the proposition that Steelworks was conducting the business of FGP prior to the dismissal. In particular, the application seeks that material in relation to whether there was a valid reason for dismissal and whether there was a genuine redundancy within the meaning of the Act. 41

[105] Steelworks opposes the order on the basis that nothing revealed about the completion date would change the legal basis of the applications as they apply to Steelworks.

[106] There is already significant material before the Commission provided by Mr Stewart. This includes the contract for sale and associated documents and this material already confirms that the completion date was prior to the date of the dismissal; albeit that the practical and full operation of the enterprise could not commence until the factory lease was finalised with effect on 28 August 2012.

[107] The production application has a very narrow focus and given the findings made earlier, would not advance the immediate issues. It was for this reason that I have not made the order in advance of determining this matter. The material may be relevant to the substantive merit of the applications and/or in relation to remedy. In the event that the applications proceed at some point, this aspect can be further considered.

6. Conclusions and consequences for the applications

[108] I have found that there is no basis to find that Steelworks was the employer of the applicants at any stage. Given the stay of proceedings against FGP, these matters cannot proceed before the Commission unless the applicants obtain leave from the Court to continue against FGP as required by s.500(2) of the Corporations Act.

[109] As presently advised, the applicants do not intend to adopt that course of action. If I am not advised by the applicants that an application will be made to the Court within 21 days of this decision, each of the applications will be dismissed.

[110] In the event that an application is made to the Court and leave is granted, I will further consider how Steelworks should be treated given its potential relevance to the issue of remedy. I would also further consider the production application should that become relevant.

COMMISSIONER

Appearances:

T Hardie of the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU) for applicants Roberg, Scriven, Tuckfield and Wozniak.

R Stam of Mahony’s Lawyers, with permission, for Mr Szymanik.

A Manos of counsel, with permission for Steelworks Australia Pty Ltd.

Hearing details:

2013

Adelaide

July 22.

 1   A further application by Mr Neill Thomas (U2012/13046) has been discontinued due to his passing away.

 2   Roberg and others v FGP Company Pty Ltd and Steelworks Australia Pty Ltd[2013] FWC 2429, issued 3 May 2013.

 3   Exhibit A1.

 4   Exhibit A2.

 5   Exhibit A3.

 6   Exhibit SW1.

 7   Clauses 1.1 and 3 of the sale contract.

 8   GEERS is a Commonwealth scheme designed to provide certain entitlements when an employee losses their employment through liquidation or insolvency of their former employer. The Fair Entitlements Guarantee (FEG) replaced GEEERS in December 2012.

 9   A bar table contention to this effect was made by Mr Hardie and was not contradicted.

 10   DePaul v Nansen Enterprises P/L t/as Bayswater Sheet Metal Supplies; Moras v Nansen Enterprises Pty Ltd t/as Bayswater Sheet Metal Supplies (1997) AIRC Print P0215.

 11   Part 3-2—Unfair dismissal of the Act is directed at dismissals by the employer of the applicants.

 12   AIRC Print S0253.

 13 (2003) 133 FCR 438.

 14   Ibid per Marshall J.

 15   Ibid per Wilcox J at par 3.

 16   Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014; Re Coogi Nominees Pty Ltd (Administrators appointed); McCluskey v Karagiosis [2002] FCA 1137; (2002) 120 IR 147. Questions of estoppel apart: Smith v Blandford Gee Cementation Co Ltd [1970] 3 All ER 154; the employee’s consent must be a real one whether express or implied and is “not to be raised by operation of law”: Denham v Midland Employers Mutual Assurance Ltd [1955] 2 QB 437 at 443. See also Re C & T Grinter Transport Services Pty Ltd; Ex parte Fitzgerald [2004] FCA 1148 Finn J at par [20] for a discussion of these and other principles concerning the identification of the true employer in relevant circumstances.

 17   Damevski v Giudice as an example.

 18   Ford v Lismore City Council (1989) 28 IR 68.

 19   Ibid at pgs 78 to 80.

 20   Phillips v Alhambra Palace Co [1901] 1 QB 59.

 21   Walker v Salomon Smith Barney Securities PL (2003) 140 IR 433.

 22   Pioneer Services Ltd v Yelnah Pty Ltd (1986) 5 NSWLR 254 per Young J.

 23   BA and BW Fabrications Pty Ltd (1997) AIRC Print P3537.

 24   DePaul and Moras v Nansen Enterprises P/L t/as Bayswater Sheet Metal Supplies (1997) AIRC Print P6737.

 25   See for example: R Donovan v Concrete Waterproofing Pty Ltd, AIRC PR910467 (2001) per Lacy SDP and the discussion of the approach taken by the court in Australian Insurance Employees Union v WP Insurance Services Pty Ltd, 42 ALR 598 at 606; 1 IR 212 at 216; Textile Footwear & Clothing Union of Australia v Bellechic Pty Ltd & Ors [1998] 1465 FCA (19 November 1998).

 26   [2002] WAIRComm 4778. This was upheld on appeal: Burswood Catering and Entertainment Pty Ltd v Australian Liquor, Hospitality and Miscellaneous Workers Union, Western Australian Branch [2002] WASCA 354.

 27 (1990) 94 ALR 679.

 28   Australian Liquor, Hospitality and Miscellaneous Workers Union, Western Australian Branch v Burswood Catering and Entertainment Pty Ltd [2002] WAIRComm 4778. See also the discussion of these decisions by the majority of the Full Bench in Australian and International Pilots Association v Qantas Airways Limited and Jetconnect Limited[2011] FWAFB 3706.

 29   See generally Briggs v James Hardie & Co Pty Ltd (1989) 16 NSWLR 549 and Willcox v Federal Commissioner of Taxation (1988) 79 ALR 267

 30   See Pioneer Services Ltd v Yelnah Pty Ltd (1986) 5 NSWLR 254 per Young J.

 31 (2004) 218 CLR 471.

 32   Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471 at [46].

 33 (2006) 158 IR 410.

 34   Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449.

 35   EquuscorpPty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471.

 36   Department of Justice v Lunn (2006) 158 IR 410 at [36].

 37   See Phoenix Activity: Sizing the problem and matching solutions, a report for the Fair Work Ombudsman by PwC, June 2012.

 38   S.3 and s.381 of the Act.

 39   Including s.577, s.578, s.590 and s.591 of the Act.

 40   Steelworks written submission, 29 May 2013.

 41   Grounds of the production application.

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