S & L Dowling Services P/L as trustee for the Dowling Familt Trust T/As Charnwood Newsagency v Neville George Wallace & Pauline Winifred Wallace (Civil Disputes)
[2009] ACAT 28
•25 August 2009
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
S & L DOWLING SERVICES P/L AS TRUSTEE FOR THE DOWLING FAMILY TRUST T/AS CHARNWOOD NEWSAGENCY v NEVILLE GEORGE WALLACE & PAULINE WINIFRED WALLACE (Civil Disputes) [2009] ACAT 28
XD 362 of 2009
Catchwords: Long service leave - transmission of business – ss 3, 4, 10, 11C & 14 of the Long Service Leave Act 1976
Long Service Leave Act 1976 (ACT), ss 3, 4, 10, 11C, 14
Retail and Wholesale Industry - Shop Employees - Australian Capital Territory - Award 2000
Dixon v Broadlex Cleaning Australia P/L [2000] FCA 476
Australian Fair Pay and Conditions Standard
Carter JW, Peden E & Tolhurst GJ, Contract Law in Australia (5th ed, LexisNexis Butterworths, 2007) at [28-12,13]
Tribunal:Allan Anforth, Senior Member
Date: 25 August 2009
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) XD 362 of 2009
S & L DOWLING SERVICES P/L AS TRUSTEE FOR THE DOWLING FAMILY TRUST T/AS CHARNWOOD NEWSAGENCY
Applicant
v
NEVILLE GEORGE WALLACE
& PAULINE WINIFRED WALLACE
Respondent
Tribunal: Mr A. Anforth
Date: 8 July 2009
ORDER
- The Application is dismissed.
……………………………
Mr A. Anforth
Senior Member
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) XD 362 of 2009
S & L DOWLING SERVICES P/L AS TRUSTEE FOR THE DOWLING FAMILY TRUST T/AS CHARNWOOD NEWSAGENCY
Applicant
v
NEVILLE GEORGE WALLACE
& PAULINE WINIFRED WALLACE
Respondent
REASONS FOR DECISION
The Respondents were the owners and operators of the Charnwood Newsagency at which they employed various staff including Donna Ninness. Ms Ninness had been employed by the Respondent on a full time basis since July 2000.
On 14 February 2005 the parties entered a contract for the sale of the newsagency from the Respondents to the Applicant which settled on 18 April 2006. At the date of transmission of the business from the Respondents to the Applicant, Ms Ninness’s employment with the Respondents was terminated and she was not paid any long service leave. Ms Ninness was then re-hired by the Applicant and continued to work for the Applicant until 6 December 2007 when her employment was again terminated. Ms Ninness then made demand upon the Applicant, as her current employer for her long service leave under the Long Service Leave Act 1976 (ACT) (the “LSL Act”).
The contract for sale contains the following clauses:
Takings and Profits / Burdens and Charges
16. (a) The Vendors shall be entitled to the takings and profits of the business and shall pay or bear all burdens, charges and amounts due for rent, electricity, telephone services and all other outgoings in respect of the said business and the premises up to and including the date of completion, from which date the Purchaser shall be entitled to or shall pay or bear the same respectively and any necessary apportionment thereof shall be made and adjusted on completion.
(b) The Vendors shall pay, satisfy and discharge all debts and liabilities owing and payable by the Vendors in connection with the said business up until and including the date for completion and shall indemnify and keep indemnified the Purchaser from and against all claims, demands, actions, suits and proceedings in respect thereof.
(c) All profits and receipts…of the business and all outgoings in respect thereof up to the actual date of completion of this Agreement shall belong to and be paid and discharged by the Vendors and after the date of completion all profits and receipts …of the said business and all outgoings shall belong to and be discharged by the Purchaser.
Purchaser's Acknowledgment
21. The Purchaser acknowledges that in entering into this Agreement it has not relied on any statement, representation, warranty or condition made or given by the Vendors or any person or agent on its behalf in respect of the subject matter of this Agreement other than those expressly contained herein, other than those expressly contained herein or provided in writing by the Vendors to the Purchaser prior to the date hereof.
….
Jurisdiction
29. The parties hereby acknowledge that this Agreement was entered into in Canberra in the Australian Capital Territory and they hereby agree that this Agreement shall be subject to the laws of the Australian Capital Territory and that the Courts of the said Territory shall be the only Courts competent to determine any dispute arising hereunder.
Entire Agreement
30. This Agreement constitutes the sole and entire Agreement between the parties and a warranty, representation, guarantee or other term or condition of any nature not contained or recorded in this Agreement is of no force or effect.
...
Severability
32. If any provision of this Agreement is held to be illegal or contrary to public policy or otherwise unenforceable by a court of competent jurisdiction then such invalidity or unenforceability shall be deemed eliminated or modified to the extent to which in the court's opinion it is necessary to make the remainder of the provisions of the Agreement enforceable.
Waiver
33. Should either the Vendors or the Purchaser breach any of the terms or conditions of this Agreement and the other party decides to waive such breach or breaches, then it is not to be implied that such waiver constitutes condonation of such breach or breaches. Each and every breach shall be regarded as a separate breach of the terms and conditions of this Agreement and each and every breach shall not merge.
Employees
35.1 Normally the vendor must-
35.1.1 terminate the employment of all employees of the business with effect on completion; and
35.1.2 pay all employee entitlements to each employee.35.2 The purchaser can re-employ any of the employees of the vendor with employment starting on completion, and if the purchaser intends to do this-
35.2.1 the purchaser must serve prior to completion a list of the employees whom the purchaser intends to re-employ;
35.2.2 the vendor must adjust under clause 16(c), as regards the employees on the list, an amount equal to:*the value of any long service leave entitlement of each employee
*the monetary value of the other employee entitlements, and
35.3 Subject to the payment aforesaid, the purchaser thereafter indemnifies the vendor against any claim by an employee against the vendor for employee entitlements.
35.4 Rights under this clause continue after completion, whether or not other rights continue.
On 2 January 2008 Ms Ninness wrote to the Applicant making demand for her long service leave entitlements. She said that she had been employed at the Newsagency since July 2000. Ms Ninness asserted that she was entitled to long service by reason of the terms of the Long Service Leave Act 1976 without being more specific as to the particular sections of that Act.
By 16 May 2008 the Applicant had been contacted by the Office of Regulatory Services (ORS) on behalf of Ms Ninness in relation to the outstanding long service leave. In response the Applicant sent a cheque in the sum of $2456.74 to ORS being the net payment of the long service leave calculated to be due to Ms Ninness. The gross sum was $3864.74. Taking the total period of employment of Ms Ninness and pro-rating this between the periods of service with the Respondents and then the Applicant, the part of the gross sum payable by the Respondents was calculated to be $2972.88. These figures were set out in a spreadsheet sent to the ORS.
On 5 June 2008 the Office of Regulatory Services wrote to the Applicant acknowledging payment by the Applicant of the sum of $2456.74 in favour of Ms Ninness. The ORS said that this finalised its involvement.
On 20 February 2009 the solicitor for the Applicant wrote to the solicitors for the Respondents seeking reimbursement of the long service leave paid to Ms Ninness. The letter read:
We refer to settlement of this matter and, in particular, to clause 35 (1) under 16 (b) your clients' were to adjust long service leave payable to the employees. We believed that these sums had been adjusted per your letter dated 8th June 2007 ("adjustments as indicated to your client".
Our clients received a letter from the Office of Regulatory Services June claiming the sum of $2,456.74 on behalf of Ms Donna Ninness.
Our clients have paid such money and now seek re-imbursement from your clients in the sum of $2,972.88 as per the attached adjustment. A copy of the Office of Regulatory Services dated 5lh June is enclosed.
Accordingly we seek such sum within 10 days from the date hereof.
On 5 March 2009 the Respondents’ solicitors wrote to the Applicant’s solicitors as follows:
We refer to our facsimile of the 23rd instant, and we wish to advise that we now have had an opportunity to consult with our client concerning the contents of your letter.
You refer to Clause 16(b), which relates to 'all liabilities payable by the vendors owing and in connection with the said business up and until and including the date for completion' there was no liability in respect of Ms. Ninness and in fact our client seems to recall that this was your client's understanding at the time he took over the news agency. The time which Ms. Ninness remained employed at this stage, gave rise to no long service leave whatsoever. As a consequence, we would maintain that there is no liability on that ground, for payment by our client.
As far as Clause 35(1) is concerned, this clause relates entirely to employees, and so far as our client is concerned he paid all employee entitlements at the time the business was transferred. Ms. Ninness received no long service entitlement from our client in view of the fact that there was none due. As a consequence, our client would maintain that pursuant to Clause 35(1) he was discharged of his liability contained in that clause.
As a consequence, our client must deny liability of any claim made by your client in that respect.
On 24 April 2009 the Applicant filed a claim in the Tribunal seeking an order for reimbursement of the gross long service leave paid to Ms Ninness in the sum of $2972.88. The application did not contain any particulars as such but it did append a range of documents being those set out above, from which the essence of the claim could be distilled.
10.
On 26 May the Respondents filed a defence which read:
The Applicant's claim is disputed on the following grounds:
1. In or around April 2006, jointly with his wife Pauline the Respondent transferred the business of the Charnwood News agency ("the Business") to Stephen Dowling and Lynne Dowling.
2. At that time, the Respondent paid all employee entitlements due or owing by him to those employees.
3. No long service leave had accrued with respect to the subject employee's employment with the Business at the time the Business was sold by the Respondent.
4. Further, or in the alternative, Section 10 of the Long Service Leave Act 1976 (ACT) ("the LSL Act") clearly indicates that, for the purposes of Long Service Leave, the accrued leave is the responsibility of the owner of the business at the time the leave falls due.
5. No long service leave was ever owed by the Respondent in the time that he carried on the Business.
6. Further, and in the alternative, the Sale of Business Agreement ("the Agreement') signed by the Respondent and the Applicant at the time of the sale of the Business stipulates that the Vendor is liable only for the "debts and liabilities...in connection with the... business up until and including the date for completion...".
7. As previously outlined, there was no long service leave due at the time of completion. Therefore, in reliance both on the Agreement which exists between the parties and the LSL Act the Respondent denies all liability whatsoever in relation to the alleged claim.
11. On 8 July 2009 the matter came before the Tribunal and both parties appeared. Mr Wallace gave evidence that he had terminated the services of all staff immediately prior to settlement in accordance with clause 35 of the contract of sale. He said that he had not received a notice under clause 35 from the Applicant indicating the Applicant intention to re-employ any of these staff.
12. Mr Dowling for the Applicant said that it was known by Mr Wallace from oral conversations that the Applicant intended to re-employ all staff, albeit that no written notice to this effect had been given.
13. After hearing from the parties it was agreed that the Tribunal would deliver a decision in writing on the issue.
The relevant law:
14. The issue between the parties concerns the responsibility for the long service leave paid to Ms Ninness upon the termination of her employment on 6 December 2007, turns on the law at it stood at that date.
15. The relevant provisions of the Long Service Act 1976 (ACT) read as follows:
Section 3 Entitlement to long service leave
(1) An employee who has completed 7 years service with a single employer is entitled to long service leave for the period of the service.
(2) An employee is entitled to long service leave for each year of service completed by the employee after the end of the 7th year of service.(3) An employee’s entitlement to long service leave for a period of service arises at the end of the period.
Section 4 Amount of long service leave
An employee accrues long service leave at the rate of 1/5 of a month’s leave for each year of service.
Section 10 Service not affected by transmission of business
Where, before or after the date of commencement of this Act, a business is transmitted from 1 employer to another and a person who was, immediately before the transmission, an employee of the first employer becomes, immediately after the transmission, an employee of the second employer—
(a) the period of service of the employee shall be deemed not to have been interrupted; and
(b) the period of service of the employee with the first employer shall be deemed to be service with the second employer.
Section 11C Pro rata long service leave entitlement
(1) Where—
(a) a person’s employment is terminated—
(i) by the person because of illness or incapacity or a domestic or other pressing necessity of such a nature to justify the termination; or
(ii) by the person upon or after attaining the minimum retiring age; or(iii) by the death of the person; or
(iv) by the employer for a reason other than the person’s serious and wilful misconduct; and
(b) the person had completed a period of service in that employment of at least 5 years but less than 7 years;
the employer shall pay the amount ascertained in accordance with
subsection (2)—
(c) to the person; or
(d) if the person is dead—to the legal personal representative of the deceased person.
(2) The amount payable is an amount that is equal to the amount of ordinary remuneration that, but for the cessation of employment, would have been payable by the employer to the person for a period of service equal to the period that bears to 2 months the same proportion as the number of years or months of service completed by the person bears to 10 years.
Section 14 No contracting out
(1) Subject to subsection (2), this Act has effect notwithstanding any award or agreement to the contrary.
(2) Nothing in this Act affects the operation of an award or agreement to the extent that the award or agreement confers upon an employee rights that are more advantageous to the employee than the rights conferred upon the employee by this Act.
16. The parties conducted this case on the basis that the Long Service Leave Act 1976 (ACT) embodied the relevant law. The parties did not refer the Tribunal to any relevant industrial instruments. Notwithstanding this the Tribunal undertook its own research on the issue and ascertained that the Retail and Wholesale Industry - Shop Employees - Australian Capital Territory - Award 2000 applied to Ms Ninness but was silent on the issue of long service leave as were the Australian Fair Pay and Conditions Standard.
Application of the law to the facts:
17. Section 3(1) LSL Act provides that long service leave is payable after 7 years of service.
18. An exception to this rule is contained in section 11C LSL Act which deals with cases where an employee is terminated after 5 years of service but less than 7 years in the one of the circumstances set out in section 11C(1)(a).
19. Ms Ninness’s employment with the Respondents was terminated immediately prior to the sale of the business through no fault on her part, which is sufficient to activate section 11C (1)(a)(iv) LSL Act. At this point in time Ms Ninness had more than 5 years and less than 7 years of continuous service with the Respondents in the business and she was therefore entitled to pro-rata long service leave from the Respondents under section 11C LSL Act.
20. The extent of the pro-rata entitlement from the Respondents is governed by section 11C(2) LSL Act and, assuming 5 years and 10 months (70 months) service with the Respondents, Ms Ninness was entitled to 7/12th of 2 months gross salary (from which tax must be deducted and remitted to the ATO).
21. The Tribunal does not know the weekly or monthly gross salary that was being paid to Ms Ninness at the date of the termination of her employment with the Respondent, but the parties should be able to readily agree this.
22. This sum was never paid to Ms Ninness by the Respondents.
23. When Ms Ninness immediately commenced employment with the Applicant following the transmission of the business, section 10 LSL Act came into play. Section 10(b) has the effect of deeming the whole of Ms Ninness’s periods of service with the Respondents, and her later service with the Applicant, as being the one period of continuous service with the Applicant. Section 10 does not itself impose liability on the Applicant for that part of the long service leave that predated the purchase of the business, it merely aggregate the periods of service and leaves the liability to fall as determined by other provisions in the LSL Act (Dixon v Broadlex Cleaning Australia P/L [2000] FCA 476).
24. The deemed continuity of service with the Applicant meant that the long service leave clock continued to run after the transmission of the business. By the time Ms Ninness’s employment with the Applicant was terminated in December 2007 she had accumulated 7 years and 10 months of total continuous long service and therefore she qualify for long service leave under section 3(1) LSL Act.
25. At this point in time section 3(3) LSL Act provided that the long service leave entitlement “arose” at the expiration of the 7 years which fell within her period of service with the Applicant.
26. The LSL Act itself has no provision for apportioning long service leave liability between successive employers. The liability falls entirely upon the employer at the time the 7 years of total continuous service occurs i.e. the Applicant (Dixon v Broadlex Cleaning Australia P/L [2000] FCA 476).
27. The above consideration of the LSL Act in isolation, without regard the contract of sale between the parties, raises the following issues, namely:
(a) Whether Ms Ninness could have relied upon section 11C(1)(a)(iv) at the time of the termination of her employment with the Respondents to have insist of\n payment by the Respondents of pro-rata long service leave per paragraph 20 above: or
(b) Whether she was entitled to take the benefit of her continuity of service with the Applicant to preserve her long service leave entitlements with the Applicant; and
(c) If Ms Ninness had required the pro-rata payment by the Respondents per paragraph (a) immediately above, did that mean that her period of long service leave commenced de novo with her new period of service with the Applicant.
28. The Tribunal has been unable to locate any authority on these issues.
29. In the present case, taking 5 years and 10 months of service at the date of termination of employment by the Respondent, Ms Ninness was entitled to 7/12th (0.583) of 2 months salary, or 116% of 1 months salary under section 11C(2).
30. By the end of 7 years total continuous service with the Applicant, Ms Ninness was entitled to 7/5th (or 140%) of 1 months salary.
31. There was clearly a gain to Ms Ninness in not pursuing payment from the Respondents and allowing her period of continuous service to accumulate with the Applicant. Had she pursued the Respondents then she would have received 116% of 1 months salary but her subsequent period of 18 months service with the Applicant would not have qualified her for any further long service leave.
32. On the assumption that the LSL Act is intended to be a piece of beneficial legislation to be construed in a manner favourable to the employee, then it seems to the Tribunal that Ms Ninness was entitled to elect no to pursue the Respondents for her pro-rata entitlement and to elect to preserve her accrued years of long service (per paragraph 27(b) above). In this event the absence of any apportionment provisions in the LSL Act has the effect of leaving the Applicant with the whole of the liability for the long service leave.
33. The absence of any apportionment provision in the LSL Act creates an obvious unfairness to the Applicant. But this unfairness could have been rectified by the terms of the contract for the sale of the business by inclusion of a relevant adjustment clause.
34. The presence of an adjustment provision in the contract for sale would not infringe section 14 LSL Act which prohibits contracting out the of terms of the LSL Act because the terms of the LSL Act only protect the employee’s entitlements and an adjustment clause in the contract for sale does not impact on the employee’s rights. The contractual adjustment clause only affects the inter parties rights of the Applicant and Respondents and in no way relieves the Applicant from the direct responsibility of paying the long service leave to Ms Ninness. The contractual adjustment clause would however permit the Applicant to seek indemnity from the Respondents for the Respondents’ share of the liability.
35. Section 16(c) of the contract for sale provides that the Respondents shall bear all outgoings of the business to the date of completion where after the Applicant became responsible for all outgoings on the business.
36. Insofar as Ms Ninness was not required to pursue a pro-rata long service leave at the date of the termination of her services with the Respondents, no liability to pay the long service leave had crystallised at that date and so section 16(c) had no application, and thus section 16(c) alone did not constitute the kind of apportionment clause referred to above.
37. Section 35 however did purport to contain an apportionment clause. Clause 35.1.1 anticipated that the Respondents would terminate the services of all existing employment prior to completion of the sale, which in fact occurred.
38. Clause 35.1.2 envisaged that the Respondents (vendor) would pay the pro-rata long service leave to terminated employees. But clause 35.1.2 runs into difficulties in the case of an employee such as Ms Ninness who continues to work for the incoming Purchaser (the Applicant) because she cannot be compelled by the Respondents to accept payment to her of pro-rata long service leave. The rights of the employee are protected in the LSL Act and the contract between the Applicant and the Respondents cannot override those rights. Thus clause 35 was required to respect the rights of any continuing employee such as Ms Ninness which included the right to carry over of accrued periods of continuous service into her new employment.
39. Consistent with above, clause 35.2 provided for the apportionment of long service liability between the Applicant and the Respondents for continuing employees. This clause requires that the Applicant (purchaser) serve the Respondents (vendor) with a list setting out which of the employees the Applicant intended to retain as continuing employees. Upon receipt of this list the Respondents (vendor) was then required to pay to the Applicant by way of adjustment under clause 16(c) the value of any accrued long service leave for each of the continuing employees.
40. Had the Applicant serve the required list under clause 35.2 then it would follow that the Respondents were required to indemnify the Applicant for the value of Ms Ninness’s accrued long service leave per paragraph 20 above which had become payable under section 11C had Ms Ninness elected to pursue it.
41. However the Applicant did not serve the required list on the Respondents albeit that Applicant asserted in evidence without contradiction that the Respondents had received oral notification of the fact that all employees would be continued. Had the Respondents not expected that Ms Ninness was to be an ongoing employee of the Applicant then the Respondents would have been required to pay Ms Ninness her pro-rata entitlement. The fact that the Respondents did not do so is consistent with the Respondents’ expectation that the Applicant intended to retain her as an ongoing employee.
42. But this does not explain why the Applicant did not raise the issue of the adjustment under clause 16(c) with the Respondents prior to settlement. Had the Applicant done so and had the Respondents demurred on the basis that no written list had been given, then there would still have been time for the Applicant to have given the list prior to settlement.
43. The issue then arises as to whether the failure by the Applicant to serve the list notice required under clause 35.2 is fatal to the Applicant’s entitlement to an indemnity or whether oral notice to the Respondent was sufficient compliance with the clause.
44. As a general rule performance under contracts must be exact and substantial compliance will only suffice for minor defects in the mode of performance or where the parties envisage that substantial performance will suffice (Contract Law in Australia 5the ed Carter, Peden and Tolhurst at [28-12,13]). In the present case the failure to provide the notice could not be said to be minor because it was the trigger than enliven the liability on the Respondents’ part to pay the pro-rata long service leave. Without compliance with clause 35.2 no contractual debt arises on the Respondents’ part.
45. The fact that the Applicant did not raise the adjust issue prior to settlement of the purchase suggests that the parties were not alive to the issue and that it is more likely the case that the Applicant or its solicitor simply failed to appreciate the potential liability involved in retaining the Respondents’ former staff.
46. At the end of the day the Applicant is the architect of his own position in that he or his solicitor failed to comply with the procedural requirements of clause 35 in the time sequence and time frame required by clause 35. It is now too late to serve the required list of employees.
47. But even if it had been open to the Tribunal as a matter of equity to have accepted the oral notice from the Applicant given prior to settlement to the Respondents concerning their intention to retain the services of Ms Ninness given prior to settlement, the problem still arises that the Applicant did not:
(a)
press the Respondents for the long service details of Ms Ninness and other continuing employees prior to settlement;
(b)
raise the adjustment with the Respondents prior to settlement; and
(c) make demand on the Respondents for indemnity until 20 February 2009 being 13 months after Ms Ninness raised her entitlement with the Applicant.
48. In these circumstances it seems that the Applicant has sat on its rights at all points of the transaction. In these circumstances the Tribunal would not be disposed to allow the Applicant to re-open the matter at this late stage.
Decision:
49. The application is dismissed.
…………………………
Mr A. Anforth
Senior Member
PUBLICATION DETAILS
TO BE PUBLISHED
To be completed by Tribunal Staff
PART A FILE NO: XD09/362
APPLICANT: S & L DOWLING SERVICES P/L AS TRUSTEE FOR THE DOWLING FAMILT TRUST T/AS CHARNWOOD NEWSAGENCY
RESPONDENT: NEVILLE GEORGE WALLACE & PAULINE WINIFRED WALLACE
COUNSEL APPEARING: APPLICANT:
RESPONDENT:
SOLICITORS: APPLICANT:
RESPONDENT:
OTHER: APPLICANT: STEPHEN BRUCE
DOWLING
RESPONDENT: NEVILLE GEORGE WALLACE
TRIBUNAL MEMBER: MR A ANFORTH
DATE OF HEARING: 8 JULY 2009 PLACE: CANBERRA
DATE OF DECISION: 25 AUGUST 2009 PLACE: CANBERRA
PART B
RECOMMENDATION:
FULL REPORT ( ) CASE NOTE ( ) UNREPORTED DECISION ( )
COMMENTS:
0