Smith v SBP Employment Solutions Pty Ltd and Ors (No.3)
[2019] FCCA 3516
•5 December 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SMITH v SBP EMPLOYMENT SOLUTIONS PTY LTD & ORS (No.3) | [2019] FCCA 3516 |
| Catchwords: INDUSTRIAL LAW – Compensation payable consequent upon termination of employment – ‘grossing up’ of loss to have regard to future taxation liability – what constitutes fair compensation in the light of future tax on compensation awarded – interest on past loss – superannuation loss – orders accordingly. |
| Legislation: Fair Work Act 2009 (Cth), s.545. |
| Cases cited: Construction, Forestry, Mining and Energy Union v Hail Creek Coal [2016] FCA 1032. |
| Applicant: | NICHOLAS SMITH |
| First Respondent: | SBP EMPLOYMENT SOLUTIONS PTY LTD |
| Second Respondent: | SBP AUSTRALIA PTY LTD |
| Third Respondent: | MAX BURNS |
| Fourth Respondent: | TONY AISTHORPE |
| Fifth Respondent: | DAN MAHONY |
| Sixth Respondent: | NEVILLE HOMBSCH |
| Seventh Respondent: | PETER CHADWICK |
| File Number: | BRG 330 of 2018 |
| Judgment of: | Judge Egan |
| Hearing dates: | 29, 30, 31 July 2019, 1 August 2019, 28 October, 25 November 2019 |
| Date of Last Submission: | 4 December 2019 |
| Delivered at: | Brisbane |
| Delivered on: | 5 December 2019 |
REPRESENTATION
| Counsel for the Applicant: | Dr. R. Haddrick |
| Solicitors for the Applicant: | FCB Lawyers |
| Counsel for the Respondent: | Mr M. Alexander |
| Solicitors for the Respondent: | Carter Newell |
ORDERS
Pursuant to section 545 of the Fair Work Act 2009 (Cth), and as a consequence of paragraphs 1 – 12 inclusive of the declarations pronounced by the Court in Smith v SBP Employment Solutions Pty Ltd & Ors (No. 2) [2019] FCCA 3318 on 5 December 2019, the First Respondent, the Second Respondent, the Third Respondent, the Fourth Respondent, the Fifth Respondent and the Sixth Respondent are jointly and severally liable to pay to the Applicant, within 28 days of these orders, the sum of $589,439.43 (inclusive of income taxation and superannuation) as compensation.
Pursuant to section 545 of the Fair Work Act 2009 (Cth), and as a consequence of paragraphs 1 – 12 inclusive of the declarations pronounced by the Court in Smith v SBP Employment Solutions Pty Ltd & Ors (No. 2) [2019] FCCA 3318 on 5 December 2019, and as a consequence of the order for compensation made in paragraph 1 of this Order, the First Respondent, the Second Respondent, the Third Respondent, the Fourth Respondent, the Fifth Respondent and the Sixth Respondent are jointly and severally liable to pay to the Applicant, within 28 days of the making of these orders, the sum of $13,925.16 as interest on the Applicant’s past economic loss as found by the Court.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 330 of 2018
| NICHOLAS SMITH |
Applicant
And
| SBP EMPLOYMENT SOLUTIONS PTY LTD |
First Respondent
| SBP AUSTRALIA PTY LTD |
Second Respondent
| MAX BURNS |
Third Respondent
| TONY AISTHORPE |
Fourth Respondent
| DAN MAHONY |
Fifth Respondent
| NEVILLE HOMBSCH |
Sixth Respondent
| PETER CHADWICK |
Seventh Respondent
REASONS FOR JUDGMENT
On 5 December 2019, the Court pronounced its declarations and orders in Smith v SBP Employment Solutions Pty Ltd & Ors (No. 2) [2019] FCCA 3318 on issues of liability for contravention of provisions of the Fair Work Act 2009 (Cth), as well as in respect of the imposition of pecuniary penalties by reason of such contraventions. [1] These reasons are to be read in conjunction with that judgment.
[1] Smith v SBP Employment Solutions Pty Ltd & Ors (No. 2) [2019] FCCA 3318
At paragraph 122 of the Court’s judgment in Smith v SBP Employment Solutions Pty Ltd & Ors (No. 2) [2019] FCCA 3318, it was provided:
“[122] The Court will hear further submissions as to the total compensation payable, and as to the quantum and rate of interest on the amount of such compensation as is payable, as well as for the amount payable in respect of superannuation loss.”
The applicant helpfully provided detailed submissions on the issue of compensation, superannuation loss and interest payable on past economic loss. Reliance was placed upon the judgment of Reeves J in Construction, Forestry, Mining and Energy Union v Hail Creek Coal [2016] FCA 1032. In that judgment, Reeves J at [61] – [64] inclusive said as follows:
“[61] There has been some disagreement in the authorities as to how taxation should be accounted for in awards of compensation that are not related to personal injuries. In Davinski Nominees Pty Ltd v I & A Bowler Holdings Pty Ltd [2011] VSC 220 (Davinski) (at [33]–[58]), Kaye J conducted a helpful review of all the authorities on this issue dating back to the late 1970s. Davinski was a commercial tenancy dispute where the Victorian Civil and Administrative Tribunal had declared invalid two relocation notices issued under the Retail Leases Act 2003 (Vic) and ordered the party who issued those notices to pay compensation. One of the main issues was the liability to pay tax on the award of compensation (see Davinski at [22]). After reviewing all the authorities, his Honour came to the following conclusion (Davinski at [58]):
… Thus, where an award of damages is not liable to taxation, it is just that the damages should be assessed by reference to the post-tax earnings of the claimant. Otherwise, the award of those damages would be well in excess of fair compensation for the loss sustained by the plaintiff. Further, where the award of damages is liable to taxation, and where it is possible, to calculate, with reasonable certainty, both the damages on the basis of the plaintiff’s lost post-tax earnings, and also the tax liability arising from the compensatory verdict, it would be unfair to assess damages, without taking the relevant tax implications into account. In such a case, the assessment of damages, ignoring tax, would not result in an amount of compensation, which is fair both to the claimant and to the defendant.
(Emphasis added)
[62] More recently the Queensland Court of Appeal in Westpac Banking Corporation v Jamieson [2015] QCA 50 (Jamieson) considered this issue in relation to an award of damages for economic loss caused by negligent investment advice. In that matter, the proposition that there should be a further grossing up to take account of the tax implications of the initial grossing up was rejected as impractical, however, the Court did not question the initial grossing up: see McMurdo P at [6]–[7] and Applegarth J at [195]–[209].
[63] It is worth noting that, among the authorities Kaye J reviewed in Davinski, there were five single judge decisions of this Court dealing with the treatment of taxation in wrongful dismissal cases where allowances were made because the awards would be taxed as assessable income in the hands of the taxpayer (see Davinski at [39]–[40]): Wheeler v Philip Morris Ltd (1989) 97 ALR 282 per Gray J; Grout v Gunnedah Shire Council (1995) 129 ALR 372 per Moore J; Byrne v Australian Airlines Ltd (1992) 45 IR 178 per Hill J; Reilly v Praxa Ltd [2004] ACTSC 41 per Gray J; and Patterson v Middle Harbour Yacht Club (1996) 64 FCR 405 per Whitlam J.
Conclusion on grossing up
[64] Mr Haylett has put forward a broad brush calculation for the grossing up that he contends should be undertaken. He has not sought any further grossing up of the kind that was rejected in Jamieson. Assuming the award is to be taxed as assessable income, Hail Creek Coal has not disputed the proposition that, if the award is paid in a lump sum in this financial year, Mr Haylett will be required to pay the tax at higher marginal rates. In these circumstances, I would adopt the conclusion that Kaye J reached in Davinski that it would be unfair to assess Mr Haylett’s compensation without making an allowance for the additional taxation he will have to pay. I therefore consider the broad brush grossing up advanced by Mr Haylett should be utilised in calculating his award of compensation.”
This Court respectfully relies upon the judgment of Reeves J, and in particular to His Honour’s finding that it would be unfair to assess compensation without making an allowance for additional taxation payable in the light of the receipt of a substantial lump sum by way of compensation.
The issue of ‘grossing up’ in other cases was the subject of consideration by Reeves J in the Hail Creek judgment where His Honour said, at [63] as follows:
“[63] It is worth noting that, among the authorities Kaye J reviewed in Davinski, there were five single judge decisions of this Court dealing with the treatment of taxation in wrongful dismissal cases where allowances were made because the awards would be taxed as assessable income in the hands of the taxpayer (see Davinski at [39]–[40]): Wheeler v Philip Morris Ltd (1989) 97 ALR 282 per Gray J; Grout v Gunnedah Shire Council (1995) 129 ALR 372 per Moore J; Byrne v Australian Airlines Ltd (1992) 45 IR 178 per Hill J; Reilly v Praxa Ltd [2004] ACTSC 41 per Gray J; and Patterson v Middle Harbour Yacht Club (1996) 64 FCR 405 per Whitlam J.”
The Court accepts that the question of grossing up was a live issue for the whole of the hearing. The Court further contemplated that all issues relating to the quantum of compensation would be addressed in further written submissions. That was why, in [122] of the Court’s judgment, submissions were sought from all parties as to the total compensation payable consequent upon its finding that the applicant would have worked for a further 3 years, earning an annual gross income of $150,000.00, from 20 January 2018 until 20 January 2021, had his employment not been terminated.
The submissions filed on behalf of the respondents - short, argumentative and unpersuasive as they were - did not assist the Court in its deliberations. The Court accepts the correctness of the applicant’s detailed submissions on all issues relating to the total quantum of compensation payable, interest on past loss of earnings, and as to past and future superannuation loss.
The Court adopts the submissions of the applicant as set out in paragraphs 5 – 62 inclusive of the applicant’s submissions filed on 29 November 2019, which submissions are as follows:
“5. The Applicant has undertaken calculations to arrive at a sum ordered by paragraph 123 of the reasons, and informed by those reasons and instructions provided for in paragraphs 120 to 122 (inclusive) of the reasons for judgment. Those calculations are summarised in the table below and set out in further detail later in these submissions.
Step
Description
Amount
Methodology
Cumulative total
1
Income the Applicant would have earned between 20 January 2018 and 20 January 2021
$450,000
(gross)
$150,000 (gross) x
3 years
$450,000 (gross)
2
Deduct tax liability for the compensation period of 20 January 2018 to 20 January 2021
$109,484.96
See paragraph 34
$340,515.04 (net)
3
Deduct net WorkCover payments
received by the Applicant during the compensation period of 20 January 2018 and 20 January 2021$43,959.14
See paragraphs 37 to 38
$296,555.90 (net)
4
Plus the superannuation lost by the
Applicant for the compensation period
of 20 January 2018 and 20 January
2021$42,750
See paragraphs 39
to 44$339,305.90 (net)
5
The net sum of $339,305.90 must be
grossed up to take into account the
additional taxation the Applicant will
be required by law to pay when all of
this sum is received by the Applicant
in the 2019/20 financial year$250,133.53
See paragraphs 47
to 52$589,439.43
(gross)
Total compensation that should be ordered
$589,439.43
STEP 1: Determine the Applicant’s gross loss
6. As already acknowledged, paragraph 122 of the reasons for judgment provides that the Court accepts the Applicant’s evidence that he had intended to continue working until age 67, but finds that his loss ought to be calculated on the basis that, had his employment not been terminated, he would have continued in his employment, but that he would only have worked for a further 3 years after 20 January 2018. In the same paragraph, the Court orders that the Applicant’s loss is to be determined based on a gross annual income of $150,000.
7. The time that elapses between 20 January 2018 and 20 January 2020 is three years. Therefore, the Applicant’s gross loss is $450,000 which is calculated as follows:
3 years x $150,000 = $450,000
STEP 2: Determine the Applicant’s net loss from the Applicant’s gross loss
8. The taxation liability must be calculated with reference to the financial years that fall within the three-year compensation period of 20 January 2018 to 20 January 2019. To determine the Applicant’s taxation liability over three financial years would result in inaccurate result because, but for the unlawful termination, the Applicant would not have earned three years’ worth of income in three financial years, but indeed four financial years. This is why the Applicant’s taxation liability with respect to the compensation period of 20 January 2018 to 20 January 2021 must be calculated over the financial years of 2017/18, 2018/19, 2019/20 and 2020/21 (four financial years in total).
9. For the following calculations, taxation liability has not been calculated with respect to the Applicant’s weekly payments paid to him by WorkCover Queensland because WorkCover Queensland has already, on the Applicant’s behalf, remitted to the Australian Taxation Office the Applicant’s taxation liability with respect to those weekly payments.
(footnote omitted)
10. To arrive at the Applicant’s net loss for the three-year compensation period, the following Step 2 determines the taxation liability for each of the four financial years and, in paragraph 35 below, adds the taxation liability for each of the four financial years together to determine the amount of taxation that should be applied to the Applicant’s gross loss to arrive at the Applicant’s net loss for the entire compensation period.
A. Taxation liability for 2017/18 financial year
11. The portion of the three-year compensation period relevant to the 2017/18 financial year is 20 January 2018 to 30 June 2018.
12. For the entire time between 20 January 2018 and 30 June 2018, the Applicant received weekly payments from WorkCover Queensland. During this period of time, the Applicant’s gross income (derived from WorkCover Queensland payments) was
$63,028.74 (gross).
(footnotes omitted)
13. Based on an annual income of $150,000, for 20 January 2018 to 30 June 2018 component of the three-year compensation period, the Applicant should have received $66,575.34 (gross), which is calculated as follows:
$150,000 per annum rate of pay divided by 365 days in the 2017/18 financial year multiplied by 162 (the number of days between 20 January 2018 and 30 June 2018 inclusive).
14. The gross loss sustained by the Applicant in relation to the 20 January 2018 to 30 June 2018 portion of the three-year compensation period is $3,546.60 (gross) ($66,575.34 minus $63,028.74).
15. Subsection 12(1) of the Income Tax Rates Act 1986 (Cth) (Ratings Act), together with Schedule 7 of the Ratings Act, provide for the relevant rate of income taxation to apply to relevant thresholds of taxable income. Pursuant to Schedule 7 of the Ratings Act, the relevant tax bracket for the current financial year is summarised below (referred to in this document as Item 3 Bracket):
Annual gross income
Taxation liability
$90,001 to $180,000
$20,797 plus 37 cents of each $1 over $90,000 plus
2% Medicare Levy
16. For the purpose of calculating the Applicant’s net loss for the 20 January 2018 to 30 June 2018 portion of the three-year compensation period, taxation must be applied to the gross loss of $3,547 using the Item 3 Bracket.
17. Taxation of the gross income is $1,383.33 and is calculated as follows:
(.37 x of $3,547) + (2% of $3,547) = $1,383.33
18. Therefore, the total taxation liability for the 20 January 2018 to 30 June 2018
(inclusive) portion of the three-year compensation period, is $1,383.33.
B. Taxation liability for the 2018/19 financial year
19. The portion of the three-year compensation period relevant to the 2018/19 financial year is 1 July 2018 to 30 June 2019.
20. Using the gross sum of $150,000 for the 1 July 2018 to 30 June 2019 portion of the compensation period, the taxation liability for that period must be calculated with reference to the Item 3 Bracket as follows:
$20,797 + (.37 x ($150-000-$90,000) + (2% of $150,000) = $45,997
21. The Applicant received $11,249.99 (gross) from WorkCover Queensland for the period of 1 July 2018 to 6 August 2018 and, in relation to that gross amount, WorkCover Queensland paid to the Australian Taxation Office $3,141 on the Applicant’s behalf.4 Because a portion of the Applicant’s taxation liability has already been remitted to the Australian Taxation Office, it must be deducted from the amount of taxation deducted from the Applicant’s gross loss to arrive at the Applicant’s overall net loss for the period.
(footnote omitted)
22. This taxation liability is $42,856 and is calculated as follows:
$45,997 - $3,141 = $42,856
23. Therefore, the total taxation liability for the 1 July 2018 to 30 June 2019 (inclusive) portion of the three-year compensation period, is $42,856.
C. Taxation liability for the 2019/20 financial year
24. For the Applicant’s gross loss in the 2018/19 financial year (which is between 1 July 2019 to 30 June 2020), the Item 3 Bracket must be applied.
25. The Applicant’s taxation liability for the portion of the three-year compensation period that commences on 1 July 2019 and ends on 30 June 2020 is $45,997 and is calculated as follows:
$20,797 + (.37 x $60,000) + (2% of $150,000) = $45,997
26. Therefore, the total taxation liability for the 1 July 2019 to 30 June 2020 (inclusive) portion of the three-year compensation period, is $45,997.
D. Taxation liability for the 2020/21 financial year
27. The Applicant’s gross loss for the 2020/21 financial year can be calculated as follows:
$150,000 per annum rate of pay divided by 365 days in the 2020/21 financial year multiplied by 203 (the number of days between 1 July 2020 and 19 January 2021) equals $83,424.66.
28. Subsection 12(1) of the Ratings Act, together with Schedule 7 of the Ratings Act, provide for the relevant rate of income taxation to apply to relevant thresholds of taxable income. Pursuant to Schedule 7 of the Ratings Act, the relevant tax bracket for the current financial year is summarised below (referred to in this document as Item 2 Bracket):
Annual gross income
Taxation liability
$37,001 to $90,000
$3,572 plus 32.5 cents for each $1 over $37,000 plus
2% Medicare Levy
29. Section 61-105 of the Income Tax Assessment Act 1997 (Cth) (ITAA97) provides Australian resident individual taxpayers with a low and middle income tax offset for the years ending 30 June 2019 to 30 June 2021, provided the individual’s taxable income does not exceed $125,333. Section 61-107(1) of the ITAA97 provides for the amount of the offset based on relevant income levels. For taxable income exceeding $48,000, but which is less than $90,000, the amount of the taxation offset is $1,080 (LIMTO). At the taxable income level of $83,425, the full LIMTO of $1,080 will be applied.5
(footnote omitted)
30. The Applicant’s taxation liability on the gross income of $83,425 is $19,248.63 and calculated as follows:
$3,572 + (.325 x $46,425) + (2% of $83,425) = $20,328.63
31. The LIMTO would be applied to the gross taxable income of $83,424.66 and therefore, there would be a reduction in taxation liability for the 2020/21 financial year from $20,321.63 to $19,248.63.
32. Therefore, the total taxation liability for the 1 July 2020 to 20 January 2021 portion of the three-year compensation period, is $19,248.63.
E. Total net loss for the compensation period
33. The total gross sum for the compensation period of 20 January 2018 to 20 January 2021 is $450,000 ($150,000 per annum x 3 years).
34. The taxation liability that would have been payable by the Applicant, or on behalf of the Applicant, to the Australia Taxation Office for the three-year compensation period of 20 January 2018 to 20 January 2021 (spready over four financial years) is arrived at by adding the taxation liability calculated for each of the financial years of 2017/18, 2018/19, 2019/20 and 2020/21 (as above).
35. This total taxation liability is $109,484.96 and is calculated as follows:
Financial year
Portion of three-year compensation period
Taxation liability
2017/18
20 January 2018 to 30 June 2018
$1,383.33
2018/19
1 July 2018 to 30 June 2019
$42,856
2019/20
1 July 2019 to 30 June 2020
$45,997
2020/21
1 July 2020 to 20 January 2021
$19,248.63
Total taxation liability
$109,484.96
36. Therefore, to ascertain the Applicant’s net loss of income in relation to the entire three-compensation period, the taxation liability of $109,484.96 must be deducted from the total compensation sum of $450,000, which equates to $340,515.04 (net).
STEP 3: Deduct the WorkCover Queensland payments actually received by the Applicant
37. The net sum of the workers’ compensation payments received directly by the Applicant during the compensation period is $43,959.14 (net)6 and must be deducted from the Applicant’s net loss referred to in paragraph 36 above.
(footnote omitted)
38. The Applicant’s net loss of income ($340,515.04) reduced by the net amount of workers’ compensation payments received by the Applicant during the entire three-compensation period of 20 January 2018 to 20 January 2021 ($43,595.14) equates to $296,555.90 (net).
STEP 4: Add the Applicant’s superannuation loss for the compensation period
39. As a matter of law, during a period whereby an employee is not performing work for their employer and is receiving workers’ compensation payments under a workers’ compensation claim, the employee’s employer is not required to pay, on the employee’s behalf, the minimum superannuation guarantee to the employee’s superannuation fund. This is because the employee is not being paid ordinary time earnings from his or her employer.
40. Therefore, as a matter of law, the Applicant did not receive superannuation contributions to his nominated superannuation fund during the period that he was receiving workers’ compensation payments from WorkCover Queensland, which, relevantly, was in relation to the period of 20 January 2018 to 6 August 2018 (inclusive).
41. The Applicant’s loss of ordinary time earnings over the compensation period is $450,000 ($150,000 per annum x 3 years). No deductions are made for the period the Applicant was receiving weekly workers’ compensation payments because, as a matter of law, superannuation was not paid to his superannuation fund on his behalf during such period.
42. Pursuant to Part 3 of the Superannuation Guarantee (Administration) Act 1992 (Cth), the minimum superannuation guarantee for the period of 20 January 2018 up until and including the date of judgment was 9.5% of the Applicant’s ordinary time earnings.
43. Therefore, the Applicant’s loss (that is, the superannuation lost) during the entire three-year compensation period is $42,750 and is calculated as follows:
$450,000 x 9.5% = $42,750
44. As a matter of law, taxation is not paid on superannuation paid to an employee’s superannuation fund on behalf of the employee because it is not considered to be ordinary time earnings.
45. As a matter of law, in circumstances where the Applicant will receive a lump sum amount in compensation for his superannuation loss, as opposed to superannuation payments being paid to his nominated superannuation fund on his behalf by an employer, it will be taxable as income. Therefore, before the Applicant’s net income loss is grossed-up in Step 6 below, his superannuation loss must be added to the Applicant’s net income loss to account for the Applicant’s taxation liability on the sum paid to him in relation to his superannuation loss.
46. The Applicant’s total net loss including income and superannuation is $339,305.90 (net) and is calculated as follows:
$296,555.90 (net loss of income) plus $42,750 (loss of superannuation) = $339,305.90 (net).
STEP 5: Account for additional taxation Applicant will pay in 2019/20 financial year
47. As the Applicant will receive the entirety of his compensation for his net loss in the current financial year (2019/20), the net loss must be increased (or “grossed-up”) to compensate the Applicant for the additional taxation he will be liable to pay to the Australian Taxation Office.7
(footnote omitted)
48. With the professional assistance of the specialist taxation accountant commissioned by the Applicant’s legal representative, on behalf of the Applicant, and that accountant’s professional accounting software, the grossed-up sum payable to the Applicant by the First Respondent is $589,439.43 (gross). This sum is explained by paragraphs 49 to 52 (inclusive) below.
49. Subsection 12(1) of the Ratings Act, together with Schedule 7 of the Ratings Act, provide for the relevant rate of income taxation to apply to relevant thresholds of taxable income. Pursuant to Schedule 7 of the Ratings Act, the relevant tax bracket for the current financial year is summarised below (referred to in this document as Item 4 Bracket):
Annual gross income
Taxation liability
$180,000 and over
$54,097 plus 45 cents for each $1 over $180,000 plus
2% Medicare Levy
50. If the Applicant’s gross taxable income for the 2019/20 financial year is $589,439.43, his taxation liability in relation to this sum is calculated as follows:
$54,097 + (.45 x ($589,439.43-$180,00)) + (2% of $589,439.43) = $250,133.53
51. Therefore, the taxation liability on the Applicant’s compensation for his net loss is $250,133.53. Once the Applicant’s taxation liability of $250,133.53 is remitted to the Australian Taxation Office by the Applicant for this current financial year, the Applicant will be left with $339,305.90 (net), which is the same amount referred to in paragraph 46 above.
52. Therefore, the First Respondent should be ordered to pay the Applicant $589,439.43 in compensation, that is $150,000 per annum x 3 years, minus the Applicant’s tax liability over four financial years, minus the payments actually received by the Applicant during the three-year compensation period plus superannuation lost during that period and then grossed-up to account for additional taxation the Applicant will be liable to pay in this financial year.
Part C – Calculation of interest
53. Paragraph 122 of the reasons for judgment invites the parties to make further submissions concerning the quantum and rate of interest on the amount of compensation payable. At the hearing on 21 November 2019, the Court ordered that interest be calculated with respect to the Applicant’s past economic net loss.
54. The Federal Circuit Court of Australia Act 1999 (Cth) and the Federal Circuit Court of Australia Rules 2001 (Cth) do not prescribe a rate of interest in relation to pre-judgment interest ordered by the Court.
55. Pursuant to the Interest on Judgments Practice Note (GPN-INT) (Practice Note), parties and their lawyers should also expect that when, pursuant to s 547(2) of the Fair Work Act 2009 (Cth) (FW Act), interest in respect of a pre-judgment period is to be included in an order (other than a pecuniary penalty order) for payment of an amount under the FW Act or a Fair Work instrument, the Court will have regard to the rates set out in paragraph 2.2 of the Practice Note.
56. Pursuant to paragraph 2.2 of the Practice Note, parties and their lawyers should expect that when, pursuant to s 51A(1)(a) of the Federal Court of Australia Act 1976 (Cth), interest in respect of a pre-judgment period is to be included in a judgment, the Court will have regard to the following rates, being rates agreed upon by the Discount and Interest Rate Harmonisation Committee established following a referral by the Council of Chief Justices of Australia and New Zealand:
(a) in respect of the period from 1 January to 30 June in any year – the rate that is 4% above the cash rate last published by the Reserve Bank of Australia before that period commenced; and
(b) in respect of the period from 1 July to 31 December in any year – the rate that is 4% above the cash rate last published by the Reserve Bank of Australia before that period commenced.
57. The cash rate published by the Reserve Bank of Australia relevant to the periods of:
(a) 20 January 2018 to 30 June 2019 (inclusive), was 1.5%; and
(b) 1 July 2019 to 21 November 2019 (inclusive), was 1.25%.
58. This means that, pursuant to paragraph 2.2 of the Practice Note:
(a) for the period of 20 January 2018 to 30 June 2019 (inclusive), the rate of interest is 5.5% (1.5% cash rate plus 4%); and
(b) 1 July 2019 to 21 November 2019 (inclusive), the rate of interest is 5.25% (1.5% plus 4%).
59. The Applicant’s past economic net loss is calculated as follows:
2017/18 financial year
(a) the net loss for the period of 20 January 2018 to 30 June 2018 (inclusive) is calculated by deducting the taxation liability for this period ($1,383.33) from the gross compensation awarded for this period ($3,546.60 (gross)), which equates to $2,163.27;
2018/19 financial year
(b) the net loss for the period of 1 July 2018 to 30 June 2019 (inclusive) is calculated by deducting the taxation liability for this period ($42,856) from the gross compensation awarded for this period ($150,000 - $11,249.99 = $138,750.01), which equates to $95,894.01;
2019/20 financial year
(c) the net loss for the period of 1 July 2019 to 21 November 2019 (inclusive) is calculated by deducting the taxation liability for this period. The period must be worked out first with reference to days and there are 144 days in this period;
2020/21 financial year
(d) the Applicant’s gross compensation awarded for the period of 1 July 2019 to 21 November 2019 (inclusive) is $59,178.08, which is calculated as follows:
$150,000 divided by 365 days = $410.96 per day x 144 days = $59,178.08
(e) the Applicant’s taxation liability for the period of 1 July 2019 to 21 November 2019 (inclusive) is $18,146.76, which is calculated as follows:
$45,997 (total taxation liability) divided by 365 days = $126.02 x 144 days = $18,146.76
(f) the net loss for the 1 July 2019 to 21 November 2019 (inclusive) period is determined by deducting the taxation liability ($18,146.76) from the gross compensation ($59,178.08), which equates to $41,031.32.
60. Therefore, the net loss for the past economic loss period (20 January 2018 to 21 November 2019) is $139,088.60 and is calculated follows:
$2,163.27 + $95,894.01 + $41,031.32 = $139,088.60
61. Therefore, applying the relevant interest rates referred to in paragraph 58 above:
(a) the interest payable with respect to the 20 January 2018 to 30 June 2019 period (527) days is $11,045.16 and is calculated as follows:
($139,088.60 x 5.5%) divided by 365 days = $20.96 daily interest rate $20.96 daily interest rate x 527 days = $11,045.16
(b) the interest payable with respect to the 1 July 2019 to 21 November 2019 period (144 days) is $2,880 and is calculated as follows:
$139,088.60 x 5.25%) divided by 365 days = $20 daily interest rate $20 daily interest rate x 144 days = $2,880
62. Therefore, the total interest that should be ordered to be paid by the First Respondent to the Applicant in relation to the Applicant’s past economic loss $13,925.16 which is calculated as follows:
Portion of three-year compensation period
Interest payable
20 January 2018 to 30 June 2019 (at a rate of 5.5%)
$11,045.16
30 June 2019 to 21 November 2019 (at a rate of 5.25%)
$2,880
TOTAL
$13,925.16
It is ordered:
a)That the First Respondent, the Second Respondent, the Third Respondent, the Fourth Respondent, the Fifth Respondent and the Sixth Respondent are jointly and severally liable to pay to the applicant the sum of $589,439.43 by way of compensation.
b)That the First Respondent, the Second Respondent, the Third Respondent, the Fourth Respondent, the Fifth Respondent and the Sixth Respondent are jointly and severally liable to pay to the applicant the sum of $13,925.16 by way of interest payable on past economic loss.
I certify that the preceding nine (9) paragraphs are a true copy of the reasons for judgment of Judge Egan
Associate:
Date: 5 December 2019
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